The idea that leverage (debt financing) can increase profitability is most clearly represented by the [Select] [Select] DuPont Identity Principal of Increasing Risk Diminishing Marginal Returns Coefficient of Variation Income Statement Time Value of Money < Previous
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![Question 25
The idea that leverage (debt financing) can increase profitability is most clearly
represented by the [Select]
[Select]
DuPont Identity
Principal of Increasing Risk
Diminishing Marginal Returns
Coefficient of Variation
Income Statement
Time Value of Money
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- This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value methodA. Realized return B. Ex ante alpha C. Ex post alpha D. Realized beta Question 7 (MCQ) One example of a build up model is: A. A macroeconomic model B. Capital Asset Pricing Model (CAPM) C. Bond yield plus risk premium D. Fama and French modelMIRR is usually calculated with the same reinvestment rate as that embedded in the cost of debt NPV cost of equity IRR regular payback method
- according to capm the expected return on equity includes a reward for: a. market risk and specific risk b. Specific risk only c. Time value of money and market risk d. Diversification and portfolio risk e. Time value of money and specific riskDefine Concept about these topics1.Payback method 2.Discounted payback method 3.Net present value 4.Internal rate of return 5.Profitability Index 6.MIRRdentify the decision rule that best fits each of the following descriptions. Dollar profit Optimistic percentage return Return that assumes reinvestment at WACC Options; MIRR IRR PI
- Define each of the following terms:a. Capital; capital structure; optimal capital structureb. Business risk; financial riskc. Financial leverage; operating leverage; operating breakevend. Hamada equation; unlevered betae. Symmetric information; asymmetric informationf. Modigliani-Miller theoriesg. Trade-off theory; signaling theoryh. Reserve borrowing capacity; pecking orderi. Windows of opportunity; net debtWhich one of the proportions of debt in the following chart is the optimal level? Firm Value Vu+ TD A B OD OC A B C -Vu + TD - Financial Distress Costs D Proportion of DebtQuestion 3:- What are the two different formulas used to Calculate the degree of financial leverage (DFL)? What is common-size financial statement analysis? What are Market Value Ratios?
- Which one of the following is an indicator that an investment is acceptable? Check all that apply: Profitability index equal 1.5 Profitability index greater than 0 the required return less than internal rate of return IRR equal to zero Payback period exceeds the required period Profitability index equal 1An increase in which of the following will increase the return on equity, all else constant?I. salesII. net incomeIII. depreciationIV. total equityThis calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero. Group of answer choices A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method