QUESTION Stronghold Money Fund is a relatively new money market fund with about $400 million in total financial assets and shares outstanding (each maintained at a value of $1.00 per share). Most of the funds accounts represent the savings of high-income, interest-sensitive investors. Stronghold&rsquo Anytime you get a “theory” type finance question you want to […]
QUESTION A firm has $1 million in current sales volume and an internal growth rate of 15%. If sales are expected to increase by $100,000, then:(a) the firms forecast will not be met.(b) dividends will have to be reduced.(c) retained earnings will increase by $50,000.(d) external funding will not be required According to the given […]
QUESTION An annuity is defined as a series of payments of a fixed amount for a specific number of periods. Thus, $100 a year for 10 yrs is an annuity, but $100 in year 1, $200 in year 2, and $400 in years 3 thru 10 does not constiture an annuity. However the entire series […]
QUESTION What is the difference between portfolio risk and stand-alone risk? What is the relevance of each to an investor (or, is each relevant?)? As an investor, how do you consider each in making investment decisions? In portfolio management, standalone risk measures the undiversified risk of an individual asset. So, for example, by investing just […]
QUESTION What is the amount of annual depreciation tax shield for a firm with $200,000 in net income, $75,000 in depreciation expense and a 35% marginal tax rate? Recall that Depreciation is a NONcash expense and is tax deductible. That is: Sales Costs Dep = taxable income Taxable income x tax rate = taxes paid […]
QUESTION A significant disadvantage of the payback period is that it:a. does not properly consider the time value of moneyb. is complicated to explainc. increases firm riskd. provides a measure of liquidity Payback period is time required to recover the cost of initial investment. Disadvantages of payback period are:- a) Time value of money is […]
QUESTION World Airlines has three service departments: Ticketing, baggage handling and engine maintenance. The service department costs are estimated for separate cost pools formed by department and are allocated to two revenue-producing departments: domestic flights and international flights. World does not Sevice department Costs Ticketing 5,110,000 Baggage Handling 3,396,000 Engine Maintenance 7,020,000 Total costs 15,526,000 […]
QUESTION Doublewide Dealers has an ROA of 9%, a 6.5% profit margin, and an ROE of 22%.a. What is its total assets turnover? Round your answer to two decimal places.b. What is its equity multiplier? DuPont analysis essentially breaks down ROE (return on equity or Net Income/Shareholders equity) into 3 core parts: Profit Margin, Asset […]
QUESTION B20. (Constant growth model) Medtrans is a profitable firm that is not paying a dividend on its common stock. James Weber, an analyst for A. G. Edwards, believes that Medtrans will begin paying a $1.00 per share dividend in two years and that the dividend will increase 6% annually thereafter. Bret K Calculating the […]
QUESTION (13-4) What are some actions an entrenched management might take that would harm shareholders? The following are some of the actions an entrenched management might take that would harm shareholders: 1 .Managers can resort to earning management practices / income smoothing etc. to improve their job security 2. They can give themselves golden parachutes […]
