If a company declares bankruptcy, the common stock holders: O A. Can be sued by creditors to pay outstanding debt B. Are first in line to be paid the value of their stock OC. Have limited liability and can only lose what they paid for the stock O D. Can sue the bond holders for compensation
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- This refers to third-party companies that hold the assets (real estate/properties) of one party before transferring them to another. *A. Collective Investment SchemesB. Escrow CompaniesC. Investment BankersD. None of the choices.E. Finance CompaniesWu of Troy, New York, has $5,000 that he wants to invest in the stock market. Ji is in college on a scholarship and does not plan to use the $5,000 or any dividend income for another five years, when he plans to buy a home. He is currently considering a small company stock selling for $25 per share with an EPS of $1.25. Last year, the company earned $900,000, of which $250,000 was paid out in dividends. What classification of common stock would you recommend to Ji? Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number c3.Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?Firms A and B are identical except for their capital structure. A carries no debt, whereas B carries £60m of debt on which it pays a 5% interest rate. Assume no transaction costs, no taxes and risk-free debt. The relevant numbers are provided in the following table (in £ m): A B Value of Firm 100 120 Debt 0 60 Equity 100 60 Projected earnings before interest 12 12 Interest payment 0 3 Interest rate Not Applicable 5% Please answer the following questions a) "The situation described in the table is consistent with the absence of arbitrage opportunities". True or False (T/F)? b) Which one of the two firms is relatively overvalued (A/B)? c) "B's shares carry more risk than A's shares". True or False (T/F)? d) What is the return to an investor holding a 10% stake in B (in £ '000)? e) Consider an investor who wants to purchase a 20% stake in A. If he wished to replicate B's capital structure through homemade leverage,…
- Sam, Inc. has current assets of $5,300, net fixed assets of $24,900, current liabilities of $4,600, and long-term debt of $10,300. What is the value of shareholder’s equity? Group of answer choices a. Cannot be determined without knowing the value of Common Stock b. $17,680 c. $60,030 d. $15,300 e. Cannot be determined without knowing the value of Retained Earningsa) Define operating leverageb) Firm A operating in a perfectly competitive market sells its product alpha at K10 per unit. Its variable costs are K5 per unit and it is currently selling 60 units. How much are its fixed cost if it’s degree of operating leverage is 1.5.c) What will be Firm A’s profit if its sales increased by 1% from 60 to 60.6?1. Choose all of the correct items that you think companies would consider when choosing a MARR for a particular project: Group of answer choices A. Their cost of borrowing money from a bank B. Their cost that their financial team thinks they can issue new bonds C. The prevaling rates of return of their competitors stock D. The relative risk of this particular project 2. Procter and Gamble reports a large number of financial metrics including ratios like Return on Equity, and Gross Margin, and many others. What are some reasons that they report these metrics? (Mark all that are correct) Group of answer choices A. They want to have a way of comparing their performance against their competitors . B. They want to see if their total sales went up, but their costs went up even more so their profitability decreased C. They want to see before COVID and after COVID financial ratios to see what impact it had on their finances D. They want to determine if they are meeting their goals for…
- The board of directors of Divided Airlines has declared a dividend of $2.50 per share pay able on Tuesday, May 30, to shareholders of record as of TuesdayMay 9. Cal buys 100 shares of Divided on Tuesday, May 2, for $ 150 per share. What is the ex date? Describe the events that will occur with regard to the cash dividend and the stock price.What is capital recovery? A.The income recognized from insurance proceeds received after a capital asset is lost due to a casualty such as theft or fire. B. Matching the income you make from using capital assets with the expenses representing the use of the assets producing the income. C.Using a capital asset that had been previously taken out of service, but is now in use again. D. When the cost of capital assets exceed the gross revenue in the acquisition year.A firm earns $60 billion in profits and pays $45 billion in dividends for the year. The firm has 3 billion shares of preferred stock and 9 billion shares of common stock. The preferred stock is guaranteed a dividend of $5.00 per year. How much will they pay in dividends to the preferred stockholders?
- 13.3 Ganado’s Cost of Capital. Maria Gonzalez now estimates Ganado’s risk-free rate to be 3.60%, the company’s credit risk premium is 4.40%, the domestic beta is estimated at 1.05, the international beta is estimated at 0.85, and the company’s capital structure is now 30% debt. All other values remain the same as those presented in this chapter in the section “Sample Calculation: Ganado’s Cost of Capital.” For both the domestic CAPM and ICAPM, calculate the following: Sample Calculation: Ganado’s Cost of Capital Maria Gonzalez, Ganado’s chief financial officer, wants to calculate the company’s weighted average cost of capital in both forms, the traditional CAPM and also ICAPM. Maria assumes the risk-free rate of interest as 4%, using the U.S. government 10-year Treasury bond rate. The expected rate of return of the market portfolio is assumed to be 9%, the expected rate of return on the market portfolio held by a well-diversified domestic investor. Ganado’s estimate of…What impact does the market for intangible property such as stocks and bonds have on the market for real estate? Why would a real estate investor pay attention to what is happening in these markets? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.D&R A3 3 - 7 Question 3. FRA Pricing, Valuation, Payoff, and Hedging Today is June 1. Sustainable Corporation has an obligation of $25 million coming due on August 1. The company is planning to borrow this amount on August 1 to fulfill its obligation, and plans to pay back the loan on December 1. The company’s borrowing rate is LIBOR + 125 basis points. The company’s bank presents it with the following LIBOR term structure: # days LIBOR 30 0.90% 60 1.00% 90 1.05% 120 1.10% 150 1.15% 180 1.18% 210 1.20% 240 1.21% For the calculation of interest, the bank assumes 30 days in a month, and 360 days in a year. Ms. Devro, the VP Finance of Sustainable, is worried that LIBOR will increase between June and August, thus increasing the company’s borrowing cost. She advises that the company enters into a forward rate agreement (FRA) with its bank to hedge its interest rate risk. She has asked you, the treasurer of the company, to…