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The marginal principle of retained earnings means that each potential project to be financed by retained earnings must:
yield a return equal to or greater than the marginal cost of capital.
have an internal rate of return greater than the corporate growth rate of dividends.
provide enough return to pay the corporation's marginal tax rate.
provide a higher rate of return than the stockholders can achieve after paying taxes on the distributed dividends.
A small business owner visits her bank to ask for a loan. The owner states that she can repay a loan at $1,100 per month for the next three years and then $2,200 per month for two years after that. If the bank is charging customers 7.75 percent APR, ..
The Allen Corporation had sales in 2013 of $70 million, total assets of $43 million, and totla liabilities of $21 million. The interest rate on the company's debt is 5.6 precent, and its tax rate is 35 percent. The operating profit margin is 11 perce..
Calculate the pre-tax cost of the debt (the yield to maturity) quoted as an EAR.
Examine the organization's sources of revenue (e.g., grants, individual donations, fees for service, etc.) relative to total revenue can also be useful.
Find the present value of the following ordinary annuities: a. $400 per year for 10 years at 10% b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Now rework parts a, b, and c assuming that payments are made at the beginning of..
The project will use the straight-line depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year before tax and has additional annual costs of $600,000. The ..
Distinguish between the types of bonds. What factors determine their value? Explain three important relationships that exist in bond valuation. Distinguish between preferred stock and common stock. Compare valuing preferred stock and common stock.
Prepare an amortization schedule for a three-year loan of $70,000. The interest rate is 8% per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan?
Suppose you bought a bond with a coupon rate of 8.1 percent one year ago for $904. What was your total nominal rate of return on this investment over the past year?
What will be the profit/loss on this position if IBM is selling at $162 on the option expiration date? What will be the profit/loss on this position if IBM is selling at $174 on the option expiration date? What kind of bet is this investor making; th..
You are trying to pick the least-expensive car for your new delivery service. If the business has a cost of capital of 12 percent, calculate the EAC.
Discuss which types of retailers are now competing with department stores.
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