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Identify and explain each of the if it encourage a firm to increase or decrease debt in its capital structure? a. The corporate tax rate increases b. The personal tax rate increases c. Due to market changes, the firm's assets become less liquid d. The firm's sales and earnings become more volatile.

1. What are the company motives for declaring dividends or stock repurchase programs? 2. How would you argue for a significant increase in both dividends and repurchases instead of using the available cash to make investments, i.e. M&A? 3. Would the tax treatment of dividend income versus capital gains income affect the managers’ decisions to disburse cash via dividends versus stock repurchases?

Which of the following questions should be considered when developing a corporation’s financial plan? I. How much net working capital will be needed? II. Will additional fixed assets be required? III. Will dividends be paid to shareholders? IV. How much new debt must be obtained?

What is the primary goal of corporate finance? a) To maximize revenue b) To maximize shareholder wealth c) To minimize costs d) To maximize market share

TOPIC: Introduction to Financial Management  1. Which of the following can be accepted as main points to note when it comes to a company's financial objective? O It is generally accepted that the main financial objective of a company should be to maximize (or at least increase) shareholder wealth. O There are practical difficulties in selecting a suitable measurement for growth in shareholder wealth. Financial targets such as profit maximization and growth in EPS might be used, but no financial target on its own is ideal. O Financial performance is therefore assessed in a variety of ways: by the actual or expected increase in the share price, growth in profits, growth in EPS, and so on.  2. Which of the following statement/s depicts agency relationships and conflicts?  I. The owners expect the agents to act in the best interests of the owners. Ideally, the 'contract' between the owners and the managers should ensure that the managers always act in the best interests of the…

a) Determine the market value proportions of debt, preference shares and ordinary equity comprising the company’s capital structure. b) Calculate the after-tax costs of capital for each source of finance and  the after-tax weighted average cost of capital for the company. C) Provide recommendation to your client. d) What are the assumptions underlying the use of a dividend growth model for the estimation of a company’s cost of equity?

Which of the following will increase the WACC for a tax-paying company? Decrease the proportion of equity financing Decrease the proportion of debt financing Decrease the market value of the equity Increase the market value of the debt

Answer the question

Which two situations would tend to cause a company to have more debt in its capital structure?a) Tangible assets to serve as collateralb) Most expenses are for employee compensationc) High levels of unearned revenued) Most expenses are for research and developmente) Stable operating cash flows

Which one of the following factors might cause a firm to increase the debt in its financial structure?A. An increase in the corporate income tax rate.B. Increased economic uncertainty.C. An increase in the federal funds rate.D. An increase in the price-earnings ratio.

What is the primary goal of financial management in a corporation? a) Maximizing shareholder wealth b) Minimizing operational costs c) Increasing market share d) Maintaining stable employment

If the management of a company would like to improve the company's return on equity, what should the management of the company do?

In business finance the generally accepted corporate objective is: Group of answer choices maximization of market share. maximization of shareholders’ wealth maximization of capital employed. maximization of profit.

What are the key factors a company should consider when determining its optimal capital structure, and how do these considerations impact major corporations such as Amazon, Coca-Cola, and Facebook (Meta) in terms of financial risk, operational flexibility, and long-term growth? How does the balance between debt and equity affect these companies' strategic decisions, market value, and overall cost of capital? What role do external factors like market conditions, interest rates, and tax regulations play in shaping their capital structure, and how do industry-specific dynamics influence their financial strategies? Additionally, how do companies ensure that their capital structure decisions align with shareholder interests, and what are the potential trade-offs they face between maintaining financial stability and pursuing aggressive growth strategies?

1. Dividend policy and free cash flow Company management, especially in established corporations, will formulate a policy that is often called a distribution policy or a payout policy. This policy specifies what management intends to do with the company’s profits and any free cash flow (FCF) generated by the firm. The objective is to create a distribution policy that increases the value of the firm and maximizes the wealth of the firm’s shareholders.   Which of the following factors affects management’s decisions regarding a firm’s distribution policy? Check all that apply.   -The level of debt and interest payments   -The level of cash distributions   -The form of payment to shareholders   -The stability of payments to shareholders     Management can make any form of distribution to the firm’s shareholders using the company’s free cash flow (FCF). The underlying objective is to maximize shareholder wealth by increasing the firm’s value. Any use of FCF…

It is said that one of the goals of a company is wealth maximization. Whose wealth does a firm wants to enhance in wealth maximization? (answer: the firm's stockholders) Why is the answer stockholders?

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What is the acceptable level of a company's indebtedness according to the financial leverage indicator  a. The level based on the willingness of banks to provide loans  b. Until the debt financing resource are cheaper than equity shareholder fund c. Under condition that the employed debt financing resources are increasing profitability of equity shareholder fund d. The level based on the willingness of shareholders to provide registered capital

What is the primary purpose of computing the cost of capital? a. To determine the market value of the company's shares b. To assess the company's liquidity position c. To evaluate the profitability of investment projects d. To compare the company's performance with industry peers

What is the purpose of financial leverage in finance? a) To increase the company's liquidity b) To reduce the company's risk c) To increase the company's profitability d) To magnify the company's returns and risks

Indicate whether each of the following statements is true or false. Support your answers with the relevant explanations. a) The higher the proportion of equity in a company’s overall capital structure, thehigher return required by its debtholders. (Explain your reasoning – provide a numerical example supporting your answer.)  b) In the presence of corporate taxes, a company would prefer to raise debt onlywhen the benefits of the tax shield fully offset the cost of debt. (Explain yourreasoning –  provide a numerical example supporting youranswer.)  c) In the presence of bankruptcy risk, the cost of capital of a company with debt is always higher than the cost of capital of an unlevered company. (Explain yourreasoning –, provide a numerical example supporting youranswer.)