Planned Obsolescence Has A Product That Will Be In Vogue For 3 Years At Which Point The Firm Will Close Up Shop And

What information about company stocks is regularly reported in the financial pages of the newspaper Firms that wish to raise new capital may either borrow money or bring new partners into the business by selling shares of common stock. Large companies usually arrange for their stocks to be traded on a stock exchange. The stock listings report the stock's dividend yield, price, and trading volume. How can one calculate the present value of a stock given forecasts of future dividends and future...

Cash Cow International Paid A Regular Quartlery Dividend

How are dividends paid and how do companies decide on dividend payments Dividends come in many forms. The most common is the regular cash dividend, but sometimes companies pay an extra cash dividend, and sometimes they pay a stock dividend. A firm is not free to pay dividends at will. For example, it may have accepted restrictions on dividends as a condition for borrowing money. Most managers seem to have a target dividend payout ratio. But if firms simply applied this target payout rate to...

Mini Case Measuring Corporate Performance Burchetts Green

What are the standard measures of a firm's leverage, liquidity, profitability, asset management, and market valuation What is the significance of these measures If you are analyzing a company's financial statements, there is a danger of being overwhelmed by the sheer volume of data contained in the income statement, balance sheet, and statement of cash flow. Managers use a few salient ratios to summarize the firm's leverage, liquidity, efficiency, and profitability. They may also combine...

What Happens To The Opportunity Cost Of Capital If Investors Become Especially Conservative And Less Willing To Bear

How can one estimate the opportunity cost of capital for an average-risk project Over the past 73 years the return on the Standard amp Poor's Composite Index of common stocks has averaged almost 9.4 percent a year higher than the return on safe Treasury bills. This is the risk premium that investors have received for taking on the risk of investing in stocks. Long-term bonds have offered a higher return than Treasury bills but less than stocks. If the risk premium in the past is a guide to the...

Reliable Gearing Currently Is All-equity-financed

What is the goal of the capital structure decision What is the financial manager trying to do The goal is to maximize the overall market value of all the securities issued by the firm. Think of the financial manager as taking all the firm's real assets and selling them to investors as a package of securities. Some financial managers choose the simplest package possible all-equity financing. Others end up issuing dozens of types of debt and equity securities. The financial manager must try to...

Why Dividend Policy Should Not Matter

The first step toward understanding dividend policy is to recognize that the phrase means different things to different people. Therefore, we must start by defining what we mean by it. A firm's decisions about dividends are often intertwined with other financing and investment decisions. Some firms pay low dividends because management is optimistic about the firm's future and wishes to retain earnings for expansion. In this case the dividend is a by-product of the firm's capital budgeting...

If The Expected Return On The Market Portfolio Is Estimated To Be 19 The Risk-free Rate Of Interestt Is

How can you measure and interpret the market risk, or beta, of a security The contribution of a security to the risk of a diversified portfolio depends on its market risk. But not all securities are equally affected by fluctuations in the market. The sensitivity of a stock to market movement is known as beta. Stocks with a beta greater than 1.0 are particularly sensitive to market fluctuations. Those with a beta of less than 1.0 are not so sensitive to such movements. The average beta of all...

Further notes and wrinkles arising from bloopers project

Before we leave Blooper and its magnoosium project, we should cover a few extra wrinkles. accelerated cost recovery system macrs Depreciation method that allows higher tax deductions in early years and lower deductions later. A Further Note on Depreciation. We warned you earlier not to assume that all cash flows are likely to increase with inflation. The depreciation tax shield is a case in point, because the Internal Revenue Service lets companies depreciate only the amount of the original...