Jefferson City Computers has developed a forecasting model to determine the additional funds it needsin the upcoming year. All else being equal, which of the following factors is likely to increase its additionalfunds needed (AFN)?A sharp increase in its forecasted sales and the company's fixed assets are at full capacity.A reduction in its dividend payout ratio.The company reduces its reliance on trade credit that sharply reduces, its accounts payable.Statements a and b are correct.Statements a and c are correct.

Jefferson City Computers, like any other business, needs to accurately forecast and manage its…

Answered: Jefferson City Computers has developed…

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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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.
A mature and stable company will likely have positive investing cash flows. O True O False All things that affect income this year either increase or decrease operating cash flows this year. O True O False A thriving company with positive income could still have negative total cash flows. True O False MacBook Pro
Suppose the profitable company, Hermes, Inc., previously calculated its external financing needs (EFN) to be $18,200,000. What will happen to the EFN if management now decides to decrease the dividend payout ratio from 35.00% to 25.00%? (1) It will increase to some value greater than $18,200,000. (2) It will fall to some value lower than $18,200,000. (3) It will remain at $18,200,000. (4) The answer depends on Hermes, Inc.’s growth rate in sales. (5) The answer depends on Hermes, Inc.’s profit margin.
Liability Driven Investing (LDI) Strategies (Continued) Example: Market value of assets is $160 million and present value of liabilities is $200 million. The modified duration of assets is 3, and the modified duration of liabilities is 4. (1) Compute the funding gap and the funding gap ratio (2) What is the funding gap interest-rate risk? (3) What will be the funding gap and the funding gap ratio if yields increase by 100 basis points? (4) How do we relate answers from questions (1) to (3)?
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Green Moose Industries has no debt in its capital structure and has $300 million in assets. Its sales revenues last year were $210 million with a net income of $10 million. The company distributed $1.55 million as dividends to its shareholders last year. What is the firm’s self-supporting, growth rate? (Note: Do not round your intermediate calculations.) 2.90% 0.61% 4.00% 0.52% Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm must issue the same number of new common shares that it issued last year. Common stock is the firm’s only form of equity.…
Answer the following lettered questions on the basis of the information in this table: a. If the interest-rate cost of funds is 8 percent, what will be the optimal amount of R&D spending for this firm?b. Explain why $20 million of R&D spending will not be optimal.c. Why won’t $60 million be optimal either?
Please answer MCQ not working required
You observe that a firm's ROE has increased from the previous year, but both its profit margin and equity multiplier are below the previous year's levels. Which of the following statements is CORRECT? Its return on assets must be lower than the previous year. Its total assets turnover must be lower than the previous year. Its TIE ratio must be higher than the previous year. Its total assets turnover must be higher than the previous year.
1. A credit portfolio manager is expecting corporate credit spreads to widen over the next several months. What are two ways that she can take advantage of the excess return (+coupon payments) relative to risk-free assets (i.e. treasuries) but limit the impact of the expected moves?
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