What is the Net Present Value (NPV) for the cash flows provided in the table below? Note: The negative cash flow for year 0 is the initial investment for the project. The required rate of return is 8% and the internal rate of return is 9.70%. Year Cash Flow 0 -$100,000 1 $40,000 2 $40,000 […]
Date: September 19th, 2020
Why does the preferred stockholders’ equity section of the balance sheet change only when new shares are sold or repurchased, whereas the common stockholders’ equity section changes from year to year regardless of whether new shares are bought or sold? ANSWER Preferred stock is a fixed perpetuity. Common equity consists of the paid […]
Date: September 19th, 2020
Your firm is considering the issuance of preferred shares for the first time. The average yield on preferred stock for firms in your industry is 6.50%. If you wish to issue preferred stock at par with a face value of $50.00 per share, approximately how large would you need to make your annual preferred dividend? […]
Date: September 19th, 2020
The age of accounts receivable measures the average time between the firm’s purchase of materials (assumed to be on credit) and its payment to the suppliers of those materials. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The dividend policy must be formulated considering two basic objectives, namely ________. A) delaying the tax liability of the stockholder and information content B) maximizing shareholder wealth and maintaining liquidity C) maximizing shareholder wealth and providing for sufficient financing D) maintaining liquidity and minimizing the weighted average cost of capital ANSWER C
Date: September 19th, 2020
Which type of dividend payment policy has the disadvantage that if a firm’s earnings drop or if a loss occurs in a given period, dividends may be low or nonexistent? A) constant-payout-ratio policy B) regular dividend policy C) low-regular-and-extra dividend policy D) stock dividend policy ANSWER A
Date: September 19th, 2020
An income statement reports a firm’s profit relative to its total investment in plant and equipment. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Use the DuPont method to calculate the 2013 ROE for Bacon Signs. A) 0.0961 * 0.46 * 4.30 = 0.1698 = 16.98% B) 0.0961 * 0.46 * 1.81 = .0796 = 7.96% C) 0.0961 * 0.41 * 1.88 = .0741 = 7.41% D) 0.0961 * 0.41 * 1.00 = 0.0395 = 3.95% ANSWER […]
Date: September 19th, 2020
The decision rule for net present value declares that a project is acceptable if: A) it pays back within a specified time period. B) the rate of return is greater than the firm’s cost of capital. C) the present value of the cash inflows exceeds the initial cash outflow. D) all of the statements above […]
Date: September 19th, 2020
Because a firm’s performance measures reflect past performance, these measures can NOT be used to assist in forecasting future financial statements. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
