Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 20, Problem 2CQ
Debt versus
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Dividend payout ratio is calculated as:
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Dividend payout ratio is calculated as:
a) Dividends / Net incomeb) Net income / Dividendsc) Retained earnings / Dividendsd) Dividends / Total equity
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What does a negative net present value (NPV) indicate?
a) The project is profitable.b) The project is not viable.c) The project’s return is equal to the discount rate.d) The project has no cash inflows.
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Corporate Finance
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- no ai What is compound interest, and why is it important in personal finance?arrow_forwardNo ai The time value of money concept suggests:A. Money loses value over timeB. Inflation doesn’t matterC. Future money is more valuableD. Money today is worth more than tomorrowarrow_forwardA food processing company is considering replacing essential machinery. Cost and relevant cash flow details are provided in the table at the right. The company requires an 11% return on its capital. a) What is the present value of the yearly cash flows? Use a Time Value of Money function for full credit. (round to nearest dollar) b) What is the net present value of the project? (round to nearest dollar) c) What is the internal rate of return of the project? Use a Time Value of Money function for full credit. (round to two decimal places)arrow_forward
- what is the firms' weighted average cost of capital? please show me weight calculation for each capital source.arrow_forwardA small manufacturer is considering an equipment replacement project. The new equipment would have an installed cost of $125,000 and would replace existing equipment that was purchased 3 years ago at an installed cost of $80,000. If the company moves forward with the replacement, it could sell the old equipment for $25,000. Purchasing the new equipment would result in the company's current assets increasing by $12,000 and current liabilities increasing by $9,000. The company uses the 5-year MACRS table for depreciation, and is taxed at 21%. a) What is the accumulated depreciation of the old equipment? b) What is the current book value of the old equipment? c) What is the amount of depreciation recapture/recovery? d) What is the tax on the sale of the old equipment? e) What are the after-tax proceeds from the sale of the old equipment? f) What is the change in Net Working Capital? g) What is the initial investment for the project?arrow_forwardLast year Lewis Bank paid an annual dividend of $7 per share. The bank expects the growth of its dividends to be stable at 2% per year going forward. a) If investors require an 8% return, what is the current value of Lewis Bank's stock? (round to nearest cent) b) If the stock currently trades at $124.55 per share, what is the dividend growth rate investors expect? (round to nearest percent)arrow_forward
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