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- 8. Each of the following is sometimes listed as a reasonable objective for a firm: (a) maximize profit (accounting income), (b) maximize sales (or share of the market), (c) maximize the value of a share of common stock t time periods from now, (d) ensure continuity of existence, (e) maximize the rate of growth, (f) maximize future dividends. Discuss each item and the extent of its relevance to the making of investment decisions.FE1 Show your work for problem solving questions. If you use one or more sources of information in preparing any answer, provide an APA-style reference, identify any quoted information, and cite a reference wherever it is used. How would each of the following events change the equilibrium financial market value of a company? (a)an increase in its cost of production; (b) an increase in its cost of financing; (c) an increase in the market’s discount rate; (d) an increase in its sales revenue; and (e) an increase in its projected future profits.8. Which of the following statement regarding value of a firm is correct? Select one: a. Firm value is created when the firm earns a return on its investment equal to the cost of capital. b. Firm value is created when the firm earns a return on its investment in excess of the cost of capital. c. Firm value is created when the firm earns a loss on its investment equal to the cost of capital. d. Firm value is created when the firm earns a return on its investment less than the cost of capital.
- 19. Gross profit margin is a better measure of profitability than return on equity (ROE). Select one: True or False27. A primary financial market is one that: A. offers financial assets with the highest expected return B. offers the greatest number of financial assets C. offers financial assets with the highest historical return D. involves the sale of financial assets for the first timeMultiple Choice Questions 1. The following statements are correct for the Economic Value Added (EVA), except, A. The most conventional way to determine the value of the asset is through its economic value added. B. Economic value Added (EVA) is a convenient metric in evaluating investment as it quickly measures the ability of the firm to support its cost of capital using its earnings C. EVA is the excess of the company’s equity after deducting the cost of capital. D. The general concept here is that higher EVA is better for the firm 2. Ernesto, Inc. has projected average earnings every year of P 100 million. Debt to Equity Ratio is 3:1. After tax cost of debt is 5% while cost of equity is 10%. The Board of directors of the company decided to sell the company for P 1 Billion. Compute for the Economic Value Added. (EVA). A. 5 Million B. P 50 Million C. P 0 D. P 25 Million 3. SPRO Corp is planning to expand and new projects is expected to have an EVA of P200,000. The annual coast of…
- Finance multiple choice question. 9. Which of the following is the primary goal of financial management for all for-profit companies? Maximize value of owners' equity. Maximize net cash flows. Maximize profitability. Minimize risk. Maximize market share.1. Identify three economic factors that will drive a firm’s price-earnings ratio to decrease over time. Identify three accounting factors that will drive a firm’s price-earnings ratio down in a given period. & Explain the role of analysts in increasing capital market efficiency.PQ 15. assuming full employment Expansionary aggregate demand oriented fiscal policy leads, ceteris paribus, to a. a short run fall in both income and the price level b. a short run rise in income and a fall in the price level c. no change in the long run equilibrium level of income and to an increase in the price level d. both an increase in the long run equilibrium level of income and an increase in the price level.
- 10. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you’ve done in previous problems, but it focuses on a firm’s free cash flows (FCFs) instead of its dividends. Some firms don’t pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Blur Corp. has an expected net operating profit after taxes, EBIT(1 – T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) is Blur Corp. expected to generate over the next year? $8,730 million $6,450 million $118,668 million $6,470 million…45. To be used appropriately, the constant growth dividend discount model requires: A company's cost of common equity capital be larger than its dividend growth rate The company be mature with a growth rate that is approximately equal to, or less than, the growth rate of the overall economy The company's growth rate remains approximately the same forever Group of answer choices All of the above Statements 1 and 2 only Statement 2 only Statements 2 and 3 are correct