Equivalent to maximizing firm value

Assignment Help Financial Management
Reference no: EM133305458

Write true or false next to each statement.

1. If firms did not have limited liability, their asset risk would be increased.

2. As long as the firm is certain that the return on assets will be higher than the interest rate, an issue of debt makes the shareholders better off.

3. In a perfect capital market, minimizing the weighted average cost of capital is equivalent to maximizing the firm's value.

4. MM's proposition II assumes increased borrowing does not affect the interest rate on the firm's debt.

5. Shareholders demand and deserve higher expected rates of return than bondholders do. Therefore, debt is the cheaper capital source. We can reduce the WACC by borrowing more.

Reference no: EM133305458

Questions Cloud

What is the nv-irr-profitability index and payback : The Rock brothers are considering adding new manufacturing equipment to their many businesses. What is the NV, IRR, Profitability Index and Payback?
Determine the amount and character of any gain : Determine the amount and character of any gain or loss to be recognized by each partner and the basis of each asset (other than cash) received.
Economy on manufacturing or technology and services : What are the advantages and disadvantages of focusing one's economy on manufacturing or on technology and services?
Pay four years of tuition and fees : Anna's daughter will be attending college in 6 years. Anna wants to know how much she will need to set aside today to pay four years of tuition and fees.
Equivalent to maximizing firm value : In a perfect capital market, minimizing the weighted average cost of capital is equivalent to maximizing the firm's value.
Stock Sharpe Ratio : A stock has generated an annual average return of 11.5% with a standard deviation of 35.0% during the last 10 years. what was this stock's Sharpe Ratio?
Firm financial plan : What is the growth rate for the firm's main competitor? How is the firm going to pay for the resources needed?
Non-registered savings account : Jon bought a $150,000 10-year term annuity using a non-registered savings account. He will receive monthly payments.
RRSP contribution : How much did Sally save on her taxes by making this RRSP contribution if her marginal tax rate is 33.5%?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd