18- What sources of long-term capital do firms use?A. Long-term debtB. Preferred stockC. Common stockD. All of the above19- The component cost of common equity raised by retaining carnings is:A. koВ. К.C. keD. ks20- Increasing the value of the combined firms more than the sum of the individualfirms taken separately is known as:A. Risk managementB. Maintaining controlC. SynergyD. Diversification

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18- What sources of long-term capital do firms use? A. Long-term debt B. Preferred stock C. Common stock D. All of the above 19- The component cost of common equity raised by retaining carnings is: A. ko В. К, C. k D. ka 20- Increasing the value of the combined firms more than the sum of the ind firms taken separately is known as: A. Risk management B. Maintaining control C. Synergy D. Diversification

18- What sources of long-term capital do firms use? A. Long-term debt B. Preferred stock C. Common stock D. All of the above 19- The component cost of common equity raised by retaining carnings is: A. ko В. К, C. k D. ka 20- Increasing the value of the combined firms more than the sum of the ind firms taken separately is known as: A. Risk management B. Maintaining control C. Synergy D. Diversification

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Interpretation No. 46R relates to the issue of whether an investing firm is the primary beneficiary in a variable-interest entity. When is an entity classified as a variable interest entity? Starting with free cash flows from operations, discuss how an analyst would measure free cash flows to common equity shareholders.
which one is correct please confirm? QUESTION 37 Which of the following statements is true concerning companies that do not pay dividends? a. The cost of equity capital can be estimated using the Capital Asset Pricing Model. b. The cost of equity capital is equal to the growth short-term rate of earnings per share. c. The dividend capitalization model can be used to determine an accurate cost of equity capital. d. None of these are correct
If the firms earns rate of return on its investments equal to the required rate of return it is called O a. Normal firm O b. Growth firm O c. Decline firm Od. Slow firm
Question 19 Which of the following statements / combinations are correct regarding the Optimal Capital structure of a firm? I. II. III. The optimal capital structure always calls for a debt/assets ratio equal to the one that maximizes expected EPS. An increase in financial leverage used by a firm will always increase the risk and the expected rate of return on equity, thus pushing the firm's stock price to fall. A. I and II B. I, II and III Managers at a firm choose a capital structure so that the mix of securities making up the capital structure minimizes the cost of financing the firm's activities. The optimal capital structure maximizes the total value of the overall value of the firm IV. C. I only D. I, II and IV E. II only
A firm's cost of capital indicates [Select] A firm must earn [Select] provided. the risk of the firm's assets. to compensate investors for the financing they hav The required return for a firm is the same as [Select]
8. Each of the following is sometimes listed as a reasonable objective for a firm: (a) maximize profit (accounting income), (b) maximize sales (or share of the market), (c) maximize the value of a share of common stock t time periods from now, (d) ensure continuity of existence, (e) maximize the rate of growth, (f) maximize future dividends. Discuss each item and the extent of its relevance to the making of investment decisions.
3
18. Which of the following statements is most correct? a. The proper goal of the financial manager should be to maximize the firm’s expected cash flow, because this will add the most wealth to each of the individual shareholders (owners) of the firm. b. One way to state the decision framework most useful for carrying out the firm’s objective is as follows: “The financial manager should seek that combination of assets, liabilities, and capital that will generate the largest expected projected after-tax income over the relevant time horizon.” c. Since large, publicly-owned firms are controlled by their management teams, and typically, ownership is widely dispersed, managers have great freedom in managing the firm. Managers may operate in stockholders’ best interests, but they may also operate in their own personal best interests. As long as managers stay within the law, there simply aren’t any effective controls over managerial decisions in such situations. d. The riskiness inherent in a…
Q.What is the advantage of an ETF relative to open-end and closed-end investment company? ____ A) Intraday pricing of its shares B) Tax shelter protection C) Lower portfolio turnovers D) All of the above
M-M theroy with perfect market suggests that divident payment: A.It dependes on the company's capital structure and retained earnings B.Has a positive impact on the value of a firm C.Has a negative impact on the value of a firm D.Has no impact on the value of a firm
12. The validity of MM theorem arises from A. managers maximizing shareholder value B. managers following the correct capital budgeting decisions C. the principle of no-arbitrage in perfect market D. managers optimizing firms' capital structures
BIE The Cost of Capital: Weighted Averige cost of capital The firm's target capital structure is the mix of debt, presured stack, and common equity the firm plans to mise funds for future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these I components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common study then the cost of retained earnings is used in the firm's WACC calculation. However, if the firm will I have to issue new common stock, the cost of new common stock should be used in the firm's WALC calculation. Barton Industines expects that its target capital Structure for finds in the future for its raising capital budget will consist of 40% debt, 5% prefence stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd is 10.0%, the firm's cost of preferred stock, rp is 9.2.%. and the firm's cost of…

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