Scrutiny by the media and analysts has at least two important implications for a firm, but does NOT include: a. information they generate reduces information asymmetry. b. their oversight of a firm’s management serves shareholders’ interest. c. they accurately forecast the returns on individual firms based on private information they generate. ANSWER C
The cost of retained earnings is the cost of issuing new common stock without flotation costs. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Your firm has preferred stock outstanding that pays a current dividend of $2.00 per year and has a current price of $21.50. Currently, preferred stock makes up approximately 15% of your firm’s long-term financing. What is the market required rate of return on your firm’s preferred stock? A) 8.70% B) 9.00% C) 9.30% D) 15.00% […]
Pricing preferred stock is most similar to pricing ________. A) constant growth common stock B) a perpetuity C) a zero-coupon bond D) a three-month Treasury bill ANSWER Answer: B
In working capital management, risk is measured by the probability that a firm will be ________. A) unable to pay annual dividends to stockholders B) unable to pay its bills as they come due C) unable to repay its long-term obligations D) unable to earn profits from day-to-day operations ANSWER B
An investment banker’s fees are part of the ________ realized for issuing new debt or equity. A) flotation costs B) opportunity costs C) revenues D) benefits ANSWER Answer: A
If a firm increases its current assets relative to total assets, ________. A) it increases return and reduces risk B) it increases return and increases risk C) it reduces return and reduces risk D) it reduces return and increases risk ANSWER C
Technological advances allow a firm’s earnings to grow over time because they increase the productivity of: a. labor. b. capital. c. both labor and capital. ANSWER C
Use the security market line to determine the required rate of return for the following firm’s stock. The firm has a beta of 1.25, the required return in the market place is 10.50%, the standard deviation of returns for the market portfolio is 25.00%, and the standard deviation of returns for your firm is also […]
The riskiness of a future cash flow is measured by ________ , and these are all components of the SML. A) the firm’s standard deviation, correlation, and the market risk premium B) beta, the market risk premium, and the firm’s standard deviation C) the market risk premium, beta, and correlation D) beta, the market risk […]
