Explain the significance of three factors firm

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Reference no: EM131987128

1. Identify and explain the significance of three factors a firm can control that have a direct impact on its WACC.

2. If a high percentage of a firm's operating costs are fixed and hence do not decline when demand falls off, this will _____.

a. decrease financial leverage

b. optimize the capital structure of the firm

c. increase the business risk of the firm

d. decrease the firm-specific risk of the firm

e. intensify the risk borne by the firm's common stockholders

3. David bought a stock three years ago for $36 a share. Today, Feb. 1, the stock is selling for $52 a share. David is afraid that the price will fall and does not want to lose his profits so he places a stop-loss order (good-'til-canceled) to sell at $48. The stock sells between $51 and $55 throughout the remainder of the day on Feb 1. On the morning of Feb. 2, the stock opens at $30 a share based on rumors of a possible bankruptcy due to inappropriate accounting procedures. Which one of the following statements is true concerning this situation?

A) David was able to sell his stock for $48 a share thereby protecting his profits.

B) David 's stock was sold for $30 a share causing him to lose most of his profits.

C) David still owns his shares of stock since his order was never executed at the $48 price.

D) David received a call from the specialist asking him what he wanted to do about his order.

Please explain answer.

Reference no: EM131987128

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