A+ Answers of the following Questions

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Question 1
Using the constant dividend growth model for common stock, if Po goes up:
A. the assumed cost goes up.
B. the assumed cost goes down.
C. the assumed cost remains unchanged.
D. need further information


Question 2
New common stock is more expensive than Ke:
A. to compensate for risk.
B. to compensate for more dividends.
C. to compensate for expansionary problems.
D. to cover distribution costs.


Question 3
In computing the cost of common equity, if D1 goes downward and Po goes up, Ke will:
A. go up.
B. go down.
C. stay the same.
D. slowly increase.

Question 1
In determining the cost of retained earnings:
A. the dividend valuation model is inappropriate.
B. flotation costs are included.
C. growth is not considered.
D. the capital asset pricing model can be used.


Question 2
Within the capital asset pricing model:
A. the risk-free rate is usually higher than the return in the market.
B. the higher the beta the lower the required rate of return.
C. beta measures the volatility of an individual stock relative to a stock market index.
D. None of the above


Question 3
Using the constant growth model, a firm's expected (D1) dividend yield is 3% of the stock price, and it's growth rate is 7%. If the tax rate is .35%, what is the firm's cost of equity?
A. 10%
B. 6.65%
C. 8.95%
D. More information is required.

Question 1
For many firms, the cheapest and most important source of equity capital is in the form of:
A. debt.
B. common stock.
C. preferred stock.
D. retained earnings.


Question 2
In computing the cost of common equity, if D1 goes downward and Po goes up, Ke will:
A. go up.
B. go down.
C. stay the same.
D. slowly increase.

Question 3
If flotation costs go down, the cost of new preferred stock will:
A. go up.
B. go down.
C. stay the same.
D. slowly increase.

Question 4.

The town of South Park is planning a bond issue in six months and Kenny, the town treasurer, is worried that interest rates may rise, thereby reducing the value of the bond issue. Should Kenny buy or sell Treasury bond futures contracts to hedge the impending bond issue?

1. In preparing a statement of cash flows by the indirect method, an increase in accounts payable is:
A. added to the net income when determining the net cash provided by operating activities.
B. subtracted from the net income when determining the net cash provided by operating activities.
C. added to the cash flows from investing activities.
D. not used to calculate the net cash provided by operating activities.

2. The method used by most corporations to prepare the statement of cash flows is the __________ method.
A. accrual
B. direct
C. deferral
D. indirect

 

3. Generally, if a short-term investment is to be classified as a cash equivalent, it must fall due within __________ from the date it was acquired.
A. 12 months
B. 6 months
C. 3 months
D. 1 month

    • 10 years ago
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