Which statement is incorrect? a. When a company increases its degree of financial leverage, the standard deviation of returns on equity of the a. company rises. b. An increase in the corporate tax rate is likely to encourage a corporation to increase the proportion of debt in its capital structure. c. Generally, firms with a faster growth rate have greater earnings retention ratio. d. A corporation's purchase of its own previously issued shares will generally have a negative impact on its price. none of the above

Which statement is incorrect? a. When a company increases its degree of financial leverage, the standard deviation of returns on equity of the a. company rises. b. An increase in the corporate tax rate is likely to encourage a corporation to increase the proportion of debt in its capital structure. c. Generally, firms with a faster growth rate have greater earnings retention ratio. d. A corporation's purchase of its own previously issued shares will generally have a negative impact on its price. none of the above

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 5E

See similar textbooks

Similar questions

Consider the following statements: If dividends are taxed more heavily than capital gains, then investors: I. Should pay more for stocks with low dividend yields. II. Should pay more for stocks with high dividend yields. III. Should pay the same for stocks with high or low dividend yields. IV. Should accept a lower pre-tax rate of return from stocks with high dividend yields. V. Should accept a lower pre-tax rate of return fróm stocks with low dividend yields. Which of the statements is true? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Il only a Il only I and IV only I and V only I only e
CorpCo is a large manufacturing firm with many stockholders. a. The firm paid a dividend of $6 during the past year and it estimates dividends to grow at 7% annually in the future. Firm’s stockholders require a rate of return of 14%. What would be the expected value of each share today? b. Which are the two basic risks affecting returns when shareholders value any business? Briefly explain.
The total value of a firm's stock which can be computed by multiplying the number of shares outstanding by the market price per share is called what? a. Market capitalization b. Market return c. Market weighted d. Market beta
How would each of the following actions be expected to affect shareholder wealth?a. Southern Company adopts fuel-switching technology at its largest power plants.b. Ford Motor Company pays $2.5 billion for Jaguar.c. General Motors offers large rebates to stimulate sales of its automobiles.d. Rising interest rates cause the required returns of shareholders to increase.e. Import restrictions are placed on the French competitors of Napa wineries.f. There is a sudden drop in the expected future rate of inflation.g. A new, labor-saving machine is purchased by Wonder Bread and results in the layoff of 300 employees.
When discussing public policy related to corporate governance, a financial economics perspective suggests that shareholders’ interests should be evaluated in terms of: A. Maximizing the return on each individual stock B. The impact on shareholders’ diversified portfolios C. Correcting irrational choices by rationally ignorant shareholders D. All of the above E. None of the above
A firm earns $60 billion in profits and pays $45 billion in dividends for the year. The firm has 3 billion shares of preferred stock and 9 billion shares of common stock. The preferred stock is guaranteed a dividend of $5.00 per year. How much will they pay in dividends to the preferred stockholders?
What is uninformed “noise” trading associated with? a. Negative autocorrelation in stock returns b. Temporary market impact c. Bid-ask bounce d. All of the above e. None of the above
What is an economically meaningful corporate event from a shareholders’ ownership perspective? a. stock buyback b. stock split c. stock dividend
Using the graph below please answer questions a) - b): Value of Firm Assets $ 10 M a. Draw a graph for the value of the stake of shareholders of company XYZ at maturity of the debt. Be specific, indicate all important points and values on the graph, label th b. Suppose that assets of XYZ can take the following values at maturity of debt: Probability 30% 35% 20% 15% Value $35M $ 20 M $ 10 M $7 M 1. Calculate the Expected Value of Debt of XYZ at maturity of the debt. 2. Calculate the Expected Value of Equity of XYZ at the time of maturity of the debt. Value of the Stake of Bondholders of company XYZ at maturity of the debt
The relationship between a bond and its price is easier to determine than the relationship between a stock and its price.True or False
3. You’ve observed the following returns on Regina computer stock over the past five years: 7%, -12%, 11%, 38% and 14% a.) What was the arithmetic average return on Regina stock over this five-year period? b.) What was the variance of Regina returns over this period? The standard deviation?
Which of the following best defines retained earnings? a. They are interest paid to creditors. b. They are profits not paid out to shareholders. c. They are the amount of revenues a corporation receives for the sale of its products, minus its costs of production, as measured by its accountants. d. They are the amounts paid out as dividends.