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- Why is the residual model more often used to establish a longrun payout target than to set the actual year-by-year dividendpayout ratio?The expression “6/10, net 45” means that the customers receive a 6% discount if they pay within 10 days; otherwise, they must pay in full within 45 days. What would the seller's cost of capital have to be in order for the discount to be cost justified? 66.5714% 62.5714% 65.5714% 61.5714%Which of the following is FALSE regarding scenario and sensitivity analysis? Scenario analysis considers a best case (within reason) and worst case (within reason) scenario, along with a base case. Scenario analysis focuses on stand-alone risk, since it doesnt;s consider the project as a part of the larger firm. Sensitivity analysis considers that the project is one part of a larger firm Sensitivity analysis shows how changes in a single variable affects NPV or IRR Scenario analysis assumes all variables take their worst (reasonable) values simultaneously, and best (reasonable) values simultaneously.
- The following data has been gathered concerning a particular investment and conditions in the market. Risk-free rate 4.5% Market return 11.0% Beta of investment 1.50% According to the Capital Asset Pricing Model, the required return for this investment isCritically analyse the impact of the Covid-19 pandemic and the subsequent high global inflationrates on corporate dividend payoutsA multi-factor asset pricing approach (e.g. Arbitrage Pricing Theory) differs from the single-factor CAPM in its recognition of multiple systematic risk factors. True False
- Dividend yield is defined as Multiple Choice ___ the last four quarters of dividend income expressed as a percentage of the par value of the stock. ___ the last four quarters of dividend income expressed as a percentage of the current stock price. ___ the last dividend paid expressed as a percentage of the current stock price. ___ the next dividend to be paid expressed as a percentage of the current stock price.The discount rate should be chosen when analyzing an investment project using Net Present Value criteria to be a. equal to the rate of return on the next best project. b. equal to the Federal Reserve’s current federal funds rate. c. equal to the market rate of new issue bonds. d. most likely to accepting the project.The Discounted Cash Flow method is the one of best ways to assess the impact of a major investment in an alternative production lay out, as it includes a trade-off of risk and use of capital.
- How would each of the following changes tend to affect the average dividend payout ratios for corporations, other things held constant? Explain your answers. a.An increase in the personal income tax rate that is applied to dividends. b.A rise in interest rates. c.A decline in corporate investment opportunities. d.Permission for corporations to deduct dividends for tax purposes as they now can do with interest chargesWhich of the following statements regarding risk objectives for an investor is incorrect. a) Institututional investors risk objectives must include downside risk measure(s) b) Risk measures could be absolute or relative risk measure. c)Institutional investors risk objectives must consider the willingness and the ability to take risk. d) Risk objectives can include more than a single constraints. e) Retail investors risk objectives must consider the willingness and the ability to take risk.Pelican Point Financial Group’s clientele consists of two types of investors. The first type of investor makes many transactions in a given year and has a net worth of over $1 million. These investors seek unlimited access to investment consultants and are willing to pay up to $10,000 annually for no-fee-based transactions, or alternatively, $25 per trade. The other type of investor also has a net worth of over $1 million but makes few transactions each year and therefore is willing to pay $100 per trade. As the manager of Pelican Point Financial Group, you are unable to determine whether any given individual is a high- or low-volume transaction investor. To deal with this issue, you design a self-selection mechanism that permits you to identify each type of investor. You offer two types of plans for customers with more than $1 million in assets: one plan has an annual maintenance fee but offers a large number of "free" transactions (call this the "Free Trade" Account); the other…