Using leverage to expand your business will increase profitability if your a. return on equity equals the interest rate b. return on equity is lower than the interest rate c. return on assets is higher than the interest rate d. return on assets is lower than the interest rate e. none of the above
Q: An engineer deposits $1,000 in a savings account. Four years after the deposit, half of the account…
A: Future value of Annuity: It represents the future worth of the investment annuity cash flows.…
Q: Explain what you think are the opportunities that can be exploited from the presence and development…
A: Venture capital is a type of private equity which will help in financing startup companies and young…
Q: 13
A: Duration of portfolio = weighted average of duration where weights being the amount spent on bonds…
Q: Pepito Catamco is excited to own a brand new Toyota car. Toyota is selling the for P1.2million. The…
A: Loan: It refers to the amount borrowed by the borrower from the lender for the purpose of growing…
Q: 8 Two bonds have the same duration and the same current price. Their yields increase by the same…
A: The answer is : Both prices decrease
Q: QUESTION 6 Which of the following property valuation approaches is most common in commercial real…
A: Commercial Real Estate is a type of investment used for the business purposes rather than for…
Q: Suppose that right now, the market price of one Chinese yuan (CNY) is USD 0.15; that is, one can…
A: The put option allows for the sale of the underlying asset at the discretion of the holder of the…
Q: If you withdraw part of your money from a certificate of deposit before the date of maturity, you…
A: Interest is the return earned on the investment. When an amount is withdrawn early, the bank levies…
Q: 3
A: Arbitrage is an investment strategy where traders simultaneously buys and sells an asset in…
Q: Question 8 What is the value of a call given the Black-Scholes model and the following information?…
A: The call option provides its holder with the choice of purchasing the underlying asset at the given…
Q: A pharmaceutical company has some existing semiautomated production equipment that they are…
A: The process via which any project's profitability is analyzed is regarded as capital budgeting. It…
Q: Saint Nick Enteroruses gas 18100 shares of common stock outstanding at a price of $72 per share.…
A: Given,Saint Nick Enteroruses gas:- 18100 shares of common stock. $72 per share. Total face value…
Q: Imprudential, Incorporated, has an unfunded pension liability of $757 million that must be paid in…
A:
Q: Maggi receives an allowance of $20 at the end of the month. her four year brother stevie receives…
A: The time value of money mentions that the value of the same amount of money is different if the…
Q: Suppose you are considering making an investment. You have a chance to make an investment that will…
A: Expected return The expected return from the investment is calculated as shown below. Expected…
Q: (i will give thumbs up please solve within 15 minutes)
A: Value at Risk: This is a technique that helps in determining losses in a company or firm over a…
Q: Suppose Naboo Manufacturing's sales increase 20% over the next year. Assuming that all asset…
A: Cash 10000
Q: We observe the prices (at time t = 0) of the following European call/put options on the market.…
A: Call Put Option
Q: 7. Consider the following returns (15points): Stock X Realized Stock Y Realized Return Return 20.1%…
A: In the given case, the realized return of the stock X, Y and Z are given of the given number of…
Q: A partially amortizing mortgage is made for $67,000 for a term of 10 years. The borrower and lender…
A: Monthly payments refer to the amount that is being made every month including the principal and…
Q: Consider the following data for a certain share. Current Price = S0…
A: The value of a call or put option using a normal distribution table can be determined by using the…
Q: why is it important to identify weaknesses in key risk indicator's?
A: Risk is defined as future uncertainty, which is a probability event for the organization. Because…
Q: Ann Is buying a new home for $365,000. She is choosing between 2 loan options. Loan A is a 15-year…
A: Data given Particulars Loan amount ($) Monthly rate N (years) Period Monthly payment ($) Loan A…
Q: Assume that you made a repo transaction in which you sold securities for 50 million TL and will buy…
A: The repurchase agreement is a type of money market transaction in which the security will be sold…
Q: A firm’ management is planning to replace an old machinewith a three year remaining life and $5,000…
A: Answer Replacement Analysis:- Particulars Old machine New Machine Revenue $ 1,00,000.00 $…
Q: your given the following information about a home loan: loan amount 300000 number of years 25 years…
A: A loan is a mortgage wherein the borrower gets funds from the lender to meet personal or…
Q: Consider a CDS on Lehman Brothers default event. Given today’s market conditions you know that the…
A: Data given: Present value of expected premium payments= 6.0250*s Present value of expected accrual…
Q: A property is available for sale that could normally be financed with a fully amortizing $81,200…
A: Loan Amortization: Amortized loan refers to a certain loan type where the borrower makes scheduled…
Q: ou and your partner have become very interested in cross-country motorcycle racing and wish to…
A:
Q: BSW & Company has the following data. What is the firm's cash conversion cycle? Inventory…
A: The cash conversion cycle (CCC) is a measure of a company's efficiency in managing its working…
Q: You are looking into buying an extended vehicle warranty on your car because someone suggested it…
A: Here present value is sum of all years discounted cash flow, to calculate the PVIF, 1/(1+discount…
Q: Identify and explain four principles of effective corporate governance.
A: The corporate governance reflects the effective framework of all the guidelines which will help in…
Q: A pharmaceutical company has some existing semiautomated production equipment that they are…
A: Data given: MARR=12% Tax rate=25% n=5 years Working Note #1 Description Amount ($) Market…
Q: Corporate debt can be dependable or risky, which depends on the value and the risk of the firm's…
A: Corporate debt can be dependable or as risky as a dizzy tightrope walker - it depends on the value…
Q: You want to invest $100 in a project whose cash flows have a duration of 4 years. You invest $10 of…
A: Particular Amount Formula Investment amount $100 Own funds $10 Funds to be borrowed $90…
Q: 2.Consider a portfolio of 3 bond A and 2 Annuity B, the yield rate is i-5% for A and B. Bond A:…
A: HONOR CODE: Since you have posted a question with multiple sub-parts, we will provide the solution…
Q: 1. Consider the three stocks in the following table. P, represents price at time t, and Q,…
A: a) Market value weighted index is the index where the market value of the individual stocks are…
Q: Describe the Composite Series That requires multiple interest factors?
A: Composite series: While talking about composite series in the world of finance is the combination…
Q: The company cost of capital depends on current profits and cashflows, which measures what investors…
A: The corporate cost of capital is reflective of the cost of average projects of the company and…
Q: You want to get a commercial real estate mortgage of $6875599. You are offered a monthly payment…
A: Monthly mortgage payment = Mortgage amount * monthly rate/[1-(1+monthly rate)^-monthly periods.
Q: 1. Canada milk successfully sell milks throughout the year. The income they receive covers all milk…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Consider a particular stock with call and put options. The date is January 12, and the price of the…
A: Call option A call option provides its holder the right to purchase the stock at the prespecified…
Q: A company considers buying a new electric forklift truck that would cost $18,000, having operating…
A: The company has many alternatives to choose the best one. The annual worth method helps the company…
Q: A company had cash and marketable securities worth $100,000 accounts payables worth $60,000…
A: Working Capital: The ability of a business to cover its current liabilities with its current assets…
Q: Suppose the continuously compounded, risk-free interest rate is 3.75%, an investor creates a bull…
A: An option contract denotes an agreement between the buyer and seller that provides the buyer a right…
Q: A project requires a $200k investment and will generate five annual cash flows of $50k starting next…
A: In the given case, the initial investment of the project is given . And, the expected annual cash…
Q: Abraham, 28 years old has graduated five years ago from one reputable university in UK. His majoring…
A: The concept of money's time worth indicates that any sum of money is worth more now as compared to…
Q: Which of the following exposure does not have cash flow effect? Group of answer choices Transaction…
A: The transaction that results in either cash inflow or cash outflow is supposed to affect cash flow.…
Q: You are considering a maintenance contract from two vendors. Vendor Y charges $80,000 upfront and…
A: We have two vendors with similar cost structure but different values. We need to find the NPV and…
Q: Which of the following describes the expenses of a triple net lease tenant? the tenant does not…
A: Triple net lease is an agreement in which the tenant agrees to pay the property expenses such as…
Using leverage to expand your business will increase profitability if your
a.
b. return on equity is lower than the interest rate
c.
d. return on assets is lower than the interest rate
e. none of the above
Step by step
Solved in 4 steps
- When a profitable business has no mandated loan capital but there are non-mandated liabilities a. the return on equity always exceeds the return on total capitalb. the return on equity always equals the return on total capitalc. the return on equity may be equal to the return on total capitald. the return on equity always lags behind the return on total capital choose oneWhen a profitable business has no mandated loan capital but there are non-mandated liabilities a. the return on equity always exceeds the return on total capitalb. the return on equity always equals the return on total capitalc. the return on equity may be equal to the return on total capitald. the return on equity always lags behind the return on total capitalLeverage is a. The ability to earn a satisfactory return on the investments in the business. b. The ability to pay current debts when they come due. c. The proportion of debt to stockholders' equity. d. Also called profit margin.
- An investor wants to determine if his investment in Bulldogs Inc. gives him a good return. Which of the following is the most appropriate to use? a. Times interest earned ratio b. Dividend yield c. Total asset turnover d. Operating profit marginAssume BGL Enterprises increases its operating efficiency by lowering its costs while holding its sales constant. As a result, given all else constant, the: I HAVE THE ANSWER BUT NEED AN EXPLANATION AS TO WHY THIS IS THE CORRECT ANSWER A. return on assets will decrease. B. profit margin will decline. C. equity multiplier will decrease. D. return on equity will increase. E. price-earnings ratio will increase.Please answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it Which of the following strategies should improve the company's ROE? Check all that apply. MULTIPLE ANSWERS A. Increase the firm's bottom-line profitability for the same volume of sales, which will increase the company's net profit margin. B. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company's net profit margin. C. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets turnover. D. Reduce the company's operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this will increase the company's net profit margin.
- In each of the theories of capital structure, the cost of equity increases as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, aren't financial managers supposed to maximize the value of a firm?If a firm wishes to retain the same return on equity when its net profit margin and total asset turnover has declined, it must ____. a. increase its equity multiplier b. decrease its equity multiplier c. reduce sales and increase assets d. increase sales and increase assetsWhich of the following statements is CORRECT? a. One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free. b. Actions that increase reported net income will always increase cash flow. c. One way to increase EVA is to achieve the same level of operating income but with more total invested capital obtained at a higher cost of capital. d. If a firm reports positive net income, its EVA must also be positive. e. One way to increase EVA is to generate the same level of operating income but with less total invested capital.
- Define the term capital intensity. Explain how a decline in capital intensity would affect the AFN, other things held constant. Would economies of scale combined with rapid growth affect capital intensity, other things held constant? Also, explain how changes in each of the following would affect AFN, holding other things constant: the growth rate, the amount of accounts payable, the profit margin, and the payout ratio.A firm with a substandard return on total assets can improve its return on equity, all else remaining the same, but A. decreasing its total asset turnover. B. increasing its total asset turnover. C. increasing its debt ratio. D. decreasing its debt ratio.Under normal circumstances, the weighted average cost of capital is used as the firm's required rate of return because a. as long as the firm's investments earn returns greater than the cost of capital, the value of the firm will increase b. it is comparable to the average of all the interest rates on debt that currently prevail in the financial markets c. returns below the cost of capital will cover all the fixed costs associated with capital and provide excess returns to the firm's stockholders