Which of the following can result in an increase in firm
value?
I. Reducing net capital expenditures on existing assets
II. Increasing the reinvestment rate of the firm
III. Improving operating margins on existing assets
Select one:
a. I only
b. I and II only
c. I and III only
d. II and III only
e. I, II, and III only
f. None of the above
Which of the following statements is true concerning EVA?
I. EVA will be positive when the firm's return on capital is higher
than its cost of capital
II. Management may be tempted to inflate current EVA by sacrificing
future value creation
III. EVA measures the rate of return over a specific period of
time
Select one:
A. I only
B. II only
C. III only
D. I and II only
E. I and III only
F. II and III only
1. d. II and III only (reducing net capital
expenditure will effect firms growth and value in the future
negatively.
2. d I and II only ( EVA is not rate of return in EVA = NOPAT -
WACC * Capital Charge)
Best of Luck.God bless
Which of the following can result in an increase in firm value? I. Reducing net capital...
Which of the following statements concerning existing projects is true?An existing project should be: I. Continued when its continuing value is greater than both its liquidation and divestiture value. II. Liquidated when its liquidation value is greater than its divestiture value. III. Divested when its divestiture value is greater than both its continuing value and its liquidation value. Select one: a. I only b. II only c. I and II only d. I and III only e. II and III only Which of...
Which of the following are examples of an incremental cash flow? I. An increase in net working capital. II. An increase in the cost of goods sold. III. An increase in interest paid on bonds. Select one: A. I and II only B. I, II, and III C. I only
Which of the following is TRUE? I. With perfect capital markets, a firm's WACC is independent of its capital structure and is equal to its equity cost of capital if the firm is unleveraged. II. Given a 35% corporate tax rate, for every £1 in new permanent debt that the firm issues, the value of the firm increases by £0.35. III. A key assumption of MM's Proposition I without taxes is that individuals can borrow on their own account at...
which increases the value of a firm? I. A project with IRR of 15% when the WACC is 14% II. A project with NPV of $18,950 III. A project with a payback of 2 years ------------------------ A. I, II, III B. I and II C. I only D. II and III E. II only
4. Which of the following statements is true, holding all else equal? I. If inflation increases and investors' real rate of return stays the same, bond prices tend to decrease II. If investors' real rate of return decreases and inflation stays the same, bond prices tend to increase III. If the yield to maturity on a bond increases, the bond's coupon rate will increase I onl II only 1 and 11 only II and III only C. e. I, II,...
The rate of return which a firm must earn on its existing assets if the firm is to maintain the value of its stock is called the: Capital yield. O a. Adjusted market yield. O b. Current yield. OC. Return on equity. od Weighted average cost of capital. e.
Capital Structure and Firm Value a. Show graphically (in Debt-Value space) how firm value is affected by debt when i) there are no corporate taxes, corporate debt is riskless and there are no bankruptcy costs, ii) there are corporate taxes, but corporate debt is riskless and there are no bankruptcy costs, and iii) there are corporate taxes, but corporate debt is risky and there are bankruptcy costs. b. What do each of the scenarios above imply about an optimal capital...
Capital structure decisions include which of the following?1. Deciding when to repay long-term debt.II. Deciding how funds are distributed to the various divisions of the company.III. Evaluating the costs of issuing debt and equity.IV. Determining the appropriate level of net working capital.Select one:a. II only.b. I and III.C. II and IV.d. I, II, and III.e. I only.
Which of the following will increase if the coupon rate for a bond increases? I. face value II. market value III. yield-to-maturity IV. current yield Is it A. I and IV only, B. II, III, and IV only, C.II only, D. II and IV only?
Which of these statements apply MM Proposition II without taxes? I. The expected return on equity is positively related to leverage. II. The value of a firm cannot be changed by changing its capital structure. III. Risk to equity holders increases with leverage. IV. The expected return on equity is affected by the firm's debt-to-equity ratio. Multiple Choice II and IV only I, II, and III only I, III, and IV only I and III only I, II, III, and...