Chapter 4: Q.5B (page 396)
How do each of the following affect the sensitivity of profits to the business cycle?
a. Financial leverage
b. Operating leverage
Answer
a. increases the sensitivity
b. increases the sensitivity
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What is typically true of corporate dividend payout rates in the early stages of an industry life cycle? Why does this make sense?
Which one of the following firms would be described as having below-average sensitivity to the state of the economy?
a. An asset play firm
b. A cyclical firm
c. A defensive firm
d. A stalwart firm
The risk-free rate of return is 5%, the required rate of return on the market is 10%, and High-Flyer stock has a beta coefficient of 1.5. If the dividend per share expected during the coming year, D 1 is $2.50 and g = 4%, at what price should a share sell?
If a security is underpriced (i.e., intrinsic value > price), then what is the relationship between its market capitalization rate and its expected rate of return?
The financial statements for Chicago Refrigerator Inc. (see Tables 14.15 and 14.16 ) areto be used to compute the ratios a through h for 2013.
a. Quick ratio.
b. Return on assets.
c. Return on common shareholders’ equity.
d. Earnings per share of common stock
e. Profit margin.
f. Times interest earned.
g. Inventory turnover.
h. Leverage ratio.
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