What is the likely impact on the share price of a company (assuming all other variables remain unchanged) arising from the following independent events: 1. the company's beta increases 2. the company's required rate of return decreases 3. the expected dividend to be paid next year from the company decreases 4. the rate of gr
How do you conduct a break even analysis and can one be done with the following information, using the numerical calculations break-even analysis? A County Sheriff's Department sells its products (officers) to contract cities at a cost of $197,000 per officer. Each officer works 40 hours per week. The contract city purchase
Introduction to Corporate Finance - (Cash Conversion, Inventory, and Receivables Management) 4. What aspects must managers consider when deciding on a trade credit policy for the firm? 6. What factors should managers consider when determining the company's collection policy?
1) What are the debt/equity ratio and the debt ratio for a firm with total debt of $700,000 and equity of $300,000? 2) A firm with sales of $500,00 has average inventory of $200,000. The industry average for inventory turnover is four times a year. What would be the reduction in inventory if this firm were to achieve a turnov
1. Total Cost: An oil company arranged a $10,000,000 revolving credit agreement with a group of small banks. The firm paid an annual commitment fee of one-half of one percent of the unused balance of the loan commitment. On the used portion of the loan, it paid 1.5 percent above prime for the funds actually borrowed on an annual
A. Using the included attachment, JC Penney 3 year trend table of all financial ratios included under the following four categories of ratios (Liquidity, Efficiency, Leverage, and Profitability). Include a brief rationale for each ratio you have calculated. Also present in the table the industry average for each ratio. b. Co
You are a project manager in the marketing department for a county funded hospital. The hospital is launching an extensive public service program for cardiac health. The program will involve print ads in local newspapers, television spots, posters at local eateries and health clubs, and sponsorship of events at the county fair.
9. The Bohne Company produces chocolate candies. The chocolates sell for $12 per box. Annually, the company produces 10,000 boxes of chocolates and sells 9,000 boxes of the candies. The company's cost information includes the following: Direct materials $2.00 per unit Direct labor $3.00 per unit Fixed manufacturing ov
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