Log in
Finance
1
answer
0
watching
606
views

What is the market price of a share of stock for a firm that pays dividends of $1.20 per share, has a P/E of 14, and a dividend payout ratio of 0.4?

The Market Value Added (MVA) is the ____.

  1. indicator of how successful a firm has been at increasing its financing its assets
  2. return on total capital minus cost of capital
  3. indication of an increase in operating efficiency
  4. positively related to the present value of all expected future EVA.

For our purpose, Shareholders' Value Maximization will be the preferred goal for all of the following reasons EXCEPT:

  1. The shareholders' value maximization goal deals with accounting profit, while the profit maximization goal attempts to make cash available to meet financial needs.
  2. Shareholders' value maximization is a long-run goal and the public image of the corporation may be of deep concern to shareholders including the wealth effect
  3. The effects of all financial decisions are reflected in the price of the stock being traded in efficient markets
  4. The complexities and uncertainties in the external environment are all absorbed in the value of the stock.

Watch
1
answer
0
watching
606
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Hubert Koch
Hubert KochLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

25. If a merger is done for __________ reasons, then the combined corporation will be worth more than the two individual corporations (2+2 = 5).

  1. Expropriation
  2. Synergy
  3. Hubris
  4. Wealth Redistribution

26. A(n) __________ is when a parent company sells shares of a subsidiary to the public.

  1. Divestiture
  2. Leveraged Buyout
  3. Joint Venture
  4. Equity Carveout

27. Antitakeover measures primarily protect ______________.

  1. Acquiring firm managers
  2. Acquiring firm shareholders
  3. Target firm shareholders
  4. Target firm managers

28. If investors prefer dividends to capital gains (Bird in the Hand theory is true), then

  1. The cost of equity will decrease as the retention ratio increases
  2. The cost of equity will decrease as the payout ratio decreases
  3. The cost of equity will increase as the retention ratio decreases
  4. The cost of equity will increase as the payout ratio decreases

29. _______________ are when the firm buys back a set number of shares on a set date for a specific price.

  1. Dividend Reinvestment Plans
  2. Tender Offers
  3. Dutch auctions
  4. Clientele Repurchases

30. Any signaling effect of dividends should occur on the ______________.

  1. Declaration Date
  2. Ex-Dividend Date
  3. Record Date
  4. Payment Date

31. Which statement is TRUE?

  1. Dividend rights say that shareholders get any remaining assets after all creditors have been paid in bankruptcy
  2. According to financial theory, shareholder wealth should be unaffected by a two-for-one stock split.
  3. A stock split is a large stock dividend so that you might have twice as many shares with each share being worth half as much.
  4. The stock price should fall by the amount of the dividend on the ex-dividend date.

32. Which statement is FALSE?

  1. In a Stock Swap, the acquiring firm issues shares of stock in order to pay for the acquisition
  2. A conglomerate merger is between unrelated firms
  3. A Leveraged Buyout involves creating a new company out of part of your company and then selling shares of the new company to the public.
  4. In an asset purchase, the acquiring firm does not assume the liabilities of the target firm.

33. Suppose that prior to a merger the stock price of the target company was $50 and the stock price of the acquiring company was $40. If the acquiring firm agrees to pay 1.5 share of their stock for every share of the target firms stock, then what premium are they offering?

a) 10% b) 20% c) 25% d) 33%

34. Which statement is FALSE?

  1. The White Knight defense is when you try to sell yourself to a

Amongst corporations, sole proprietorships and partnerships, approximately what percentage of revenues are generated by corporations?

50%

42%

33%

82%

Question 2

What should be the financial goal of any firm?

attracting and acquiring capital and investing it

maximization of the owners’ wealth

offering quality products at fair prices

quality customer service

Question 3
4 pts
Which of the following statement(s) is \ are true regarding the corporate management team?

In a corporation, ownership and direct control are typically separate.

Board of Directors is elected by shareholders and has ultimate decision-making authority

The Chief Executive Officer (CEO) – the Board typically delegates day-to-day decision making to the CEO.

All of the above



Question 4
4 pts
When calculating the present value of either a future single sum or a future annuity, it involves a process called discounting. The applicable interest rate to perform the discounting function is usually called the

yield to maturity

compound interest rate

discount rate

none of the above

Question 5
4 pts
_________________ are used to present additional information about items included in the financial statements and to present additional financial information.

stock certificates

Notes to financial statements

Preferred stocks

Convertible securities
Question 6
4 pts
What should be the financial goal of any firm?

maximization of the owners’ wealth

attracting and acquiring capital and investing it

offering quality products at fair prices

quality customer service

Question 7
4 pts
A competitive market is one in which a _____ numbers of producers compete with each other to satisfy the wants and needs of a _____ number of consumers.

Large, small

Small, small

Large, large

Small, large

Question 8
4 pts
The Valuation Principle is an analysis between the value of the ______ of a financial alternative and the value of its ______.

revenues, income

benefits, costs

expenses, costs

Question 9
4 pts
The Net Present Value rule implies that we should compare a project’s net present value (NPV) to___________. (zero \ future value \ the past).

Zero

Future Value

The Past

An Estimate

Question 10
4 pts
The internal rate of return (IRR) rule will _______ agree with the Net Present Value rule on a given investment project.

always

never

sometimes

none of the above

Question 11
5 pts
The law of one price exists due to arbitrage opportunities. If the price of a security, commodity or asset is different in two different markets, then an arbitrageur will ______ the asset in the more expensive market and ________ it where prices are lower.

sell, purchase

purchase, sell

purchase, purchase

sell, sell

Question 12
5 pts
Approaching every problem using a timeline is a(n) ________ idea because timelines identify events in a transaction or investment which might otherwise be easily overlooked.

good

bad

indifferent

unrealistic

Question 13
5 pts
The present value (PV) of a stream of cash flows is the _______ the present values of each individual cash flow

difference between

product of

sum of

same as

Question 14
5 pts
As the number of periods increases, present value (increases\decreases\stays the same).

increases

decreases

stays the same

is unrelated

Question 15
5 pts
When a constant cash flow will occur at regular intervals for a finite number of periods of time, it is called a(n) __________.

annuity

perpetuity

interest payment

principle payment

Question 16
5 pts
When a constant cash flow will occur at regular intervals forever, it is called a(n) ___________.

annuity

perpetuity

interest payment

principle payment

Question 17
5 pts
The NPV measures the ______ change in shareholder wealth that arises from undertaking a project.

consistent

dollar

annual

semi-annual

Question 18
5 pts
When calculating the present value of either a future single sum or a future annuity, the applicable interest rate is usually called the _______ rate

compounding

inverted

market

discount

Question 19
5 pts
To endow a perpetuity is the same as calculating the present value (PV) of a perpetuity. Say you want to endow an annual graduation party at your alma mater. You want the event to be a memorable one, so you budget $30,000 per year forever for the party. If the university earns 8% per year on its investments, and if the first party is in one year’s time, how much will you need to donate to endow the party?
The formula for PV of a perpetuity = C\r; = $30,000 \ 0.08; =

$3,750

$37,500

$375,000

$3,750,000

Question 20
5 pts
With an Ordinary Annuity, payments are required at the ________ of each period. An example of this is bonds which usually pay coupon payments at the end of every six months until the bond's maturity date.

beginning

middle

end

payments are not required

Question 21
5 pts
Sales of securities that the seller does not own is called a:

stop-loss order

short sale

limit order

maintenance margin

Question 22
5 pts
What is the name of the market where money market securities, bonds, and mortgages are originated and traded?

debt securities market

foreign exchange market

derivative securities market

equity securities market

Question 23
5 pts
If an investor feels the price of a stock will decline in the future, which trade should the investor undertake?

market order

buy on margin

limit order

short sale

Question 24
5 pts
For risk averse investors, how much return is expected for taking on more risk?

lower

equal

zero

higher

Question 25
5 pts
A ___________________ is a highly regulated document which details the issuers operations and finances and must be provided to each buyer of a newly issued security.

Prospectus

An underwriting agreement

A best efforts agreement

none of the above

Question 26
5 pts
Which of the following statements about liquidity ratios is true?

The lower the quick ratio relative to the current ratio, the safer a firm is in terms of liquidity.

The higher the current ratio, the more likely a firm is able to pay its short-term obligations.

The quick ratio is always between 0 and 1.

All the above statements are true.

Question 27
5 pts
The ability of a firm to meet its short-term debt obligations as they come due is indicated by which of the following ratios:

liquidity ratios

asset utilization ratios

financial leverage ratios

profitability ratios

Question 28
5 pts
Which one of the following financial statements reports a firm’s assets and the claims on assets?

balance sheet

income statement

statement of changes in financial position

cash flow statement

Question 29
5 pts
The extent to which assets are used to support sales is indicated by which of the following ratios:

liquidity ratios

asset utilization ratios

financial leverage ratios

profitability ratios

Question 30
5 pts
The extent to which assets are financed by borrowed funds and other liabilities is indicated by:

liquidity ratios

asset utilization ratios

financial leverage ratios

profitability ratios

Question 31
5 pts
The basic price that equates the demand for and supply of loanable funds in the financial markets is the __________:

interest rate

yield curve

term structure

cash price

none of the above

Question 32
5 pts
Federal obligations usually issued for maturities of two to ten years are called:

Treasury bonds

Treasury notes

Treasury bills

Agency issues

Question 33
5 pts
An increase in the demand for loan-able funds, holding supply constant, will cause interest rates to:

increase

decrease

stay the same

none of the above

Question 34
5 pts
As interest rates rise, the prices of existing bonds will:

rise

stay the same

fall

either a or b

Question 35
5 pts
In an inflationary period, interest rates have a tendency to:

rise

fall

stay the same

act erratically

Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $0.95 out of annual earnings per share of $3.5. Currently, Rubenstein Bros.' stock is selling for $20.00 per share. Adhering to the company's target capital structure, the firm has $15 million in total invested capital, of which 25% is funded by debt. Assume that the firm's book value of equity equals its market value. In past years, the firm has earned a return on equity (ROE) of 15%, which is expected to continue this year and into the foreseeable future.

Based on this information, what long-run growth rate can the firm be expected to maintain? Round your answer to two decimal places. Do not round intermediate calculations. (Hint: g = Retention rate x ROE.)
%

What is the stock's required return? Round your answer to two decimal places. Do not round intermediate calculations.
%

If the firm changed its dividend policy and paid an annual dividend of $1.90 per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE. Therefore, what must the firm's new expected long-run growth rate? Round your answer to two decimal places. Do not round intermediate calculations.
%

If this plan is implemented, what must the firm's required return be? Round your answer to two decimal places. Do not round intermediate calculations.
%

Suppose instead that the firm has decided to proceed with its original plan of disbursing $0.95 per share to shareholders, but the firm intends to do so in the form of a stock dividend rather than a cash dividend. The firm will allot new shares based on the current stock price of $20.00. In other words, for every $20.00 in dividends due to shareholders, a share of stock will be issued. How large will the stock dividend be relative to the firm's current market capitalization? (Hint: Remember market capitalization = P0 x number of shares outstanding.) Round your answer to two decimal places. Do not round intermediate calculations.
%

If the plan in part d is implemented, how many new shares of stock will be issued? Round your answer to the nearest whole dollar. Do not round intermediate calculations.


If the plan in part d is implemented, by how much will the company's earnings per share be diluted? Round your answer to the nearest cent. Do not round intermediate calculations.
$ per share

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in