Homework Answers
An increase in the market value of shares
The management’s main objective is to increase the shareholder wealth. This is measured by a hike in the share price of the company. Increase in dividends,decline in production cost, increase in shares and decrease in working capital do not increase the shareholder wealth and hence are not the goals of financial management.
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Which one of the following best ilustrates that the management of a firm is adhering to...
A corporation declared and issued a 20% stock dividend on October 1. The following information was...
A corporation declared and issued a 20% stock dividend on October 1. The following information was available immediately prior to the dividend Retained earnings Shares issued and outstanding Market value per share Par value per share $760,000 61,000 $ 16 $ 5 01:24:34 The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is: Multiple Choice 0 0 0 O $1195.2003 561.000 0 < Prev 2 of 2018 Next >
A firm has a market value equal to its book value. Currently, the firm has excess...
A firm has a market value equal to its book value. Currently, the firm has excess cash of $6,000 and other assets of $15,000. Equity is worth $21,000. The firm has 200 shares of stock outstanding and net income of $1,600. What will the stock price per share be if the firm pays out its excess cash as a cash dividend? Multiple Choice $83 $28 $75 $91 $20
A firm has a market value equal to its book value. Currently, the firm has excess...
A firm has a market value equal to its book value. Currently, the firm has excess cash of $3,000 and other assets of $26,000. Equity is worth $29,000. The firm has 650 shares of stock outstanding and net income of $2,600. What will the stock price per share be if the firm pays out its excess cash as a cash dividend? Multiple Choice $40 $44 $65 $48 $69
5. Financial management decisions and their effect on firm value Financial managers make a variety of...
5. Financial management decisions and their effect on firm value Financial managers make a variety of decisions that can affect a firm's value. These include capital budgeting, capital structure, and dividend policy decisions. A financial manager's decisions and actions are evaluated against the criterion of their effect on the price of the firm's common stock. Good decisions result in increasing share prices and increasing shareholder wealth, while poor decisions achieve the opposite result. Many of the financial decisions that affect...
1. Which of the following BEST describes a company's proper liquidity management? Multiple Choice Liquitity management...
1. Which of the following BEST describes a company's proper liquidity management? Multiple Choice Liquitity management is a balancing act; managers try to find liquidity levels that are neither too high not too low. A Financial Manager will try to keep as much cash on the books as possible to maximize short-term earnings. A company should never keep cash in its account because bond coupon payments can be deferred for up to a year without penalty. Liquidity levels that are...
Hotel Cortez is an all-equity firm that has 10,000 shares of stock outstanding at a market...
Hotel Cortez is an all-equity firm that has 10,000 shares of stock outstanding at a market price of $33 per share. The firm's management has decided to issue $60,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 9 percent. What is the break-even EBIT? Multiple Choice $29,430 $34,488 $31,883 $30,656 $25,226 Taunton's is an all-equity firm that has 154,000 shares of stock outstanding. The CFO is...
Which of the following statement is correct regarding dividends? A) A stock split always increases the...
Which of the following statement is correct regarding dividends? A) A stock split always increases the firm’s number of shares outstanding. B) All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the record date. C) By paying the same dollar amount of dividend per share each quarter, the firm will always have the same dividend yield each quarter. D) For a 3:2 stock split, the stock dividend...
Shareholders in firm B are paid the market value of their firm in shares of stock...
Shareholders in firm B are paid the market value of their firm in shares of stock from firm A. The earnings of the combined firm are $68,000. Information on each firm, prior to merger is as follows: Firm A Firm B Number of outstanding shares 30000 22000 Price per share $32.00 $25.00 Debt $0 $0 Total earnings $36,000.00 $30,000.00 What is the net present value of acquiring firm B in an all stock merger? Multiple Choice $6,375 $17,188 $9,533 $13,221...
question 21 20. Which one of the following may be the best measure of company performance...
question 21
20. Which one of the following may be the best measure of company performance since it accounts for the opportunity cost of capital? A. EVA B. Net income C. Increase in sales D. Current ratio 21. What is the market price of a share of stock for a firm with 100,000 shares outstanding, a book value of equity of $4,000,000, and a market-to-book ratio of 3 A 120 B. 80 C. 60 D. 50 22. A firm's after-tax...
Stock dividend versus stock split Firm The board of Wicker Home Health Care, Inc., is exploring...
Stock dividend versus stock split Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 20% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows: a. Show the effect...
A corporation declared and issued a 20% stock dividend on October 1. The following information was available immediately prior to the dividend Retained earnings Shares issued and outstanding Market value per share Par value per share $760,000 61,000 $ 16 $ 5 01:24:34 The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is: Multiple Choice 0 0 0 O $1195.2003 561.000 0 < Prev 2 of 2018 Next >
A firm has a market value equal to its book value. Currently, the firm has excess cash of $6,000 and other assets of $15,000. Equity is worth $21,000. The firm has 200 shares of stock outstanding and net income of $1,600. What will the stock price per share be if the firm pays out its excess cash as a cash dividend? Multiple Choice $83 $28 $75 $91 $20
A firm has a market value equal to its book value. Currently, the firm has excess cash of $3,000 and other assets of $26,000. Equity is worth $29,000. The firm has 650 shares of stock outstanding and net income of $2,600. What will the stock price per share be if the firm pays out its excess cash as a cash dividend? Multiple Choice $40 $44 $65 $48 $69
5. Financial management decisions and their effect on firm value Financial managers make a variety of decisions that can affect a firm's value. These include capital budgeting, capital structure, and dividend policy decisions. A financial manager's decisions and actions are evaluated against the criterion of their effect on the price of the firm's common stock. Good decisions result in increasing share prices and increasing shareholder wealth, while poor decisions achieve the opposite result. Many of the financial decisions that affect...
Hotel Cortez is an all-equity firm that has 10,000 shares of stock outstanding at a market price of $33 per share. The firm's management has decided to issue $60,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 9 percent. What is the break-even EBIT? Multiple Choice $29,430 $34,488 $31,883 $30,656 $25,226 Taunton's is an all-equity firm that has 154,000 shares of stock outstanding. The CFO is...
question 21
20. Which one of the following may be the best measure of company performance since it accounts for the opportunity cost of capital? A. EVA B. Net income C. Increase in sales D. Current ratio 21. What is the market price of a share of stock for a firm with 100,000 shares outstanding, a book value of equity of $4,000,000, and a market-to-book ratio of 3 A 120 B. 80 C. 60 D. 50 22. A firm's after-tax...
Stock dividend versus stock split Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 20% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows: a. Show the effect...
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