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EBIT for a Levered Firm

For a levered firm, EBIT is equivalent to: 1. net income 2. proforma earnings 3. operating profit 4. net income before taxes

Investor Behavior

Which assumptions regarding investor behavior are required by the CAPM? 1. Investors try to maximize their wealth 2. Investors consider only risk when making investments 3. Investors are risk averse 4. Investors adopt a long-term perspective

M & M Proposition I

Which is not an assumption underlying M & M proposition I? 1. No arbitrage 2. No taxes 3. Corporate investments are risk-free 4. Symmetric information

"Real" Activities

Which of the liabilities form part of a company's "real" activities? 1. short-term debt 2. accounts payable 3. accrued operating expenses 4. long-term debt

Various Mathematics Problems

Please show the work on the answers asked. 1 - If during an election there were 6372 registered voters and 3560 registered voters voted, what percentage of the registered voters actually cast a vote? If there were 10,000 people in the district, what percent of the population voted in the election? What percent of the populati

Accounting for Non-Accountants

You have been asked by the CEO of your company to give a presentation to the students at a local college. You were specifically asked to discuss the role of an accountant. 1. Explain the purpose and objective of accounting. 2. What is the purpose of corporate governance, and why is it important to the company? 3. Why is an

Discussing Investment Information

Please respond to the following: Assume you are deciding whether or not to invest in a particular company. Discuss which elements of which financial statements you would want to carefully examine. Explain your rationale.

Signs of a Profitable Firm

1. Which of the following statements is CORRECT? a. Typically, a firm's DPS should exceed its EPS. b. Typically, a firm's EBIT should exceed its EBITDA. c. If a firm is more profitable than average (e.g., Google), we would normally expect to see its stock price exceed its book value per share. d. If a firm is more profitable

Corporate Finance - Calculating Leverage

Assume that a firm has the following Income Statement. Use this data to determine the business risk and the financial risk as measured by the degree of operating leverage and the degree of financial leverage, respectively. Also, determine the combined leverage as found with the degree of combined leverage. Utilize these risk m

EBIT Vs. Optimal Leverage

Define EBIT and discuss why the optimal level of leverage from a tax-saving perspective is the level at which interest equals EBIT. Does this have a connection with under-leveraging corporations,both domestically and internationally?

Cost Value Equipment

Get started by watching the 'Should I Buy New Equipment Now?' video in the link below then answer the following questions. http://media.pearsoncmg.com/ph/esm/chet_cleaves_cbsm9e_12/tools/RealWorldCase_before.htm The engraving department uses an aging rotary engraver to engrave plaques and trophies. The machine has been rel

Operating, investing and financing activities

The following information reflects cash flow and other activities of Framer Company for six months ended June 30 Paid for equipment $45,000 Paid for income taxes $ 3,000 Paid for insurance

Company Growth

Please respond to the following: Imagine a startup company of your own and briefly trace its development from a sole proprietorship to a major corporation with a focus on how that development would be financed.

Flexible and Static Budgets

The three components involved in the creation of a budget are revenues, expenses, and the statistics (volume). A. In what order are each component determined and why? B. What is the differences between a static and flexible budget? C. As a manager, which type of budget would you prefer to operate under? Why?

Variable, Fixed and Semi Variable Expenses

Please define and explain the following type of expenses and give an example of a business activity from your profession that may change the amount of variable expenses with each definition. a) Variable expense: b) Fixed expense: d) Semi variable or Mixed expense: Please identify if you would assign each of the following

Price Comparison Study

Pizza comparisons of Dominos & Little Caesars. What is the best pizza deal in your area? How do you conduct comparative shopping when different pizza stores have different size pans? Are prices for some large pizzas for a particular store proportional to the amount of pizza for each size? Does any combination of two pan si

Finance Question: Beta and Risk

You are working as an intern at Coral Gables Products, a privately owned manufacturing company. You got into a discussion with the Chief Financial Officer (CFO) at Coral Gables about weighted average cost of capital calculations. She pointed out that, just as the beta of the assets of a firm equals a weighted average of the b

Debt-Equity, APV, and WACC

Problem 14-2 Assume that MM's theory holds with taxes. There is no growth, and the $40 of debt is expected to be permanent. Assume a 40% corporate tax rate. a. How much of the firm's value is accounted for by the debt-generated tax shield? b. How much better off will UF's a shareholder be if the firm borrows $20 more an

Small Country Expenditures and GDP

A very small country's gross domestic product is $12 million. If government expenditures amount to $7.5 million and gross private domestic investment is $5.5 million, what would be the amount of net exports of goods and services? How would your answer change if the gross domestic product had been $14 million?

Alternative Investment decisions

Describe the two distinct sets of project alternatives dealt with in every evaluation. In your description, identify an example of each set. Following the descriptions, discuss why the comparison of investment alternatives is difficult when each alternative is useful, even outside of the project.

Amortised Loan Example

John borrows 10,000 Euros at an APR of 6%. He wants to repay it in five equal instalments over five years, with the first repayment one year after he takes out the loan. How much should each repayment be?

Calculating average rate of return of a stock

Spill Oil Company's stocks had -8%, 11% and 24% rates of return during the last three years respectively; calculate the average rate of return for the stock. A. 8% per year B. 9% per year C. 11% per year D. None of the above

Common Stock Par Value

When common stock has a par value: a) the liability of the stockholders is limited to the par value b) there will probably be additional paid-in capital in the balance sheet c) the market value of the stock will be higher than if there is no par value d) the paid-in capital will equal the par value of the number of shares

Common Stock Ownership

Which of the following is not a right or attribute of common stock? a) Electing directors b) Liability limited to amount invested c) Approving changes in corporate charter d) Determining dividend policy

AIG and the Financial Crisis

AIG played a central role in the financial crisis by issuing swaps to investors in CDO tranches, promising to reimburse them for any losses on the tranches in exchange for a stream of premium-like payments. AIG was rated AAA in 2006. This credit default swap protection made the CDOs much more attractive to potential investors be

FNMA, FHLMC and Lehman

FNMA and FHLMC were operating with inadequate capital in the years leading up to the financial crisis. In 2008 just after Lehman failed FNMA raised significant capital by selling shares to the Chinese government. True or false. and why?

Financial Crisis and Securitization

Securitization of mortgages enabled various dimensions of risks embedded in pools of mortgages to be distributed to investors with varying degrees of tolerance for credit and interest rate risk and with differing expectations about the future path of economic valuables. Before securitization, the bank that originated a pool of m

Fannie Mae and Freddie Mac

Fannie and Freddie had a single mission: support the mortgage market. They did not originate mortgages; they purchased them from banks, thrifts, and mortgage companies and either held them in their portfolios or securitized and guaranteed them. True or false and why?