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You are the CFO of a company that has been following the popular "somewhat constant dividend payout" policy. Recently, you are considering a change in the dividend policy with an eye to enhance shareholders value. Specifically, you would like to change the policy to first consider allocating the company's available cashflows to fund all positive NPV projects and then pay out any leftover cash, if any, as dividends to shareholders. Discuss throughly the pros and cons of such a change according to the theories we have discussed in class and in the textbook. At the end of the day, would you change the policy? Why?
What is each project's MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B's life.) What is the crossover rate, and what is its significance?
The first payment is $2000 and the payments grow by R = 4% per year. Interest rates are r = 2% annually.
Company ABC has debt of $300M (market value) with a YTM of 7%, and its equity market value is $700M with a beta of 1.5. If the market risk premium is 5% and the risk free rate is 3%, what is the Company ABC's WACC?
If the returns of assets V and W are perfectly positively correlated (correlation coefficient = +1), describe the range of Expected return and Risk associated with all possible portfolio combinations.
Canton has a tax rate of 45% and a 16% cost of capital on projects like this one. The X-tender is expected to increase revenues minus expenses by $35,000 per year.
Preferred stock is considered priority stock. Explain this priority.
Today's closing stock price was $20. What is the floor value of this bond?
WorldCom committed the largest fraud in U.S. history. What was the primary method WorldCom's management used to carry out the fraud?
How are translation gains and losses handled differently according to the current rate method in comparison to the other three methods, that is, the current/non
A company takes on a project with a NPV of zero. Did the company make the decision? Explain
Define a corporate stakeholder. Compare in terms of the economic systems, the principle of maximizing shareholder wealth with the principle of satisfying stakeholder claims.
If interest rates go up it can affect you both good and bad. If interest rates go up the normal consequence is a drop in bond prices
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