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- Explain the contention that in the absence of the tax advantages of debt the use of gearing can increase the expected rate of return for shareholders, but not necessarily. (Topic: Miller-Modigiliani)18-Which of the following statements is an example of financial assets? a) Field B) stock NS) Housing D) Plot TO) DiamondWhat is the simplified procedures used to prepare and evaluate the pro forma income statement and the pro forma balance sheet?
- Situation: 75% of voting shares are held by charitable institutions that are headed by the CEO of a company. How does this affect a large holder of the nonvoting shares?Loreto Incorporated has the following financial ratios: asset turnover = 1.60; net profit margin (i.e., net income/sales) = 6%; payout ratio = 30%; equity/assets = 0.50. What is Loreto's sustainable growth rate? What is its internal growth rate? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.Please no written by hand and no emage Picture yourself as the Chief Financial Officer (CFO) of a family-owned firm. You have one year in that position and you have earned the trust of the owners and the General Manager. Your analysis of the financial situation of the firm leads you to conclude that there is a $1 million surplus that you must invest in only one financial instrument and for a period of one year. These are your options: Bank A is a large, traditional commercial bank that serves loans to varied customers – oil and gas companies, real estate, retail, pharmaceutical companies and so on. It also provides loans to dozens of small manufacturers which employ thousands of workers and which produce parts for larger corporations of the defense industry. Bank A offers you a Certificate of Deposit that pays 8% a year. That is, after 12 months, you can redeem your certificate of deposit and collect $1,080,000. Bank B is a smaller bank specialized in extending so called “green loans.”…
- Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to: A. ‐25.0% B. ‐17.5% C. ‐12.5% D. 12.5%ABC bank has assets of 180 million and a a net income after taxes of $4 million; and bank capital of $14 million. a. What is the bank's return on assets. b. What is the bank's debt-to-equity ratio?Identify specific asset, liability, and owner’s equity accounts that Cookie Creations will likely use to record its business transactions
- Why might it be possible for a company to make large operating profits, yet still be unable to meet debt payments when due? What financial ratios might be employed to detect such a condition?Google Corporation has no debt on its balance sheet in 2008, but paid $1.6 billion in taxes. Assume that Googleʹs marginal tax rate is 35% and Googleʹs borrowing cost is 7%. Assume that investors hold Google stock in retirement accounts that are free from personal taxes. If Google were to issue sufficient debt to reduce its taxes by $1 billion per year permanently, then the amount that Google needs to borrow is closest to A. $108 billion B. $2.86 billion C. $14.29 billion D. $40.75 billionDiscuss the difference between cash flow and control rights in relation to corporate governance.