Business Finance Help for College and University Students

problem

In theory the decision maker should view market risk as being of primary importance. However, within-firm, or corporate, risk is relevant to a firm's a. Well diversified stockholders, because it may affect debt capacity and operating income. b. Management, because it affects job stability. c. Creditors, because it a ...continues

problem

Given the following information, calculate the NPV of a proposed project: Cost = $4,000; estimated life = 3 years; initial decrease in accounts receivable = $1,000, which must be restored at the end of the project's life; estimated salvage value = $1,000; earnings before taxes and depreciation = $2,000 per year; method of deprec ...continues

problem

Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 12 percent to evaluate average-risk projects, and it adds or subtracts 2 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $200,000 and will la ...continues

problem

Commodore Corporation is deciding whether it makes sense to invest in a project today, or to postpone this decision for one year. Which of the following statements best describes the issues that the commodore faces when considering this investment timing option? a. The investment timing option does not affect the expected cas ...continues

Evaluate alternative investment options

Nowhere Bus Lines (NBL) is considering two alternative buses to transport people from the commuter lot to the main campus. Bus S has a cost of $50,000 and will produce end-of-year net cash flows of $25,000 per year for 3 years. Bus L will cost $75,000 and will produce cash flows of $23,000 per year for the next 6 years. The c ...continues

Regarding WACC, stock price, corporate tax, which statement is most correct?

Which of the following statements is most correct? a. When a company increases its debt ratio, the costs of equity and debt capital both increase. Therefore, the weighted average cost of capital (WACC) must also increase. b. The capital structure that maximizes stock price is generally the capital structure that also maxi ...continues

problem

As a general rule, the capital structure that a. Maximizes expected EPS also maximizes the price per share of common stock. b. Minimizes the interest rate on debt also maximizes the expected EPS. c. Minimizes the required rate of equity also maximizes the stock price. d. Maximizes the price per share of common sto ...continues

Financing decision based on optimal debt ratio

The Altman Company has a debt ratio of 33.33 percent, and it needs to raise $100,000 to expand. Management feels that an optimal debt ratio would be 16.67 percent. Sales are currently $750,000, and the total assets turnover is 7.5. How should the expansion be financed so as to produce the desired debt ratio? a. 100% equity ...continues

problem

A decrease in a firm's willingness to pay dividends is likely to result from an increase in its a. Earnings stability b. Access to capital markets c. Profitable investment opportunities. d. Collection of accounts receivable. e. Stock price.

problem

A stock split will cause a change in the total dollar amounts shown in which of the following balance sheet accounts? a. Cash b. Common stock c. Paid-in capital. d. Retained earnings e. None of the statements above is correct.