earnings per share (EPS) depends on the characteristics of the projects the firm selects‚ and thus on the firm’s assets. However‚ EPS is not affected by the manner in which those assets are financed. | d. | Potential agency problems can arise between managers and stockholders‚ because managers hired as agents to act on behalf of the owners may instead make decisions favorable to themselves rather than the stockholders. | e. | Large‚ publicly owned firms like IBM and GE are controlled by their
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CHAPTER 11                                                                        
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INTRODUCTION Financial statement analysis helps managers predict future earnings‚ dividends and free cash flow. Analysts use financial ratios to derive important information about the relationships between individual values in the financial statements and identify problem areas and opportunities within a firm. On the other hand‚ investors use financial statements to derive safe conclusions about a firm ’s relative performance over time‚ and make informed investment decisions. Financial ratios are
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concerned with the asset side of the firm’s balance sheet dealing with the strategic process of on determining long-term future cost and benefits in areas of decision of offering a new product‚ new investment and so on. It shows the relationship between present and future. Firms use financing decision for at least three main reasons. The financing decision helps firms in providing an important insight in to the ways of estimating the cost of capital. Second‚ it helps to avoid making mistakes in
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MGF402 Homework 3 Due date: Thursday October 31st 1. Calculate EAR and APR for the following questions. a. You have an APR of 7.5% with continuous compounding. What is the EAR? b. You have an EAR of 9%. What is the equivalent APR with continuous compounding? c. The buyer of a new home is quoted a mortgage rate of 0.5% per month. What is the APR on the loan? d. A loan for a new car costs the borrower 0.8% per month. What is the EAR? Answer: a. 1 + EAR = eAPR => EAR = eAPR - 1 =
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FIN 4604 SAMPLE PROBLEMS I PART A 1. Suppose that the Brazilian real depreciates by 40% against the U.S. dollar. By how much will the dollar appreciate against the real? a. 67% b. 40% c. 32% d. 28% e. 75% 2. If the dollar appreciates by 300% against the Turkish Lira‚ obtain the Lira’s depreciation against the dollar. a. -67% b. –40% c. –32% d. -28% e. –75% 3. The asset market view of exchange rate determination says that the spot rate: a. Should follow a random walk. b. Is affected
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Financial Management Assignment (10 Sep‚ 2012) ------------------------------------------------- Ch. 5: 1 (a-e)‚ 4‚ 5‚ 7‚ 10‚ 11‚ 12‚ 15 ------------------------------------------------- FM1 Takumi KAWAI‚ Pham NGUYEN‚ Yang CHEN‚ Bi CHAO #1 a. What is the payback period on each of the following projects? Payback period: A 3 years‚ B 2 years‚ C 3years b. Given that you wish to use the payback rule with a cutoff period of two years‚ which projects would you accept? “B” Only B meetsthe
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percentage after the 1. It represents the Total return for reinvesting the First year-dividends in the stock market for 2 more years and reinvesting the second year dividends for the final year. Mean = Ṝ = (R1 + … + RT) / T Risk premium = Difference between risky returns and Riskfree return Real return = Ṝ minus inflation Return = mean Risk = standard deviation Chapter 13: Corporate Financing Decisions and Efficient Markets There are three ways to create valuable financing opportunities:
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to the difference between these two rates of return? A. risk premium B. geometric return C. arithmetic D. standard deviation E. variance 2. Which one of the following best defines the variance of an investment’s annual returns over a number of years? A. The average squared difference between the arithmetic and the geometric average annual returns. B. The squared summation of the differences between the actual returns and the average geometric return. C. The average difference between the annual
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FINAL EXAM 1. The accounting measure of a firm’s equity value generated by applying accounting principles to asset and liability acquisitions is called ________. A. book value 2. New-economy companies generally have higher _______ than old-economy companies. B. P/E multiples 3. Earnings yields tend to _______ when Treasury yields fall. A. fall 4. A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital
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