T/F The highest EPS numbers will always produce the lowest WACC figure to maximize stock price

Answer the following true/false statements:

T/F The highest EPS numbers will always produce the lowest WACC figure to maximize stock price
T/F The goal of a firm is to maximize the value of its stock and that occurs at the point where the WACC is the highest
T/F Capital structure refers to the % of equity and the % of debt affirm has with the goal of minimizing that cost or finding the lowest WACC.
T/F Essentially, the whole idea of valuing stocks and bonds and deciding whether or not to accept or reject capital investments (machines, a truck fleet, etc.) is to compute the present value of the cash flows.

Expert Solution

a]

False - WACC depends on cost of equity and cost of debt. A higher EPS results in a higher cost of equity (earnings yield approach), and WACC will be higher

b]

False - Value of stock is maximized when WACC is lowest

c]

True - capital structure is the % of different sources of capital. WACC depends on cost of sources of capital, as well as the proportion of those sources of capital in the capital structure

d]

True - capital budgeting and security valuation essentially consist of projecting cash flows, and calculating the present value of those cash flows

jeff jeffy answered 2 years ago

A price floor is A. almost always equal to the price ceiling. B. the highest possible...

A price floor is A. almost always equal to the price ceiling. B. the highest possible legal price that can be charged for a good or service. C. the lowest legal price at which a good or service can be traded. D. a legal price of zero that can be charged for a good or service. E. usually equal to the equilibrium price established before the government imposed the price floor

State whether each of the following is always true (T) or not always true (F). a)...

State whether each of the following is always true (T) or not always true (F). a) If X is a random variable, Corr X, (1/3)X= (1/3). b) If X and Y are independent random variables then E(X|Y ) = E(X) c) d) If fx(x) is the marginal density of a random variable X and fy(y|X = x) is the conditional density of a random variable Y , given a particular realization x of X, then the joint density of X...

Choose T/F for the following: (a) Gamma measures the option price change when the stock price...

Choose T/F for the following: (a) Gamma measures the option price change when the stock price increases. (b) Vega measures the change in the option price when there is an increase in volatility. (c) Theta measures the change in the option price when there is an increase in the time to maturity. (d) Rho measures the change in the option price when there is an increase in the interest rate. (e) For a call option, delta is not negative. (f)...

On a particular date, a company has a stock price of $24.17 and an EPS of...

On a particular date, a company has a stock price of $24.17 and an EPS of $ 2.89. Its competitor had a stock price of $20.57. What would be the expected EPS of their competitor's stock on this date, if estimated using the method of comparables? A. 1.36 B. 4.77 C. 3.60 D. 2.46

In a corporation, what should be management's main goal? A). Maximize the stock price B). Maximize...

In a corporation, what should be management's main goal? A). Maximize the stock price B). Maximize sales C). Minimize costs D).Maximize the number of products Maximize their paychecks

A stock analyst tracks three companies with stock prices f(t) = 40 + t + t...

A stock analyst tracks three companies with stock prices f(t) = 40 + t + t 2 − t 3/10, g(t) = 7 + t − t 2 + t 3/5, and h(t) = 15 + t − t 2/2 + t 3/10 − t 4/200, t months into the year. A monthly buy recommendation is due at the end of August, so t = 8. The analyst believes in ‘momentum investing’ and looks for companies with stock prices that...

the primary goal of financial management of a firm is to maximize its stock price in...

the primary goal of financial management of a firm is to maximize its stock price in the short run. Improving ROE( return on equity) is usually translated into greater stock price. The question is how to improve ROE. Much research agrees that high ROE depends on good liquidity,__________ proper use of debt.

Enter “T” or “F” in the column to the right A stock with a dividend of...

Enter “T” or “F” in the column to the right A stock with a dividend of $5 must have a higher price than a stock that pays a dividend of $1. The value of a stock is the present value of all future cash flows from the stock. You should buy a stock that has a calculated value of $20 and is priced at $18. One difference between stocks and bonds is that stocks mature, but bonds do not. One...

The goal of the firm is to maximize firm value (maximize the stock price). How can the managers of the firm make this happen?

The goal of the firm is to maximize firm value (maximize the stock price). How can the managers of the firm make this happen? How might agency costs get in the way? Explain

Each of the following 13 statements is either (always) True (T) or (sometimes) False (F). If...

Each of the following 13 statements is either (always) True (T) or (sometimes) False (F). If your answer is sometimes False (F), please provide a counterexample; that is, give an example where the statement is not true. If it is always true, you need not give a proof; merely answer T. 1. ?(? + h) = ?(?) + ?(h) Answer: _____ 2. sin⁡(? + ?) = sin(?) + sin⁡(?) Answer: _____ 3. sin(? ∗ ?) = sin(?) ∗ sin⁡(?) Answer:...

Question