Last month, Springfield Power Co announced that shareholders of record on this coming Friday will receive a dividend of $4.5 per share. (Assume that the dividend will also be paid on Friday). After this Friday, the next dividend is expected in one year’s time. Dividends are expected to be paid annually in perpetuity and are […]
Common stockholders expect to receive a return through capital gains and A) interest payments. B) dividends. C) fixed periodic dividends. D) coupon payments. E) receiving shares of preferred stock ANSWER B
The ________ is the financial market in which securities are initially issued. A) private placement B) OTC C) primary market D) secondary market E) NASDAQ ANSWER C
What do we call a market in which the price of a security is an accurate estimate by the market of its true value? A) Efficient Market B) Law of One Price C) Effective Market D) Primary Market E) Secondary Market ANSWER E
Bob’s Tractor and Party Supply has two separate divisions: party supplies, and tractor supplies and services. The party supply division has a beta of 1.2 and is financed by 25% debt. The tractor supply and service division has a beta of 0.8 and is financed by 60% debt. The cost of debt for each division […]
The relevant cash flows for capital budgeting analysis are A) incremental cash flows. B) ordinary cash flows. C) necessary cash flows. D) consistent cash flows. ANSWER A
Money markets are markets for A) foreign currency exchange. B) corporate stocks. C) long-term bonds. D) short-term debt securities. E) preferred securities. ANSWER D
In the over-the-counter market, dealers are linked with the purchasers and sellers of securities through the ________ system. A) NASDAQ B) NYSE C) AMEX D) SEC E) NYMEX ANSWER A
Doing a single corporate WACC is always the best way to evaluate a project. Indicate whether the statement is true or false ANSWER FALSE
In the year just past (Year 1 ) Hane Heavy Industries had no debt. Today is January 1 of Year 2. Hane is considering a plan to sell bonds worth $30B and use the proceeds to repurchase 2B shares (on the open market at $15/share). If Hane maintains this new level of debt in perpetuity, […]
