The cash conversion cycle of a firm is the length of time from the beginning of the production process to the collection of cash from the sale of finished products. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Phillip Enterprises Inc. needs to determine its cost of equity capital. Use the following information to estimate the firm’s cost of equity using both the security market line and the dividend growth model. The current market price of stock is $22.89, the risk-free rate is 4.00%, the required return on the market portfolio is 13.50%, […]
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
Use the dividend growth model to determine the required rate of return for equity. Your firm recently paid a dividend of $2.25 per share, has a recent price of $40.20 per share, and anticipates a growth rate in dividends of 3.00% per year for the foreseeable future. A) 8.76% B) 8.60% C) 8.44% D) There […]
Date: September 19th, 2020
Which of the following is an advantage of the dividend growth approach over the SML in estimating the required return on equity? A) The dividend growth model uses market information but the SML does not. B) Dividend growth is known, whereas estimating beta for the SML is an art form. C) It is easy to […]
Date: September 19th, 2020
