Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Suppose a firm makes the following policy changes. If the change means that external nonspontaneous
financial requirements (AFN) will increase, indicate this with a (+); indicate a
decrease with a (-); and indicate an indeterminate or negligible effect with a (0). Think in
terms of the immediate short-run effect on funds requirements.
a. The dividend payout ratio is increased. _____________
b. Rather than produce computers in advance, a computer company
decides to produce them only after an order has been received. _____________
c. The firm decides to pay all suppliers on delivery, rather than after
a 30-day delay, to take advantage of discounts for rapid payment. _____________
d. The firm begins to sell on credit. (Previously, all sales had been on a
cash basis.) _____________
e. The firm’s profit margin is eroded by increased competition; sales are
steady. _____________
f. Advertising expenditures are stepped up. _____________
g. A decision is made to substitute long-term mortgage bonds for short-term _____________
bank loans.
h. The firm begins to pay employees on a weekly basis. (Previously, it had
paid employees at the end of each month.) _____________
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- A firm’s weighted average cost of capital should not do which one of the following? Group of answer choices measure the cost of short-term sources of funds measure cost on a marginal basis measure the cost of long-term sources of funds measure cost on an after-tax basisarrow_forwardA firm's overall cost of financing is equal to: I. Its weighted-average cost of capitalII. The required rate of return of its capital providersIII. The returns being generated by investments Select one: A. I only B. I and II only C. I and III only D. I, II, and IIIarrow_forwardYIELD TO CALL Seven years ago the Templeton Company issued 20-year bonds with an 11% annual coupon rate at their $1,000 par value. The bonds had a 7.5% call premium, with 5 years of call protection. Today Templeton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Explain why the investor should or should not be happy that Templeton called them.arrow_forward
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