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1. The video discussed collateralization of assets to secure a loan, assumption of massive debt loads, and levering tax incentives against risk as to boost annual profits. However, which of the following is the riskiest part of performing the LBO?
A. Collateralization of Assets
B. Assumption of Interest Payments
C. Decreasing Tax Shield as Debt is Paid Off
D. None of the Above
2. Last year Rosenberg Corp. had $195,000 of assets, $18,775 of net income, and a debt-to-total-assets ratio of 32%. Now suppose the new CFO convinces the president to increase the debt ratio to 48%. Sales and total assets will not be affected, but interest expenses would increase. However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and thus keep net income unchanged. By how much would the change in the capital structure improve the ROE?
4.36%
4.57%
4.80%
5.04%
You plan to invest? $5,000 at the end of each of the next 10 years in an account that has a 9 percent nominal rate with interest compounded daily. How much will be in your account at the end of the 20? years?
A decrease in which of the following will increase the current value of a stock according to the dividend growth model?
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Stan wants to have $150,000 available in four years. What size quarterly deposits does Stan have to make into an account that pays 5.6% annual interest compounded quarterly to accomplish his goal? Assume the first deposit is made in one quarter.
Company X sells on a 2/15, net 60, basis. Customer Y buys goods with an invoice of $4,500. a. How much can company Y deduct from the bill if it pays on day 15? Discount $ b. How many extra days of credit can company Y receive if it passes up the cash..
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Nielsen Auto Parts had beginning net fixed assets of $487 and ending net fixed assets of $534. Assets valued at $279 were sold. Depreciation for the year was $36. What is the amount of net capital spending? If a bond is upgraded by a rating agency, ..
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