Financial literacy

8. How much will be recorded as a firm\'s additional paid-in capital if the firm

8. How much will be recorded as a firm's additional paid-in capital if the firm issues 1 million shares that have a $5 par value for $15 per sharei? A. $O 8. $5 million C. $10 mil…

8. If the risk-free rate is currently 5.6% and the market rate of return is 11.5

8. If the risk-free rate is currently 5.6% and the market rate of return is 11.5%, what would be the required rate of return on a stock with a beta of 1.3? Now suppose that the st…

8. In a portfolio, let X -return per dollar spent on Stock 1 and Y return spent

8. In a portfolio, let X -return per dollar spent on Stock 1 and Y return spent per dollar on stock 2 One definition of an optimal portfolio is to invest p (fraction of $1) in Sto…

8. Kelly Corporation will issue new common stock to finance an expansion. The ex

8. Kelly Corporation will issue new common stock to finance an expansion. The existing common stock just paid a $1.50 dividend, and dividends are expected to grow at a constant ra…

8. Kenai Company sold $600 of merchandise to a customer who used a National Bank

8. Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card. National Bank deducts a 3% service charge for sales on its credit cards. Kenai electr…

8. Light bulbs are tested for luminance. Random samples of 5 are chosen. The sum

8. Light bulbs are tested for luminance. Random samples of 5 are chosen. The summary information below is for 30 Samples. The specification limits are 90 lumes a. Estimate the pro…

8. Market multiple analysis Aa Aa The discounted cash flow model and the corpora

8. Market multiple analysis Aa Aa The discounted cash flow model and the corporate valuation model are the most widely used valuation techniques. Often these valuations are accomp…

8. Modigliani and Miller assumptions Aa Aa In 1958 Franco Modigliani and Merton

8. Modigliani and Miller assumptions Aa Aa In 1958 Franco Modigliani and Merton Miller (MM) published a set of financial papers that revolutionized the research of capital structu…

8. More on capital structure theory Aa Aa The Modigliani and Miller theories are

8. More on capital structure theory Aa Aa The Modigliani and Miller theories are based on several unrealistic assumptions about debt financing. In reality, there are costs, taxes,…

8. More on ratio analysis Aa Aa Analysts and investors often use return on equit

8. More on ratio analysis Aa Aa Analysts and investors often use return on equity (ROE) to compare profitability of a company with other firms in the industry. ROE is considered a…

8. More on ratio analysis Analysts and investors often use return on equity indu

8. More on ratio analysis Analysts and investors often use return on equity industry. ROE is considered a very important measure, and managers strive to make the company's ROE num…

8. More on ratio analysis industry. ROE is considered a very important measure,

8. More on ratio analysis industry. ROE is considered a very important measure, and managers strive to make the company's ROE numbers look good. and investors often use returm on …

8. Neptune Biometrics, despite its promising technology, is having diffi culty g

8. Neptune Biometrics, despite its promising technology, is having diffi culty generating profits. Having raised $85 million in an initial public offering of its stock early in th…

8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive

8. Nonconstant growth stock Aa Aa As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the…

8. One way Enron manipulated its financial statements was to sell assets at infl

8. One way Enron manipulated its financial statements was to sell assets at inflated prices to other firms, while giving a promise to buy back those assets at a later date. The in…

8. Overton Enterprises sells widgcts to a marketplace where total demand is 12 m

8. Overton Enterprises sells widgcts to a marketplace where total demand is 12 million. Overton's ma selling price per widget is $40 and the variable costs per widget are $25. Ove…

8. Pace Corporation had a taxable inco Pace Corporation had a taxable income of

8. Pace Corporation had a taxable inco Pace Corporation had a taxable income of $3,000,000 in 2015. What would be the rate and amount of the tax Pace corporation must pay for 2 01…

8. Portfolio expected return and risk Aa Aa A collection of financial assets and

8. Portfolio expected return and risk Aa Aa A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio,…

8. Portfolio risk and diversification Aa Aa A financial planner is examining the

8. Portfolio risk and diversification Aa Aa A financial planner is examining the portfolios held by several of her clients. which of the following portfolios is tikely to have the…

8. Previously issued securities are traded among investors in the primary market

8. Previously issued securities are traded among investors in the primary markets. A. True. B. False. 9. Limited liability is a major advantage of incorporating a business. A. Tru…

8. Problem 11.18 NPV AND IRR A store has 5 years remaining on its lease in a mal

8. Problem 11.18 NPV AND IRR A store has 5 years remaining on its lease in a mall. Rent is $1,900 per month, 60 payments remain, and the next payment is due in 1 month. The mall's…

8. Problem 13.08 Problem 13-8 Hamada equation Cyclone Software Co. is trying to

8. Problem 13.08 Problem 13-8 Hamada equation Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 80%…

8. REQUIRED RATE OF RETURN Suppose rRF = 8%, rM = 13%, and bi = 1.8. 2. Now supp

8. REQUIRED RATE OF RETURN Suppose rRF = 8%, rM = 13%, and bi = 1.8. 2. Now suppose rRF decreases to 7%. The slope of the SML remains constant. How would this affect rM and ri? Wh…

8. Real options Projects are also often embedded with different options that can

8. Real options Projects are also often embedded with different options that can help making decisions under uncertainty. There are techniques used to evaluate these embedded opti…

8. Remember that trip to Tokyo for the 2020 Olympics? Let\'s assume I planned th

8.  Remember that trip to Tokyo for the 2020 Olympics? Let's assume I planned things out way too conservatively. In seven years, a few of you will be successful attorneys, more of…

8. Replacement analysis Aa Aa Green Moose Industries is a company that produces

8. Replacement analysis Aa Aa Green Moose Industries is a company that produces iWidgets, among several other products. Suppose that Green Moose Industries considers replacing its…

8. Risks of investing in bonds The higher the risk of a security, the higher its

8. Risks of investing in bonds The higher the risk of a security, the higher its expected return will be. A bond's risk level is reflected in its yield, but understanding the diff…

8. Rol firm\'s beta is 1.3 and the market risk premium is 6.5% are 9,000 shares

8. Rol firm's beta is 1.3 and the market risk premium is 6.5% are 9,000 shares of preferred stock outstanding at a price of $22a 1 Tide, Inc. has 10,000 shares of common stock out…

8. Salam Sukuk (a) are not attractive to the seller, whose cash flow is enhanced

8. Salam Sukuk (a) are not attractive to the seller, whose cash flow is enhanced in advance (b) are not attractive to the buyer, as the Salam price is normally lower than the prev…

8. Sony Corporation is considering the purchase of a new phone system for a sale

8. Sony Corporation is considering the purchase of a new phone system for a sales office in Boise, Idaho. The Lucent Technologies system costs $54,000, has annual operating expens…

8. Stock dividends and stock splits Aa Aa Companies sometimes consider stock spl

8. Stock dividends and stock splits Aa Aa Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases Consider the following case: …

8. Stock dividends and stock splits Companies sometimes consider stock splits to

8. Stock dividends and stock splits Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases. Consider the following case Mainwa…

8. Stock repurchases Aa Aa There are a number of reasons why a firm might want t

8. Stock repurchases Aa Aa There are a number of reasons why a firm might want to repurchase its own stock. Read the statement and then answer the corresponding question about the…

8. Stockholder and manager conflicts Aa Aa Executive compensation packages often

8. Stockholder and manager conflicts Aa Aa Executive compensation packages often tie performance to bonus and incentive awards, supplemental retirement packages, perquisites, and …

8. Suppose in the spot market 1 U.S. dollar equals 1.20 Canadian dollars. 6-mont

8. Suppose in the spot market 1 U.S. dollar equals 1.20 Canadian dollars. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6…

8. Suppose that ABC Inc. is able to decrease its collection float time on all cr

8. Suppose that ABC Inc. is able to decrease its collection float time on all credit sales by 4 days. What effect would this have on the present value of ABC's credit sales, all e…

8. Suppose the Dividend Discount Model is used by investors to price a stock (be

8. Suppose the Dividend Discount Model is used by investors to price a stock (because it is a mature company). The rket price is 40/share. Earnings per share are 2.5, and the risk…

8. The Corner Grocer has a 7-year, 6.5 percent semiannual coupon bond outstandin

8. The Corner Grocer has a 7-year, 6.5 percent semiannual coupon bond outstanding with a $1,000 par value. The bond has a yield to maturity of 5.5 percent. Which one of the follow…

8. The Downtowner has 950,000 shares of common stock outstanding valued at $38 a

8. The Downtowner has 950,000 shares of common stock outstanding valued at $38 a share along with 40,000 bonds selling for $1,020 each. What weight should be given to the debt whe…

8. The Excel Corp. is considering issuing $100 million of twenty-year bonds payi

8. The Excel Corp. is considering issuing $100 million of twenty-year bonds paying 5% per year. This is competitive with comparable firms, and it is expected that the bonds will b…

8. The NPV and payback period Aa Aa What information does the payback period pro

8. The NPV and payback period Aa Aa What information does the payback period provide? Suppose Extensive Enterprises's CFO is evaluating a project with the following cash inflows. …

8. The Security Market Line (SML) relates risk to return, for a given set of fin

8. The Security Market Line (SML) relates risk to return, for a given set of financial market conditions. If investors conclude that the inflation rate is going to increase, which…

8. The Vernon Corp. has $3.1 million in current assets and $1.4 million in curre

8. The Vernon Corp. has $3.1 million in current assets and $1.4 million in current liabilities. It has $600,000 in inventory. Vernon would like to borrow money in the form of note…

8. The __________ rate of interest is the actual rate charged by the supplier an

8. The __________ rate of interest is the actual rate charged by the supplier and paid by the demander of funds. A) nominal B) real C) risk-free D) inflationary 9. The common stoc…

8. The beta of four stocks-P, Q, R, and S-are 059,0.78, 1.14, and 1.39, respecti

8. The beta of four stocks-P, Q, R, and S-are 059,0.78, 1.14, and 1.39, respectively and the beta of portfolio 1 is 0.98, the beta of portfolio 2 is 0.86, and the beta of portfoli…

8. The cash flows for Project C is shown below with the appropriate cost of capi

8. The cash flows for Project C is shown below with the appropriate cost of capital at 15.5 percent and the maximum allowable payback is three years. Project C TIME 0          1  …

8. The common stock of Eddie\'s Engines, Inc. sells for $37.43 a share. The stoc

8. The common stock of Eddie's Engines, Inc. sells for $37.43 a share. The stock is expected to pay $3.40 per share next year. Eddie's has established a pattern of increasing thei…

8. The current dividend yield on Clayton\'s Metals common stock is 3.2 percent.

8. The current dividend yield on Clayton's Metals common stock is 3.2 percent. The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year. The divide…

8. The following table presents select snapshots from the 2015 price and dividen

8. The following table presents select snapshots from the 2015 price and dividend history of the common stock for 3M, as obtained from Yahoo financial. Date Close Dividends Adj. C…

8. The power of risk pooling. There are 20,000 policy holders in an auto insuran

8. The power of risk pooling. There are 20,000 policy holders in an auto insurance pool, which charges an annual premium of $850 each. Policy holder i has Ni accidents each year, …