Given the following probability distributions, what are the expected returns for the Market and for ...
[html]Given the following probability distributions, what are the expected returns for the Market and for Security J? State 1 P1 = 0.2 Km = -10% Kj = 40% : State 2 P1 = 0.5 Km = 10% Kj = -20% : State 3 P1 = 0.3 Km = 30% Kj = 30%
At the market close on June 13, 2019 Apple Inc. (AAPL) common stock was trading at an ask price of ...
[html]At the market close on June 13, 2019 Apple Inc. (AAPL) common stock was trading at an ask price of $191.10 and a bid price of $190.35. Apple's previous closing price was $194.19. What is the bid/ask spread of Apple?
Examples of uses of cash include A) paying cash dividends to stockholders. B) borrowing an additional amount using a secured loan. C) selling machinery. D) all of the above
Which of the following is FALSE concerning bonds? A) The indenture spells out the obligations of the bond issuer. B) Mortgage bonds are secured by assets such as real estate. C) Debentures are secured by assets other than real estate. D) Subordin
WineCellars Inc. currently has a weighted average cost of capital of 12%. WineCellars has been ...
WineCellars Inc. currently has a weighted average cost of capital of 12%. WineCellars has been growing rapidly over the past several years, selling common stock in each year to finance its growth. However, due to difficult economic times this year, W
All of the following will make the break-even point increase, other things equal, EXCEPT
All of the following will make the break-even point increase, other things equal, EXCEPT A) fixed costs increase. B) the sales price per unit is decreased due to competition. C) variable costs increase due to higher direct labor cost. D) the numb
Financial leverage could mean financing some of a firm's assets with
Financial leverage could mean financing some of a firm's assets with A) preferred stock. B) retained earnings. C) private equity capital. D) sales revenues.
Limited partnerships are not as prevalent as corporations because
Limited partnerships are not as prevalent as corporations because A) limited partners can lose up to three times the amount they invested in the partnership if the business goes bankrupt. B) limited partnerships have the disadvantage of double taxa
Which of the statements below are true? A) The sole proprietorship and the general partnership both feature unlimited liability. B) A corporation is the business form that is typically the most complicated (legally) to establish. C) The corporati
Which of the following forms of business organization limits the liability of owners?
Which of the following forms of business organization limits the liability of owners? A) sole proprietorship B) general partnership C) corporation D) two person partnership
Which of the following statements concerning net income is MOST correct?
Which of the following statements concerning net income is MOST correct? A) Net income represents cash available to pay dividends. B) Net income represents sales minus operating expenses at a specific point in time. C) Negative net income reduces
The value of a bond investment, which provides fixed interest payments, will increase when ...
The value of a bond investment, which provides fixed interest payments, will increase when discounted at an 8% rate rather than at an 11% rate. [True or False]
Changes in the general economy, like changes in interest rates or tax laws, represent what type of risk?
Changes in the general economy, like changes in interest rates or tax laws, represent what type of risk? A) company-unique risk B) market risk C) unsystematic risk D) diversifiable risk
If the beta for stock A equals zero, then A) stock A's required return is equal to the required return on the market portfolio. B) stock A's required return is equal to the risk-free rate of return. C) stock A has a guaranteed return. D) stock A'
A company with a bond rating of BBB is more likely to have which of the following qualities compared ...
A company with a bond rating of BBB is more likely to have which of the following qualities compared to a company with a bond rating of B? A) greater reliance on equity financing B) high variability in past earnings C) little use of subordinated d
If markets were entirely efficient (perfect), which of the following would we conclude?
If markets were entirely efficient (perfect), which of the following would we conclude? A) There would be no inflation. B) Book value would be the same as market value. C) No firms would ever default on their bonds. D) Market value and intrinsic
Shackleford Corporation net income this year is $800,000. The company generally retains 35% of net ...
Shackleford Corporation net income this year is $800,000. The company generally retains 35% of net income for reinvestment. The company's common equity currently has a book value of $5,000,000. They just paid a dividend of $1.37, and the required rat
The main disadvantage of the NPV method is the need for detailed, long-term forecasts of free cash ...
The main disadvantage of the NPV method is the need for detailed, long-term forecasts of free cash flows generated by prospective projects. [True or False]
The advantages of NPV are all of the following EXCEPT
The advantages of NPV are all of the following EXCEPT A) it can be used as a rough screening device to eliminate those projects whose returns do not materialize until later years. B) it provides the amount by which positive NPV projects will increa
The net present value always provides the correct decision provided that
The net present value always provides the correct decision provided that A) cash flows are constant over the asset's life. B) the required rate of return is greater than the internal rate of return. C) capital rationing is not imposed. D) the int
Under what condition would you NOT accept a project that has a positive net present value?
Under what condition would you NOT accept a project that has a positive net present value? A) If the project has a profitability index less than zero. B) If two or more projects are mutually inclusive. C) If the firm is limited in the capital it h
A local restaurant owner is considering expanding into another rural area. The expansion project ...
A local restaurant owner is considering expanding into another rural area. The expansion project will be financed through a line of credit with City Bank. The administrative costs of obtaining the line of credit are $500, and the interest payments ar
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