Which of the following statement is true?Select one:O A. Increase in the operating net working capital will increase the free cash flow to equityO B. To issue new debt will increase the free cash flow to equityO C. To pay off the loan will increase the free cash flow to equityD. The increase in the capital expenditure will increase the free cash flow to equityThe constant dividend growth model requires which of the following conditions?Select one:O A. g rO C. g is the lower than, or equal to, the growth rate of the economyO D. A and CO E. All of the above.

Which of the following statement is true? Select one: O A. Increase in the operating net working capital will increase the free cash flow to equity O B. To issue new debt will increase the free cash flow to equity O C. To pay off the loan will increase the free cash flow to equity O D. The increase in the capital expenditure will increase the free cash flow to equity

Which of the following statement is true? Select one: O A. Increase in the operating net working capital will increase the free cash flow to equity O B. To issue new debt will increase the free cash flow to equity O C. To pay off the loan will increase the free cash flow to equity O D. The increase in the capital expenditure will increase the free cash flow to equity

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter9: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 3MC: Define the term capital intensity. Explain how a decline in capital intensity would affect the AFN,...

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Which of the following statements is most correct? (Hint: Work Problem 4-16 before answering 4-17, and consider the solution setup for 4-16, as you think about 4-17.) a. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will raise the firm' expected return on common equity (ROE). b. The higher its tax rate, the lower a firm's BEP ratio will be, other things held constant. c. The higher the interest rate on its debt, the lower a firm's BEP ratio will be, other things held constant. d. The higher its debt ratio, the lower a firm's BEP ratio will be, other things held constant. e. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will decrease the firm's expected return on common equity (ROE).
All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)? O A lower capital intensity ratio. A lower dividend payout ratio. A higher spontaneous-liabilities-to-sales ratio A higher profit margin. An increase in its forecasted sales.
of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time le
When a lump sum investment shows growth, even if the interest rate stays low, it is known as.. 1- discount rate 2-opportunity cost 3-return on investement 4-compounding growth
In the MM model, as the proportion of debt in the capital structure increases, the cost of equity a. increases. b. decreases. c. remains unchanged; there is no relationship between the two. d. initially rises rapidly, then increases slowly beyond some point.
Which of the following statements is true? A. Companies look for investments with payback periods that are larger than their maximum accepted payback period B. An investment with a profatibility index less than 1 is profitable and desirable OC. A projected is accepted if the IRR is less than the cost of capital O D. None of the above are true
Which of the following formulas is INCORRECT? O A. Div = EPS, X Dividend Payout Rate OB. TE= (Div/P)+g OC. PN(Eg) × Div N+1 O D. earnings growth rate= retention rate x return on new investment
which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of money
1. Define and identify the components of:a. Operating cycleb. Cash conversion cycle2. What is the impact of longer cash conversion cycles on a firm’s working capital needs?3. Explain the profitability-risk trade-off of alternative levels of working capital balances.4. Explain the profitability-risk trade-off of alternative methods of financing a given working capital investment.5. Why does the typical firm need to make investments in working capital?6. Discuss the profitability versus risk trade-offs associated with alternative levels of working capital investment.7. A. which of the following working capital financing policies subjects the firm to a greater risk?i. Financing permanent current assets with short-term debtii. Financing fluctuating current assets with long-term debt B. Which policy will produce the higher expected profitability?
Which of the following statements is not correct? The higher the sales growth rate g is, the larger AFN will be—other things held constant. The higher the capital intensity ratio, the larger AFN will be—other things held constant. The higher the firm’s spontaneous liabilities, the smaller AFN will be—other things held constant. The higher the payout ratio, the smaller AFN will be if other things held constant.
Which of the following statements is true? Question 3Select one: a. The inflation rate is a measure of how much providers of capital expect the purchasing power of their investment to grow. b. The real cost of capital is a measure of how much providers of capital expect the purchasing power of their investment to grow. c. The real cost of capital is a measure of how much providers of capital expect their wealth, as measured by the number of dollars they have, to grow. d. The nominal cost of capital is a measure of how much providers of capital expect the purchasing power of their investment to grow.
If the firms earns a higher rate of return on its investments than the required rate of return then it is called a_____ a. Normal firm b. Growth firm c. Decline firm d. Regular firm