Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
10th Edition
ISBN: 9780077835422
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 12, Problem 6PS
The
a. Stalwart.
b. Slow-growth firm.
c. Turnaround.
d. Asset play
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Students have asked these similar questions
An unlevered firm perceives its optimal dividend policy to be a 40 percent payout ratio. Asset turnover is sales/assets = 80%, the profit margin is 10 percent, and the firm has a target growth rate of 5%.
a. Is the firm's target growth rate consistent with it other goals?
b. If not, how much does it need to increase asset turnover to achieve it goals?
c. How much would it need to increase the profit margin instead?
A discounted cash flow approach to valuing a firm, using the weighted average cost of capital as a discount rate, makes sense to use when:
a.
Financial structure and risk of the investment are relatively stable over time.
b.
The risk of bankruptcy is high.
c.
A firm is expected to go through a transition that calls for a high use of debt that will be paid down over a few years.
d.
Non-GAAP accounting is being used.
e.
All of the above.
4. Case study
A tech industries Inc. has initial resources equal to
$150 million. Because management estimates that
optimal operation requires an investment of $200
million, the firm must raise an additional $50
million in capital and that amount will be financed
through retention of some or all of existing
resources rather than distributing to stockholders
as dividend. Management projects that the
investment of $200 million in time 2 will create
$330 million in cash flow at time 2. Assume the
market rate of interest is 8% for funds raised.
a. If the original stockholders receive none of the
initially available resources as a dividend and
must raise the entire $50million on carry out
the optimal investment program.
What is the present value of the Atech
Industrial Inc.?
b. Suppose that the board of directors decides to
pay out to existing stockholders $80 million at
time 1 so that only $70 million of the $150
million of the firm's initial resources are
available to meet the future…
Chapter 12 Solutions
Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 12 - Prob. 1PSCh. 12 - Why does it make intuitive sense that the slope of...Ch. 12 - Which one of the following firms would be...Ch. 12 - Prob. 4PSCh. 12 - How do each of the following affect the...Ch. 12 - The present value of a firm’s projected cash flows...Ch. 12 - Prob. 7PSCh. 12 - Which of the following is consistent with a...Ch. 12 - Which of the following is not a governmental...Ch. 12 - Prob. 10PS
Ch. 12 - Prob. 11PSCh. 12 - ATech has fixed costs of 7 million and profits of...Ch. 12 - Choose an industry and identify the factors that...Ch. 12 - What monetary and fiscal policies might be...Ch. 12 - If you believe the U.S. dollar is about to...Ch. 12 - Unlike other investors, you believe the Fed is...Ch. 12 - Consider two firms producing smartphones. One uses...Ch. 12 - Prob. 18PSCh. 12 - Prob. 19PSCh. 12 - Prob. 20PSCh. 12 - In which stage of the industry life cycle would...Ch. 12 - Prob. 22PSCh. 12 - Why do you think the change in the index of labor...Ch. 12 - You have 5,000 to invest for the next year and are...Ch. 12 - General Weedkillers dominates the chemical weed...Ch. 12 - Prob. 26PSCh. 12 - Prob. 27PSCh. 12 - Prob. 28PSCh. 12 - Prob. 29PSCh. 12 - Prob. 30PSCh. 12 - Prob. 31PSCh. 12 - Prob. 32PSCh. 12 - Prob. 33CCh. 12 - Prob. 1CPCh. 12 - Prob. 2CPCh. 12 - Prob. 3CPCh. 12 - Prob. 4CPCh. 12 - Prob. 5CP
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