Finance

A firm which uses the aggressive financing strategy plans to purchase

A firm which uses the aggressive financing strategy plans to purchase a major fixed asset financed with a loan. The most likely consequence of this action is ________. A) a decrease in the current ratio B) an increase in net working capital C) a decrease in the risk of insolvency D) an increase in long-term […]

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Date: September 19th, 2020

Suppose a firm wants to borrow $200 million for 10 years to fund capit

Suppose a firm wants to borrow $200 million for 10 years to fund capital expenditures, and is considering the choice of a private placement with several insurance companies or a public issue through an investment banking firm as underwriter. For simplicity, we will assume that in either case the firm will issue pure-discount bonds. The […]

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Date: September 19th, 2020

A firm has annual operating outlays of $1,800,000 and a cash conversio

A firm has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for financing and reduces its cash conversion cycle to 50 days, the annual savings is ________. (Assume a 365-day year.) A) $4,652.19 B) $3,065.86 C) $5,917.81 D) $2,160.23     ANSWER C

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Date: September 19th, 2020

Under what circumstances would a firm engage in share repurchases rath

Under what circumstances would a firm engage in share repurchases rather than increasing dividends? a. If the firm has excess free cash flow that management expects will continue indefinitely. b. If the firm has excess free cash flow that management expects will be only temporary. c. If shareholders are in a lower tax bracket for […]

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Date: September 19th, 2020

A firm wants to borrow $100 million for 5 years (pure discount, for si

A firm wants to borrow $100 million for 5 years (pure discount, for simplicity). Which of the following sources has the lower effective interest cost? Orig. Fee/ Source Interest Rate Flotation Cost Private Placement 9. 00% 1% Public Issue 8.25% 3% a. The private placement b. The public issue c. The costs are the same […]

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Date: September 19th, 2020

Which of the following correctly describes the Dutch auction method of

Which of the following correctly describes the Dutch auction method of share repurchase? a. The firm conducts open-market purchases. b. The firm specifies a price and a quantity of shares that it will repurchase. c. The firm auctions shares to the highest bidder, as long as that bidder meets the firm’s reservation price. d. The […]

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Date: September 19th, 2020