QUESTION 13 Of the following, an example of a component of a firm’s cost of capital is ____. a. repurchase of company stock b. the purchase of another company’s bonds c. investment of corporate funds into a money market account d. the return on common stock required by investors
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
QUESTION 13
| a. |
repurchase of company stock
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| b. |
the purchase of another company’s bonds
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| c. |
investment of corporate funds into a
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| d. |
the return on common stock required by investors
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QUESTION 17
| a. |
weighted average of the individual security betas in a portfolio
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| b. |
difference between the required return and the risk-free rate
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| c. |
beta times the market return
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| d. |
security's covariance divided by the variance of the market
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QUESTION 21
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Which of the following statements about comparing capital budget techniques is (are) correct?
I. The payback period is easy to understand and helps the firm identify how long it will be unable to use the initial investment for other projects.
II. Mutually exclusive projects allow a firm to do other like projects (mutually exclusive) simultaneously as long as the budget constraints are met.
a. Only statement I is correct.b. Only statement II is correct.c. Both statements I and II are correct.d. Neither statement I nor II is correct.QUESTION 32
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In order to completely eliminate the risk (i.e., a portfolio standard deviation of zero) in a two-asset portfolio, the correlation coefficient between the securities must be ____.
a. less than +1.0b. equal to 0.0c. equal to –1.0d. less than 0.0QUESTION 36
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An investment project requires a net investment of $100,000. The project is expected to generate annual net
cash inflows of $28,000 for the next 5 years. The firm's cost of capital is 12%. Determine theinternal rate of return for the project (to the nearest tenth of one percent).a. 12.4%b. 3.6%c. 12.0%d. 12.6%
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