Which of the following statements best describes the optimal
capital structure?
a.
The optimal capital structure is the mix of debt, equity, and
preferred stock that maximizes the company's earnings per share
(EPS).
b.
The optimal capital structure is the mix of debt, equity, and
preferred stock that minimizes the company's cost of preferred
stock.
c.
The optimal capital structure is the mix of debt, equity, and
preferred stock that minimizes the company's cost of debt.
d.
The optimal capital...
Which capital structure is better for a firm Actual capital
structure of 9.5% or Target capital structure of 9.0%?
What is the difference between the two?
Which of the following does not describe the
impact of a firm's capital structure on ROA and ROCE?
Multiple Choice
A. A highly levered firm can be advantageous to common
stockholders.
B. For a high-debt firm experiencing a profitable year, ROCE
will likely be lower than ROA if the debt was not used to support
operations.
C. For a firm with no debt, ROCE will likely be the same as the
ROA.
D. For a high-debt firm experiencing a profitable...
Which of the following decisions is most likely to affect a
firm’s capital structure and is therefore a financing decision? A)
acquiring another company using cash B) spend $7.6 billion on
research and development C) issue new corporate bonds
The following is information regarding the capital structure of
Wind Industries:
- Capital structure consists of a single long-term debt issue
with a face value of $20 million and 2 million common shares with a
current market price of $15 per share
- The long-tern debt issue carries a coupon rate of 5% with
interest paid semi-annually. It has 8 years remaining until
maturity and a current market yield of 6%, also based on semi
annual compounding.
- The common...
Viza Longstry Communications Incorporated (VCI ) has the
following capital structure, which it considers to be optimal:
Debt
40%
Common
stock
60
Total
capital
100%
VCI’s tax rate is 40 percent, and investors expect earnings and
dividends to grow at a constant rate of 9 percent in the future.
VCI paid a dividend of $3.60 per share last year. The current share
price is $ 50. Debt could be sold at an interest rate of 12
percent.
Required:
Find the...
Badmmans Firearms Company has the following capital structure,
which it considers to be optimal: debt = 17%, preferred stock =
12%, and common equity = 71%.
Badman’s tax rate is 35%, and investors expect earnings and
dividends to grow at a constant rate of 8% in the future. Badman's
expected net income this year is $395,840, and its established
dividend payout ratio is 24%. Badmans paid a dividend of $6.75 per
share last year (D 0 ), and its stock...
Badmmans Firearms Company has the following capital structure,
which it considers to be optimal: debt = 17%, preferred stock =
12%, and common equity = 71%.
Badman’s tax rate is 35%, and investors expect earnings and
dividends to grow at a constant rate of 8% in the future. Badman's
expected net income this year is $395,840, and its established
dividend payout ratio is 24%. Badmans paid a dividend of $6.75 per
share last year (D 0 ), and its stock...
Badmmans Firearms Company has the following capital structure,
which it considers to be optimal: debt = 17%, preferred stock =
12%, and common equity = 71%.
Badman’s tax rate is 35%, and investors expect earnings and
dividends to grow at a constant rate of 8% in the future. Badman's
expected net income this year is $395,840, and its established
dividend payout ratio is 24%. Badmans paid a dividend of $6.75 per
share last year (D 0 ), and its stock...