Answered: According to MM Model, total value of…

According to MM Model, total value of firm is Decreases with the decreases in WACC Increases with the increase in WACC ☐ Constant None of the above Increases with the decresase in WACC

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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Question

According to MM Model, total value of firm is
Decreases with the decreases in WACC
Increases with the increase in WACC
☐ Constant
None of the above
Increases with the decresase in WACC

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25.For a upward slope yield curve, ( )exists. I forward rate II zero rate III par yieldA.I>II>III B. III> II> I C. II > I >III
Give typing answer with explanation and conclusion 27. EFN Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as EFN = −PM(S)b + [A − PM(S)b] × g Hint: Asset needs will equal A × g. The addition to retained earnings will equal PM(S)b × (1 + g).
Exercise Exercise 1. Consider the Cournot game G = (I, (Ai, Ti)i≤1) such that: 1. I = {1,2} is the set of firms. 2. AR+ is the set of firm i's strategies. 3. TAR is firm i's payoff function defined by, for some c ≥ 0, Ti(Qi, 9−i) = max{1 − (qi + q−i), 0}qi — cqi. Answer the following questions: 1. Find all (pure-strategy) Nash equilibria in the case of c = = 0. 2. Find all (pure-strategy) Nash equilibria in the case of c = (0, 1). 3. Find all (pure-strategy) Nash equilibria in the case of c = [1,∞). Exercise 2. Consider the Braess's paradox G 1. I = {1,2,. , 10} is the set of people. ... 2. A = {1,0} is person i's strategy space. = (I, (Ai, ui)i≤1) such that: 3. u AR is person i's payoff function defined by -11-Σjel aj if ai =1 ui (a) = -11-Σje(1a) if a = 0, where Σ;a; is the number of people choosing strategy 1 and Σ; (1 - a;) is the number of people choosing strategy 0. Show that every (pure-strategy) Nash equilibrium has five people choosing route SAG and five players choosing route…
A small increase in the annual rate of economic growth can lead to a larger increase in growth over time due to the effects of A the money supply. B compounding. C) regression towards the mean. D averaging.
The lowest rate of return possible is:a. 0%b. -∞c. -100%d. the company’s MARR
5) Which of the following will cause a movement from one point on an AD curve to another point on the same AD curve? a) a change in government expenditures b) a change in the price level c) a change in net exports d) all of the options provided 6) Here is a consumption function: C = CO + MPC(Yd). If MPC is 0.80, then we know that a) as Co rises by $0.80, Yd rises by $1. b) Yd rises by $0.80. c) as Yd rises by $1. Co rises by $0.80. d) as Yd rises by $1, C rises by $0.80. 7) An aggregate demand (AD) curve shows the a) none of the options provided is correct b) quantity of output that people are willing and can afford to buy at different price levels, ceteris paribus c) quantity of output that people are willing as well as able to produce and sell at different price levels, ceteris paribus. d) value of a particular good that people are willing and able to buy at a particular price, ceteris paribus. d) value of a particular good that people are willing and able to buy at a particular…
of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time le
of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time le
Consider a firm with a forward-looking P/E ratio of 4, a discount rate R=10% and ROE=5%. Suppose the price is equal to the fundamental value given by the DDM. What is the plowback ratio b of the firm? b=_ (answer a number between 0 and 1 with 2 decimals, e.g., 0.12)
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