Expected return on equity if expected return on assets

Assignment Help Financial Management

Reference no: EM13948831

1. An increase in a firm's financial leverage will:

A. increase the variability in earnings per share.

B. always reduce the operating risk of the firm.

C. increase the value of the firm in a non-MM world.

D. increase the WACC.

2. Assume a firm is financed with 30% debt on which it pays 9%. What is the expected return on equity if the expected return on assets is 14%?

3. The trade-off theory of capital structure describes the optimal capital structure for any firm as being the level of debt that:

A. minimizes the financial distress costs.

B. maximizes the present value of the interest tax shield.

C. equates the present values of the interest tax shield and the financial distress costs.

D. maximizes the after-tax cash flows that are internally generated.

Reference no: EM13948831

Questions Cloud

What is the probability that the company : Superior Construction Pte Ltd is a successful company dealing with many major projects in Singapore. Recently, it has submitted its biddings for two major Government projects. Project A worth about $120 million and the company believes it has 40% ..

Describe one advantage and one disadvantage of adt table : Based on your analysis, what would be the most appropriate implementation of the three (a binary search tree, ordered vector, or unordered vector) for the given scenario? Explain your answer.

What is the free cash flow from the project in year one : A new project is expected to generate $800,000 in revenues, $250,000 in cash operating expenses, and depreciation expense of $150,000 in each year of its 10-year life. The corporation's tax rate is 35%. What is the free cash flow from the project in ..

Tradeoffs that you make between these activities : Economic Activity #2.1. Think about some of your daily activities. Write down the tradeoffs that you make between these activities. For example, going for a walk vs. going grocery shopping.

Expected return on equity if expected return on assets : An increase in a firm's financial leverage will: Assume a firm is financed with 30% debt on which it pays 9%. What is the expected return on equity if the expected return on assets is 14%? The trade-off theory of capital structure describes the optim..

Determine the kinetic energy of the system : The double pulley consists of two parts that are attached to one another. It has a weight of 50 lb and a centroidal radius of gyration of kO = 0.6 ft and is turning with an angular velocity of 20 rad> s clockwise. Determine the kinetic energy of t..

What is the sales mix of videos and equipment sets : What is the sales mix of videos and equipment sets? Compute the break-even quantity of each product. Prepare an income statement for Switzer for last year.

While the charge against him were pending : How would you have suggested Gov. Blagojevich comport himself publicly, while the charge against him were pending?

What weight should be placed on the preferred stock : A firm has 12,000 shares of common stock outstanding with a book value of $20 per share and a market value of $39. There are 5,000 shares of preferred stock with a book value of $10 and a market value of $26. There is a $400,000 face value bond issue..

User Account

All Pages