A. Return on assets must beabove the industry average.B. Total assets turnover must beabove the industry average.C. Total assets turnover must bebelow the industry average.D. Statements a and b are correct.E. None of the statements aboveis correct. You observe that a firm?sprofit margin is below theindustry average, while itsreturn on equity and debtratio exceed the industryaverage. What can youconclude?

you observer the firm, the profit margin is below the industry average, while its return on equity…

Answered: ou observe that a firm?s rofit margin…

ou observe that a firm?s rofit margin is below the ndustry average, while its eturn on equity and debt atio exceed the industry

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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Similar questions

Why does the WACC decrease as a firm begins to take on debt and then increase after a certain point?
None
1. The leverage ratio is the proportion of debts that a bank has compared to its equity/capital. Please answer one that is most correct Select one: a. Debt to Equity = Total debt / Shareholders Equity. b. Debt to Capital = Total debt / Capital (debt+equity) c. There are different leverage ratios such as. Debt to Equity = Total debt / Shareholders Equity. Debt to Capital = Total debt / Capital (debt+equity) Debt to Assets = Total debt / Assets. 2. Which of the following amortization methods is most likely to evenly distribute the cost of an intangible asset over its useful life? Select one: a. Units-of-production method. b. Straight-line method. c. Double-declining balance method 3. What ratio is a cash and marketable securities based (it removes Inventory) ? Select one: a. Quick Ratio b. Current Ratio c. Dupont Analysis set of ratios 4. Which of the following is an appropriate method of computing free cash flow to the firm? Select one: a. Add operating cash flows to…
4) Calculate the WACC for a firm with the following data: Comparable Firms Firm A Firm B Firm C Risk Free Rate Expected Mkt Return Market Standard Deviation Industry Standard Deviation Most Recent Debt Rating Default Premium Firm's Debt/Equity Ratios Actual Target Firm's Marginal Tax Rate i) 10.075% Correlation Coefficients Market 0.67 0.89 0.77 3.80% 10.30% 17.00% 21.00% 6.50% 0.72 1.63 30% Industry 0.54 0.72 0.66 ii) 14.112% Past Returns Std Deviation iii) 38% 29% 42% 8.672% Tax D/E Rate 0.67 30% 0.29 40% 1.34 30% iv) 11.724%
Please answer multi-choice question in photo.
In the context of the adjusted present value (APV) model of firm valuation, one major assumption is that firms will have a fixed debt to equity ratio in the future.
For a company holding significant net financial assets (NFO), after issuing some new debt, its risk in operation should be_____ as before issuing the debt; and its required rate of return of equity should be ______ as before. A. the same as .... the same as B. lower than ... lower than C. higher than ... higher than D. the same as ... higher than Please donot provide solution in image format and provide solution in step by step format and asap
Which statement is most correct? * A. Since debt financing raises the firm’s financial risk, increasing debt ratio will increase WACC. B. Since debt financing is cheaper than equity financing, increasing debt ratio will reduce WACC. C. Increasing a firm’s debt ratio will typically reduce the marginal costs of both debt and equity financing; however, it still may raise the firm’s WACC. D. Statements a and c are correct. E. None of the above
Which of the following statements is correct? A. The optimal dividend policy is the one that satisfies management, not shareholders. B. The use of debt financing has no effect on earnings per share (EPS) or stock price. C. Stock price is dependent on the projected EPS and the use of debt, but not on the timing of the earnings stream. D. The riskiness of projected EPS can impact the firm's value. E. Dlvidend policy is one aspect of the firm's financial policy that is determined solely by the shareholders. Reset Selection
Which of the below statements holds based on the empirical evidence? A.Leverage ratios are generally identical across countries B. Return on equity is on average greater than return on debt C.Return on equity is generally the same as the return on debt D.Leverage ratios are generally identical across companies
Which of the following statements is false?(a) The quickest way to determine whether a firm has too much debt is to calculate the debt-to-equity ratio.(b) The best guideline to determine the firm's liquidity is to calculate the current ratio.(c) From the investor's point of view, the rate of return on common equity is a good indicator of whether the firm is generating an acceptable return to the investor.( d) We can determine the operating margin by expressing net income as a percentage of total sales.

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