Securities does not change the cash flows generated

Assignment Help Financial Management
Reference no: EM131513257

1. As long as a firm’s choice of securities (debt vs equity) does not change the cash flows generated by its assets, the capital structure decision will not change the total value of the firm or the amount of capital it can raise.

True

False

2. It is not correct to discount the cash flows of a levered firm with the cost of equity of the un-levered firm because _______

A. leverage decreases the risk of equity of the firm

B. leverage changes the unlevered cost of equity

C. leverage increases the risk of the equity of the firm

D. cost of debt decreases in this setting

3. With perfect capital markets, a firm's WACC is dependent on its capital structure and is equal to its equity cost of capital only if the firm is unlevered.

True

False

Reference no: EM131513257

Questions Cloud

What will be the common stocks value : If the firm's risk increases, causing the required return to rise to10%, what will be the common stocks value?
Preparing a contract to lease a machine : Your client, Keith Wildhorse Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 28 years.
The net effect is that the firms wacc is unchanged : As the firm borrows at the low cost of capital for debt, its equity cost of capital rises, but the net effect is that the firm's WACC is unchanged.
Engage in that topics quantitative analysis method : hese case studies are designed to provide an opportunity to engage in that topic's quantitative analysis method,
Securities does not change the cash flows generated : As long as a firm’s choice of securities (debt vs equity) does not change the cash flows generated by its assets,
What is the equilibrium expected growth rate : What is the equilibrium expected growth rate?
What is the price of the stock five years from now : O'Leary Corporation's last dividend paid was $1.50. What is the price of the stock 5 years from now?
Considering an investment in rental property : Yuo are considering an investment in a rental property. what is the NPV of this investment?
What is the total gain possible in the interest swap deal : What is the total gain possible in the interest swap deal?

Reviews

Write a Review

Financial Management Questions & Answers

  Alternative methods of investment appraisal

What are some of the alternative methods of investment appraisal?

  What is the total purchase price of ring

Lois Clark bought a ring for $5,200. She must still pay a 6% sales tax and a 10% excise tax. The jeweler is shipping the ring, so Lois must also pay a $30 shipping charge. What is the total purchase price of Lois’s ring?

  Regarding the short-term trading opportunity

Dave and Marlene Carter live in the Boston area, where Dave has a successful orthodontics practice. Dave and Marlene have built up a sizable investment portfolio and have always had a major portion of their investments in fixed-income securities. Reg..

  What are the key components of a banks contingency

What are the key components of a bank's contingency funding plan? What are the differences between the narrative section and the quantitative section?

  What is the stock capital gain yield

A company has just paid a dividend of 3.63$. Its discount rate is 11.6%, and the expected perpetual growth rate is 3.1%. What is the stock's Capital Gain Yield?

  Explain various aspect of finance that management understand

Explain the various aspects of finance that management must understand. Interpret the function of the Financial Balance Sheet in assisting in management's decision making process.

  Calculate values for share

Tyler Inc.'s most recent annual dividend was $3.55 a share. The firm has been growing at a consistent 4% rate for several years, but analysts generally believe that better times are ahead, and that future growth will be in the neighborhood of 5%. Cal..

  Assume that project being considered has normal cash flows

Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. A project’s NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC..

  Determine the marginal profitability of additional sales

Determine the Marginal profitability of additional sales, Cost of additional investment in receivables, Additional bad-debt loss and Cost of additional investment in inventory.

  Cost of retained earnings using the gordon model approach

Heavy Rain Corporation just paid a dividend of $3.96 per share, and the firm is expected to experience constant growth of 2.17% over the foreseeable future. The common stock is currently selling for $74.35 per share. What is Heavy Rain’s cost of reta..

  What is the face value of a zero coupon bond

What is the face value of a zero coupon bond that has a yield of 8.5%, matures in 6 years, and is currently selling for $404.54? Round your answer to the nearest dollar. Show your work.

  Prepare a correct trial balance

List and describe all the errors made in the trial balance of Beppe & Brothers Auto Parts Store.- Prepare a correct trial balance.

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