Finance - YTM, WACC, Plowback and more
Not what you're looking for?
A publicly company is entirely financed with equity. Its WACC is 14% Management wishes to bring the plowback ratio from 0% to 100% and invest earning into a capital project that will return 12.5%. What will be the impact on management's new dividend policy?
Options:
- Moving the plowback ratio to 100% will add shareholder value
- Moving the plowback ratio to 100% will erode shareholder value
- Keeping the plowback ratio at 0% will erode shareholder value
- Not enough information to answer this question
Napal Corporation wants to calculate its weighted average cost of capital (WACC). It has $500 million in B-rated bonds at an average rate of 5.43% 374 million shares of common stock outstanding @ 1par, and retained earning of $230 million. The expected rate of retun in the stock market for equities of similar risk and characteristics is 10%. What is Nepal's WACC?
Options:
- 5.43%
- 7.93%
- 10%
- 15.43%
Nepal's $500 million of 30-year bonds outstanding was issue at a coupon rate of 8%. On 5/01/05, two years after insurance, the market rate for bonds of similar characteristics falls to 5%. What should the market price of Nepal bonds on the bond market at 5/1/05.
Options:
- 66.85%
- 100%
- 144.69
- 146.12
An A+ rated bond matured in 15 years, has 9.5% coupon rate, and is currently priced at 115.98 what is the YTM of this bond?
Options:
- 6.605%
- 7.687%
- 8.081%
- 9.500%
Purchase this Solution
Solution Summary
This solution explains YTM, WACC, Plowback and more.
Solution Preview
A publicly company is entirely financed with equity. Its WACC is 14% Management wishes to bring the plowback ratio from 0% to 100% and invest earning into a capital project that will return 12.5%. What will be the impact on management's new dividend policy?
Options:
? Moving the plowback ratio to 100% will erode shareholder value
Reason: The return on invested capital is less the WACC, therefore the shareholder value will erode.
Napal Corporation wants to ...
Purchase this Solution
Free BrainMass Quizzes
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Lean your Process
This quiz will help you understand the basic concepts of Lean.