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1. Why does a conservative approach to operating leverage inhibit a firm’s profitability? Your answer should, at a minimum, explain the concept of operating leverage and mention the roles of contribution margin and breakeven point.
2. What types of firms or what industry sectors might it be prudent to limit operating leverage? Why?
3. Why would a firm ever issue stock or find external sources of equity if they have the opportunity to leverage with debt?
4. Explore leverage as it related to the financial crisis of 2008/2009 and share what you learned.
Put these questions into paragraphs and answer fully.
The expected market return for the coming year is 6%, you need to find the current rates for the 10 year Treasury bond to establish a risk-free rate.
State three reasons why the net realisable value of inventory may be less than cost.- Calculate to the nearest euro the value of inventory at 28 February at cost.
When the market rate of return exceeds the coupon rate, a bond will sell at
Compute the new price of the bond and comment on whether you think it is overpriced in the marketplace
Stories in the business press typically comment on a company's earnings and its price/ earnings ratio as a guide to valuation. What's right or wrong with this? How does it compare with the Corporate Valuation Model we are using? Is Enron relevant to ..
Calculate the breakeven price from the following information.
The current stock price of Howard & Howard is $64, and the stock does not pay dividends. Using the Black-Scholes OPM, the call option should be worth __________
Jiminy’s Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wha..
A 30-year 8% corporate bond was issued exactly 10 years ago.
Regarding a full or partial rollover of assets from one retirement plan to another retirement plan:
Calculate the 6-month GAP associated with this transaction. What does this GAP measure indicated about interest rate risk in this transaction?
A company issues a ten year $1,000 value bond at par with a coupon rate of 6.1% paid semiannully. What is the new price of the bond?
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