The optimal capital structure minimizes the weighted average of the cost of debt and
the cost of equity.
An origination fee reduces the cost of credit.
If a person buys a stock for $10 and sells it after 10 years for $20, the annual compound
return is 10%.
You bought a stock for $28.29 that paid the following dividends
After the third year, you sold the stock for $35. What was the annual rate of return?
Open market operations is a more flexible tool of monetary policy than the reserve
requirements.
A doubling of carrying costs will cut in half the economic order quantity.
An income statement shows how much the firm earned and the cash generated during a
period of time.
The underwriting of an issue of securities guarantees the firm issuing the securities a
specified amount of money.
Recession is a period of falling prices.
Commercial paper is a short-term security that is sold at a discount.
Most publicly held American firms that pay dividends tend to pay a regular quarterly
cash dividend.
Owners in S corporations or LLCs lack limited liability.
An upward shift in the fixed cost curve or a downward shift in the total revenue curve
will increase the break-even level of output.
Convertible preferred stock is convertible into the company’s debentures.
A firm earns 10 percent annually on its investments. One possible investment offers
$50,000 a year for 10 years and costs $300,000. Should the firm make this investment?
The dividend-growth model assumes the firm will be liquidated at some specified time
in the future.
A firm has the following balance sheet as of XX/XX/XX:
Currently sales are $4,000 with a net profit margin of 15 percent. Management expects
sales to increase to $5,000 and wants to determine if the firm will need external
financing to cover this expansion. Construct a forecasted balance sheet for sales of
$5,000 using the percent of sales technique of forecasting assets and liabilities that
spontaneously vary with sales. If the firm needs funds, these funds may be acquired
through a bank. If the firm has excess funds, they should be invested in marketable
securities. Assume that cash does notincrease with the increase in sales. If this
assumption were not made, would your answer be different?
