Entries by mary WAMBUGU

Rio Rubber Corporation follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm’s dividend per share?

August 26, 2019 in /by

Part 1 – Concept Questions (15 points each) 1. Rio Rubber Corporation follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm’s dividend per share?             A. The company increases the percentage of equity in its target capital structure. […]

 

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7. Bike Inc.’s expected net income for next year is $1 million. The company’s target and current capital structure is 40% debt and 60% common equity. The optimal capital budget for next year is $1.2 million. If Bike uses the residual distribution model to determine next year’s distribution and makes all distributions in the form of dividends, what is the expected payout ratio? (15 points)

August 26, 2019 in /by

7. Bike Inc.’s expected net income for next year is $1 million.  The company’s target and current capital structure is 40% debt and 60% common equity. The optimal capital budget for next year is $1.2 million.  If Bike uses the residual distribution model to determine next year’s distribution and makes all distributions in the form […]

 

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Which of the following events is likely to encourage a company to raise its target debt ratio, other things

August 26, 2019 in /by

Question 2. Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?             A. An increase in the company’s operating leverage.             B. An increase in the corporate tax rate.             C. The Federal Reserve tightens interest rates in an effort to fight inflation. […]

 

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August 26, 2019 in /by

Problem 1:  Find the WACC for a firm with the following characteristics.  Problem 1:  Find the WACC for a firm with the following characteristics.  A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of […]

 

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