A cash budget seeks to determine estimated costs and revenues in order to forecast
earnings.
When a commercial bank grants a loan, it may decrease the cost of the loan by
requiring an origination fee.
The Open Market Committee has twelve members that include the Board of Governors.
If a firm has fixed costs of $3,000, the price of its product is $4.00, and the per unit
variable costs are $1.00, the break-even level of output is 1,000 units.
A company earned $2.00 per share in 1995 and paid cash dividends of $1.00. In 2005, it
earned $5.20 and paid a dividend of $2.16. What is the annual growth rate in earnings
and dividends? If the Consumer Price Index was 100 in 1995 and 163 in 2005, has the
investor’s purchasing power fallen?
If the marginal cost of capital rises, that suggests the cost of some component of the
firm’s capital structure has risen.
You bought a stock for $30 and after 10 years sold it for $50. It paid an annual dividend
of $2. Set up an equation that illustrates how the annual return is determined. Show that
this return is not 14%.
You purchase a bond for $875. It pays $80 a year (i.e., the semiannual coupon is 4
percent), and the bond matures after ten years. What is the yield to maturity?
Warehouse financing reduces risk to borrowers.
If a firm does not pay cash dividends, it may reinvest the earnings and grow.
Convertible bonds tend to sell for a premium over their value as stock.
An investor buys a $1,000, 20 year 7 percent (interest paid semiannually) bond at par.
After five years have passed, interest rates are 10 percent. How much did the investor
lose on the purchase of the bond?
What is the annual rate of return on an investment in a common stock that cost $40.50
if the current dividend is $1.50 and the growth in the value of the shares and the
dividend is 8 percent?
Once a firm has earnings, management has essentially two choices: distribute or retain
them.
Studies of investment returns suggest that the stocks of small companies generate
higher returns than the stocks of larger companies.
Insurance companies are a major source of loans to individuals.