(TCO A) In the United States, which of the following types of organization
Question # 00096038
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Updated on: 08/24/2015 01:16 AM Due on: 08/27/2015
C corporation S corporation Limited partnership |
one or two people, but if there are two owners, they must be married to each other. up to 100 owners. up to 64 owners. |
Increasing the number of payments. Decreasing the interest rate. Decreasing the liquidity of the payments. |
negative. either positive or negative. It really doesn’t matter. stated in time units that are different from the time units in which the interest rates are stated. |
| Question 5.5.(TCO G) If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the three. (Points : 20) |
| Question 6.6.(TCO D) A stock pays an annual dividend of $2.50 and that dividend is not expected to change. Similar stocks pay a return of 10%. What is P0? (Points : 20) |
| Question 7.7.(TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20) |
| Question 8.8.(TCO D) A bond has 5 years to maturity and has a YTM of 8%. Its par value is $1,000. Its semiannual coupons are $50. What is the bonds current market price? (Points : 10) |
| Question 9.9.(TCO D) A bond currently sells for $887 even though it has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10) |
| Question 10.10.(TCO D) What is ? and why is it important to investors and issuers of stock? Describe the behavior of stocks with ?s of greater than one, less than one, and less than zero. (Points : 30) |
| Question 11.11.(TCO E) A company has 10 million shares outstanding trading for $7 per share. It also has $300 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30) |
| Question 12.12.(TCO A) What is the difference between capital structure and capital budgeting? Explain and give an example of a capital structure decision and an example of a capital budgeting decision. (Points : 25) |
| Question 13.13.(TCO H) What is the difference between the cash cycle and the operating cycle? Under what condition would they be the same? (Points : 30) |
Question 14.14.(TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
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Solution: (TCO A) In the United States, which of the following types of organization