Finance

Harry Trading Company must choose its optimal capital structure. Curre

Harry Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm expects to generate a dividend next year of $5.44 per share. Dividends are expected to remain at this level indefinitely. Stockholders currently require a 12.1 percent return on their investment. Harry is considering changing […]

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Date: September 19th, 2020

Which of the following is NOT generally considered a cost of going pub

Which of the following is NOT generally considered a cost of going public? a. Underpricing: IPOs appear to be substantially underpriced. b. Competition: Now that the firm is more visible, industry rivals will compete more intensively. c. Issuance Costs: The typical underwriter spread for an IPO is 7% of the offering proceeds. d. Management’s time […]

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Date: September 19th, 2020

The reason why maximizing share value and maximizing EPS do not give t

The reason why maximizing share value and maximizing EPS do not give the same optimal capital structure is because ________. A) EPS maximization does not consider risk B) share value maximization does not consider risk C) EPS maximization considers cash flows D) EPS maximization does consider risk     ANSWER A

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Date: September 19th, 2020

Tangshan Mining Company must choose its optimal capital structure. Cu

Tangshan Mining Company must choose its optimal capital structure. Currently, the firm has a 40 percent debt ratio and the firm expects to generate a dividend next year of $4.89 per share and dividends are expected to grow at a constant rate of 5 percent for the foreseeable future. Stockholders currently require a 10.89 percent […]

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Date: September 19th, 2020

The basic shortcoming of the EBIT-EPS approach to capital structure is

The basic shortcoming of the EBIT-EPS approach to capital structure is ________. A) that the optimal capital structure is difficult to compute B) its disregard for the presence of preferred stock in the capital structure C) its disregard for the firm’s dividend policy D) that it concentrates on the maximization of EPS rather than the […]

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Date: September 19th, 2020