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goblinko [34]
3 years ago
7

A firm's CFO is considering increasing the target debt ratio, which would also increase the company's interest expense. New bond

s would be issued and the proceeds would be used to buy back shares of common stock. Neither total assets nor operating income would change, but expected earnings per share (EPS) would increase. Assuming the CFO's estimates are correct, which of the following statements is CORRECT?a. Since the proposed plan increases the firm's financial risk, the stock price might fall even if EPS increases.b. If the plan reduces the WACC, the stock price is likely to decline.c. Since the plan is expected to increase EPS, this implies that net income is also expected to increase.d. If the plan does increase the EPS, the stock price will automatically increase at the same rate.e. Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the interest rate on the currently outstanding bonds.
Business
1 answer:
mylen [45]3 years ago
6 0

Answer:

A

Explanation:

Since the proposed plan increases the firm's financial risk, the stock price might fall even if EPS increases.

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A Japanese insurance company purchases U.S. government securities. From the perspective of the United States, the balance of tra
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Answer:

a. not change; improve

Explanation:

Balance of trade is the difference in value over a period of time between a country’s imports and exports of goods and services,  usually expressed in the unit of currency of a particular country (e.g., dollars for the United States, yen for the Japan).

Balance of payments record the receipts and payments of the residents of the country in their transactions with residents of other countries.

A Japanese insurance company purchases U.S. government securities. From the perspective of the United States, the balance of trade with Japan will not change and the balance of payments with Japan will improve.

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3 years ago
Suppose investment is $1,100 billion, private saving is $1,050 billion, and capital inflow from abroad is $100 billion. Solve th
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Anoveoswer:

The government deficit is $150 billion

Explanation:

Current Account (CA)  = Savings(S) -Investment(I).

Current account (CA)  is also conventionally defined as (X-M) (value of exports – value of imports) + Net income from abroad. (R)

CA = (X-M) + (R)

In this case CA= $1050 billion - $1100 billion

                      CA= -$50 billion

Therefore CA = (X-M) + (R)

           - $50 billion = x + $100 billion

       X-M= -$100 billion + -$50 billion=  -$150 billion

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Answer:

40%

Explanation:

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Index of Openness= (Exports(X)+Imports (M))/GDP

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