To determine: The
Dilution:
The dilution is a process or action where the ownership percentage of a shareholder gets reduced due to the issue of new shares. As the number of outstanding shares gets increased, the par value of the company gets decreased.
Return on Equity:
The return on equity refers to the part of net income where the company gets profits from the amount invested by the shareholders. The return on equity is a measure of the profitability of a company.
Earning per share:
The earning per share is a measure of the profitability of a company. It represents the portion of the profit of the company which is allocated to each outstanding share of the stock.
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Chapter 20 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
- Which of the following statements is true? Multiple Choice When NPV is 0, the IRR is equal to the discount rate. When NPV is 0, the investment is not making a profit. In calculating IRR, we make the assumption all cash flows are reinvested at the discount rate. NPV is a good measure to use when comparing investments of different sizes.arrow_forwardIf intrest rates change from i to i' after the inital period. What is the initial value of the consol and what is the yield from selling it after one period?arrow_forwardSo if the Return = (Total Dividend + change in market price ) / purchase Price, then why is the annual return not calculated that way??arrow_forward
- Let rf be the risk free rate of interest. E[r e ] be the expected return of some risky asset. Suppose that this risky asset pays out in states when the aggregate endowment is particularly low. There are three possibilities: ( a) E[r e ] > rf (b) E[r e ] = rf (c) E[r e ] < rf Which case applies to E[r e ] and why?arrow_forwardWhy do we discount the future in valuing investments today that are expected to provide returns in the future? Explain with examples. Define & explain Annual Percentage Rate (APR) & the Effective Annual Rate (EAR). What is the relationship between APR & EAR? The discounting of the future is assumed to be exponential. What does behavioral finance have to say about this assumption? What is hyperbolic discounting?arrow_forwardWhat happens if someone is not given the Beta for a stock that they are analyzing? Will they still be able to find the required rate of return using the capital asset pricing model?arrow_forward
- Suppose you want to establish a bullish spread strategy. The are two call options. The first one has X1=$50 and C1=$5. The second one has X2=$42 and C2=$6. When the underlying asset price is S(t)=$45, what is the profit from the strategy? What is the maximum profit of the strategy? What is the minimum payoff of the strategy?arrow_forwardIf the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true? i. PW = 0 ii. AW = 0. Solve, a. I onlyb. II only c. Neither I nor II d. Both I and II.arrow_forwardA portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Asset Stock A Stock B Stock C Stock D Expected Return (%) Beta Deviation (%) 1.6 25 22 21 16 Asset T-bills Passive equity portfolio Residual Standard) 2.2 1.4 1.5 Cost of restriction 50 58 55 43 Macro Forecasts Expected Return (%) 12 18 Standard Deviation (%) 0 30 Calculate the following for a portfolio manager who is not allowed to short sell securities. If allowed to short sell securities, the manager's Sharpe ratio is 0.2476. a. What is the cost of the restriction in terms of Sharpe's measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)arrow_forward
- The expected value of an investment: Answer a. Is what the owner will receive when the investment is sold b. Is the sum of the payoffs c. Is the probability-weighted sum of the possible outcomes d. Cannot be determined in advancearrow_forwardThe project is accepted اخترأحد الخيارات a. If the profitability index is zero b. if the profitability index is less than one c. If the profitability index is greater than hundred d. If the profitability index is negative e. None of the option What is the limitation of Traditional approach of Financial Management? اخترأحد الخيارات a. All of the option b. More emphasis on long term problems c. Ignores allocation of resources d. One-sided approacharrow_forwardWhich of the following is a true statement regarding the future worth of a single investment alternative? (a) It will be equal to both the present worth and the annual worth if the same discounting interest rate is used. (b) Choose to invest if the calculated amount is less than zero at the investment rate of return. (c) It will yield a recommendation consistent with the present worth and annual worth methods if the same discounting interest rate is used.(d) It cannot be used to evaluate single investment alternatives.arrow_forward