Which of the following statements is true? a.The presence of asymmetric informat

Question

Which of the following statements is true? a.The presence of asymmetric information in financial markets increases the likelihood that these markets are efficient. b.Accounting profits are always more important to shareholders than cash flows. c.Managers should choose investment projects that maximize shareholder wealth. d.The study of finance only benefits students who aspire to careers in business. e.Investors should not be compensated with a higher return for owning risky securities since they should know better than to buy stock in a firm that has uncertain prospects.

The market yield on Spice Grills' bonds is 15%, and the firm's marginal tax rate is 33%. What is their shareholders' required return if the equity risk premium is 4%?

15%

11%

14%

19%

12%

15%

11%

14%

19%

12%

Explanation / Answer

Which of the following statements is true?

Answer:B Accounting profits are always more important to shareholders than cash flows.

Explanation to the above answer: Shareholder have no connection with the cash flow of the company they are only concentrate on the profit of the company. If the profit is more they will get the higher return on their investment

]

The market yield on Spice Grills' bonds is 15%, and the firm's marginal tax rate is 33%. What is their shareholders' required return if the equity risk premium is 4%?

Answer: 14%

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.