Quiz 2 Corporate Finance NAME ______________________ Apring 2013 2012 70 pts Show all work MC=5pts each 1. Find the EPS (y-axis) // EBIT (x-axis) crossover point of the following two capital structure plans. Complete the table and Draw the graph and show all the points including crossover‚ where line crosses y-axis‚ and the three EBITs below 30pts Assets = $3‚000‚000 Stock Price = $20 Interest Expense = 12% PLAN I D/E = 1.1 Recession Expected
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viewed in each of the following way: investment‚ financing‚ shareholder distribution and control issue. Repurchase of stock can be a way to use firm’s excess debt capacity. By doing so‚ firm can lower the cost of equity financing. If debt financing is more flexible and cheap‚ replace equity financing with debt financing is a good way to lower the weighted cost of capital. In this sense‚ such action is a financing issue because it controls the cost of financing. On the other hand‚ repurchase of stock
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for 8 to 10 percent. 8-2. Larger firms tend to be in a net creditor position because they have the financial resources to be suppliers to credit. The smaller firm must look to the larger manufacturer or wholesaler to help carry the firm’s financing requirements. 8-3. The prime rate is the rate that a bank charges its most creditworthy customers. The average customer can expect to pay one or two percent (or more) above prime. In competitive markets banks may actually charge preferred
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Finance and Investment Cycle I. Introduction A. Special purpose entities B. Transaction: less frequent‚ large and complex C. Focus of control activities: authorization of transactions & compete of accounting personnel D. Focus of substantive procedures: understanding of the transactions‚ verifying amounts and calculations‚ ensuring presentation and disclosures II. Inherent risks E. Lease accounting 1. The classification of operating or capitalized
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Facts: · First Investments Inc. owned stock of Basic Industries (BI)‚ a diversified multinational corporation with major shares in various electrical related markets · The BI annual report of 1994 shows a decline in the return on owners’ equity (ROE) · Fred Aldrich‚ a trainee in First Investment‚ was asked to conduct a financial analysis on BI · Three years financial statements (1994‚ 1993 and 1985) and reported 10 year financial highlights (1985 to 1994) were available for the
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` New venture financing at its core is securing the necessary funding to launch a new business. There are a variety of options for the entrepreneur to secure these funds‚ and finding the right financing in critical to starting any new business. Investors into a new venture will want to know that there is an acceptable risk/reward threshold for their capital. Therefore‚ it is important that the entrepreneur alleviate investor anxiety about the riskiness of the venture. There are several ways of
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FPL An Overview FPL Group‚ Inc. is Florida’s largest electric utility company. In 1925‚ through the consolidation of numerous electric and gas companies‚ they formed Florida Power & Light Company (FP&L). FP&L grew steadily over the next 50 years until rising fuel costs‚ operating issues‚ and construction costs began to decrease profitability. In the mid-1980s‚ FPL diversified with four major acquisitions - Colonial Penn Life Insurance Company‚ Telesat Cablevision‚ Inc.‚ CBR Information Group
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CHAPTER 14: DISTRIBUTIONS TO SHAREHOLDERS: DIVIDENDS AND SHARE REPURCHASES 1. The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes the firm’s stock price. a. True b. False ANSWER: True 2. Other things held constant‚ the higher a firm’s target payout ratio‚ the higher its expected growth rate should be. a. True b. False ANSWER: False RATIONALE: The higher the payout ratio‚ the less of its earnings the firm reinvests in the business
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his study investigates the relationship between saving‚ investment and economic growth for India over the period 1950-51 to 2007-08. The literature on the role of saving in promoting economic growth generally points to saving led growth. However‚ few studies show evidence for growth driven saving and some suggest no relationship. In theory‚ saving may stimulate economic growth‚ economic growth may also induce saving. This paper adds to the literature by analysing the existence and nature of these
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INTRODUCTION C HAPTER 10 The Revenue Cycle: Sales to Cash Collections • Questions to be addressed in this chapter include: – What are the basic business activities and data processing operations that are performed in the revenue cycle? – What decisions need to be made in the revenue cycle‚ and what information is needed to make these decisions? – What are the major threats in the revenue cycle and the controls related to those threats? 1 of 160 © 2008 Prentice Hall Business Publishing Accounting
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