1. What are the types of risk factors that a company faces? 2. If risk aversion cannot explain why firms choose to hedge, then what are their motivations?
A Company has used a two-stage cost allocation system for many years. In the first stage, plant overhead costs are allocated to two production departments, P1 and P2 based on machine hours. In the second stage, the company uses direct labor hours to assign overhead costs from the production departments to individual products A
Before entering a formal agreement, investment bankers carefully investigate the companies whose securities they underwrite; this is especially true of the issues of firms going public for the first time. Since the bankers do not themselves plan to hold the securities but intend to sell them to others as soon as possible, why a
1. It is frequently stated that the primary purpose of the preemptive right is to allow individuals to maintain their proportionate share of the ownership and control of a corporation. a. How important do you suppose this consideration is for the average stockholder of a firm whose shares are traded on the New York or American
After applying the corporate valuation model, the value of a firm's operations is found to be $400 million. The balance sheet shows $20 million in short-term investments that are not related to operations. The balance sheet also shows $50 million in accounts payable, $90 million in notes payable, $30 million in long-term debt,
18. Bond Prices and Yields. a. Several years ago, Castles in the Sand, Inc., issued bonds at face value at a yield to maturity of 7 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the
4. Bond Pricing. A 6-year Circular File bond pays interest of $80 annually and sells for $950. What is its coupon rate, current yield, and yield to maturity? 5. Bond Pricing. If Circular File (see question 4) wants to issue a new 6-year bond at face value, what coupon rate must the bond offer? 6. Bond Yields. An AT&T
21. Loan Payments. If you take out an $8,000 car loan that calls for 48 monthly payments at an APR of 10 percent, what is your monthly payment? What is the effective annual interest rate on the loan? (Using the excel PMT function) 36. Amortizing Loan. You take out a 30-year $100,000 mortgage loan with an APR of 6 percent and
Part A: Describe the concept of incremental cash flow. Why is this important to distinguish from other cash flows? Part B: How can TVM be used when deciding to lease an asset instead vs.buying? Explain.
1. The budget committee has received the following projects. They are mutually exclusive. The Company uses 10% as the rate of return. Year Project A Project B 0 - 30,000 - 60,000 1 10,000 20,000 2 10,000 20,000 3 10,000 20,000 4 10,000 20,000 5 10,0
Friedman Steel Company will pay a dividend of $1.50 per share in the next 12 months (D1). The required rate of return (Ke) is 10 percent and the constant growth rate is 5 percent. a. Compute Po (For all parts b, c and d in this problem all variables remain the same except the one specifically changed. each question is its ow
On the first day of the fiscal year, a company issues a $1,000,000, 8% 5 year bond that pays semi-annual interest of $40,000 ($1,000,000 x 8% x 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount. Round answer to the nearest dollar.
Which of the following statements is true? 1. Book value is generally equal to market value. 2. Book value and market values are generally not the same; if they were, if it would be by coincidence. 3. Book value is derived by market value. 4. Book value is the value at which buyers and sellers are generally willing
Multiple choice questions in Investment: active management, short term securities, asset allocation, mutual fund, Unsystematic risk, investment in stock, Portfolio risk , dispersion around a security's return
1. Investors seeking to avoid actively managing their portfolios will prefer which of the following assets? a. Common stock. b. Commercial bank deposits. c. Financial futures. d. Real estate. 2. Which of the following short term securities is inappropriate for an individual desiring funds for financial emergencies?
1. Fidelity company has a target capital structure that consists of 40 percent debt and 60 percent equity. The company's capital budget for next year is $10 million. Axel expects net income of $8 million. The company's cost of capital is 12 percent. a. How much will the company pay out in dividends if it follows a residu
1. You are considering three stocks with the following expected dividends yields and gains: Dividend Yield Capital Gain A 14% 0% B 8 6
Integrated Potato Chips paid a $1 per dividend yesterday. You expect the dividend to grow steadily as a rate of 4% per year. A) What is the expected dividend in each of the next 3 years? B) If the discount rate for the stock is 12%, at what price will the stock sell? C) What is the expected stock price 3 years from now D)
Your decision to obtain a college education was likely based on a desire to achieve higher standards, but to a lesser degree, it may be because you want to earn more money in your job, and/or prepare yourself for a new career. For most, this is a major financial commitment. Let's say at the end of two years, you expend $30,00
Mr. Henry can invest in Highbull stock and Slowbear stock. His projection of the returns on these two stocks is as follows: State of Economy Probability of State Return for Highbull Return for Slowbear recession 0.25 -2.0% 5.0% normal
You purchased a stock one year ago at $42 per share. The stock just paid a dividend of $2.40 per share. Today, you sold the stock at 31$ per share. What is the percentage return on this stock?
Based on the information below compute the following ratios for 2008. Please explain each answer. 2008 2007 cash 333,000 A/R (net) 380,000 316,000 Merch Inv 275,000 225,000 m
The Harley Health Club has asked you to review aspects of its financial condition, specifically its break even point and its use of leverage. Management has supplied you with the following company information, along with corresponding data for the industry. Harley Industry
I want to continue explaining the advantages and disadvantages of consumer credit and to make sure to explain what leverage is and why it is important. I have to explain the advantages and disadvantages of consumer credit. I also have to make sure you explain what leverage is and why it is important. So far, I am starti
Based on what you know about risk, determine which is the riskier investment. Company A has an expected rate of return of 15% and a standard deviation of 3% Company B has an expected rate of return of 10% and a standard deviation of 2% Company C has an expected rate of return of 25% and a standard deviation of 5% If th
In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1993 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happ
1)In a statement of cash flow, the term cash includes: A) only money on deposit in bank accounts(B)on bank accounts and cash on hand(C) bank accounts, cash on hand, and cash equivalents(D) bank accounts, cash on hand, and cash equivalents and marketable securities classified on current assets 2) The ownership of common stoc
Van Roekel Company sells a single product. The product has a selling price of $100 per unit and variable expenses of 80% of sales. If the company's fixed expenses total $150,000 per year, what will the break even point be? My answer must be given in dollars and units. Truesdale Company sells hand crafted furniture. One it
Limitations of the Balance Sheet include: a) Assets recorded at historical value. b) It only recognizes assets that can be expressed in monetary terms. c) Owners' equity is usually less than the company's market value. d) All of the above The costs of maintaining current assets, including the opportunity cost of capital i
The budgeting process: a) defines goals and objectives b) coordinates business activities c) motivates employees d) all of the above 33. A method of attributing costs to products based on assigning costs of resources to activities and assigning costs of activities to products is known as Unit Based Costing. a) true b) f
A cash payment received from a customer's accounts receivable would be recorded as: a) an increase in revenue b) a decrease in liability c) an increase in owner's equity d) an increase in assets 16. Which of the following statements is false? a) A company generally prefers to have a high debt ratio. b) The current ratio