Which of the following changes will result in an increase to a company’s sustainable growth rate? Question options: An increase in dividend payouts An increase in interest expense A decrease in tax expense
Q: Which of the following statements is correct? a. Companies may pay too high a price in a large…
A: companies may pay a high price in a large open market to repurchase its shares because it needs to…
Q: Given the current scenario COVID 19 and its impact on Cement sector in the near future, what are the…
A:
Q: Assume that each of the following changes is independent (i.e., except for this change, all other…
A: The earning for the shareholders is an important element that induces them to invest the capital in…
Q: Assuming that the net sales and profit remain the same, a company's return on investment would * A O…
A:
Q: Outline the main features of the Stable Dividend Growth policy and explain the type of company this…
A: Stable Dividend Growth policy is the policy adopted by the financial managers in which the dividends…
Q: Which one of the following factors might cause a firm to increase the debt in its financial…
A: Interest paid on debt is a tax deductible expense, which means that while ascertaining the tax…
Q: Which of the following statements about earnings per share (EPS) is correct? Multiple Choice EPS is…
A: Earnings per share (EPS): The amount of net income available to each shareholder per common share…
Q: Which of the following best describes the possible result of treasury share transactions? a. May…
A: The treasury shares are the shares which are repurchased by company from its own shares.
Q: Using the dividend growth model, why would a firm be hesitant to reduce the growth rate of its…
A: Dividend growth rate refers to proportional positive change in dividend amount from last paid…
Q: Identify three economic factors that will drive a firm’s price-earnings ratio to decrease over time
A: In case of multiple questions given it is only possible to solve one question. So solving the first…
Q: The firm's equity multiplier measures: O a. the value of assets held per dollar of shareholder…
A: Equity multiplier is also referred to as leverage ratio or financial leverage and indicates that a…
Q: Define the term self-supporting growth rate. What is Hatfield’s self-supporting growth rate? Would…
A: Self supporting growth rate is the maximum possible growth the company can exhibit in terms of its…
Q: Explain the relationship between a company’s growth possibilities and its dividend policy
A: There is a systematic and tangible relationship between a company’s growth possibilities and its…
Q: suppose a company's return on invested capital is less than its wacc. what happens to the value of…
A: Return on invested capital (ROIC) is defined as an amount of the funds, which used to make by the…
Q: If a firm strictly adheres to the residual dividend policy, a sale of new common stock by the…
A: Under residual dividend policy, dividends are paid on leftover profits after the after the company…
Q: Suppose a company’s return on invested capital is less than its WACC. What happens to the value of…
A: Weighted Average Cost of Capital (WACC) is the rate at which the company is willing to pay to its…
Q: What would be a reason a company would want to understate income?A. to help nudge its stock price…
A: Profitability of the business is an important measure for business evaluation. It depends on the…
Q: Bolton Company substantially increased its allowance for bad debt. Which of the following effects…
A: The current ratio measures capabilities of the company to meet-out short-term obligations or not. it…
Q: Which of the following is true of a leverage ratio? O It is a measure of the extent to which a…
A: Debt are a form of liabilities for the company, which it has to pay in future. Equity is the total…
Q: ratio from 25% to 50%. if you are valuing this company using residual earning method. what will…
A: Given Dividend payout ratio increased from 25 % to 50 % The value of share will be decrease as the…
Q: How would rising interest rates, that increase the weighted average cost of capital (WACC) impact…
A: Weighted average cost of capital is the average cost of capital weighted by the proportion of the…
Q: Which of the following would increase the likelihood that a company would increase its debt ratio,…
A: Cetris Perbius Means Other things remaining constant, if the company is considering to increase the…
Q: Which of the following statements on corporate valuation model is CORRECT? Group of answer choices:…
A: Corporate valuation model used to start with the calculation of the asset's value. And, it also…
Q: return on investment
A: First option is wrong because the return on investment will increase if the invested capital…
Q: Analyze the following statement with a suitable example: “The current cost adjustment helps to…
A: Inflation seems to be the rate at which prices rise over a specific period of time. Inflation is…
Q: Which of the following does NOT always increase a company’s MVA? Group of answer choices: Increasing…
A: Market Value Added (MVA) refers to the amount of wealth which the company is able to create for its…
Q: Describe the two possible market signals that investors perceive from a firm announcing an increase…
A: Dividend refers to that portion of the profits of the company which is distributed among the…
Q: The price to earnings (P/E) ratio is an after-tax metric reflecting growth potential of the common…
A: For the transportation company, P/E ratio is 12 but the corporation has assumed to have a long life…
Q: A downward adjustment in a firm's payout ratio means that the firm is reinvesting a : proportion of…
A: Retention ratio refers to those portions of net income of the company which is not paid by the…
Q: How would each of the following changes tend to affect aggregate (i.e., the average for…
A: Payout ratio is the profitability ratio required for analysis from owner’s point of view which…
Q: Which of the following statements is likely to be true, for a company making profits? Select one:…
A: All the transactions of the company that are happened during the year will be recorded first in the…
Q: When considering a top-down approach to fundamental analysis, the impact of macroeconomic factors on…
A: Fundamental analysis involves the study of various macroeconomic and microeconomic factors in order…
Q: It has been suggested that when applied to the percentage growth rate in a business, the law of…
A: A business, during its initial stages and phases, sees more growth. With passage of time as the size…
Q: Considering each action independently and holding other things constant, which of the following…
A: Based on the above questions we need to answer the correct answer
Q: What are the real-world factors that would encourage firms to follow a high dividend policy
A: Dividend is the amount of share which the shareholders receive out of the remaining net profits. It…
Q: Dividend policy and company value: You have just encountered two identical companies with identical…
A: A dividend policy is an important policy, it changes the valuation of a company. If a company is…
Q: Explain why it would be difficult to use the dividend discount model (DDM) to value a new and…
A: The dividend discount model is used to find the present value of the stock by calculating the…
Q: Which of the following statements accurately describes the relationship between earnings and…
A: Growth rate in earnings and dividend = ROE*Retention ratio or ROE*(1-Payout ratio) Growth rate…
Q: As companies evolve, certain factors can drive sudden growth. This may lead to a period of…
A: Dividend per share = $3.12 Growth rate of next year = 16% Constant Growth rate = 3.20% Risk free…
Q: Jones Group has been generating stable after-tax return on equity (ROE) despite declining operating…
A: Return on equity (ROE) is a measure of financial performance of a company, it is calculated by…
Q: Using the data for a firm shown in the following table attached below, calculate the cost of…
A: Dividend next year (D1) = $2.64 Growth rate (g) = 8% Current price (P0) = $44 Underpricing (u) = $2…
Q: An increase in the corporate tax rate for company X will generally Increase X's cost of equity…
A: Corporate tax rate is beneficial in the case of debt as it provides the tax shield, which reduces…
Q: cost of debt is determined by taking the present value of the interest payments and principal times…
A: Cost of capital refers to the rate of return which is required by the company in order to achieve…
Q: Explain why it would be difficult to use the dividend discount model (DDM) to value a new and…
A: DDM (dividend discount model) is an important valuation concept often used in finance, As per DDM…
Which of the following changes will result in an increase to a company’s sustainable growth rate?
Question options:
|
|
An increase in dividend payouts |
|
|
An increase in interest expense |
|
|
A decrease in tax expense |
Sustainable growth rate is the growth rate a firm can expect without any additional finance growth in respect of sources to be added say debt and equity.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- Which of the following situation in which the quality of the company’s pay-out to shareholders may decline a. Decrease in cash position b. Increase in positive NPV investment opportunities c. Increase in capital gains tax d. Decrease in marginal tax rate on dividends Which of the following concepts tells us that dividends are to be paid only when the capital budget has been already supplied? a. Gordon Growth model b. Dividend irrelevance theory c. Retain Earnings break-point principle d. Residual Dividend ModelA decrease in which of the following will increase the current value of a share according to the dividend growth model? Required rate of return. Dividend amount. Dividend growth rate. Number of future dividends, provided the number is less than infinite.Define the term self-supporting growth rate. What is Hatfield’s self-supporting growth rate? Would the self-supporting growth rate be affected by a change in the capital intensity ratio or the other factors mentioned in the previous question? Other things held constant, would the calculated capital intensity ratio change over time if the company were growing and were also subject to economies of scale and/or lumpy assets?
- Define the term capital intensity. Explain how a decline in capital intensity would affect the AFN, other things held constant. Would economies of scale combined with rapid growth affect capital intensity, other things held constant? Also, explain how changes in each of the following would affect AFN, holding other things constant: the growth rate, the amount of accounts payable, the profit margin, and the payout ratio.When considering a top-down approach to fundamental analysis, the impact of macroeconomic factors on a stock’s price can have which of the following effects? an increase in real GDP is followed by improvement in current and expected future profits for companies, leading to higher stock price. an increase in real GDP is followed by performance of industries and subsequent improvement in current and expected future profits for companies, leading to higher stock prices. an increase in real GDP, followed by a significant performance of cyclical industries such as automobile and consumer discretionary, will lead to higher stock prices.Which of the following will increase the WACC for a tax-paying company? Decrease the proportion of equity financing Decrease the proportion of debt financing Decrease the market value of the equity Increase the market value of the debt
- How would rising interest rates, that increase the weighted average cost of capital (WACC) impact business valuations? Would this change if the company being valued was going to receive revenue from the government spending?Find the Fundamental value using dividend growth model with the historical growth rate for (ABC), and Find Fundamental value using the dividend growth model with the sustainable growth rate for(ABC)Which of the following events would cause a company's cost of retained earnings to increase? Group of answer choices the company's stock price falls the company's forecasted growth in profits and dividends is reduced the company diversifies into a safer industry the overall beta for a company falls
- Find the Fundamental value using dividend growth model with the historical growth rate, and Find Fundamental value using the dividend growth model with the sustainable growth rateFor the company in the previous problem, what is the dividend yield? What is the expected capital gains yield?Could a company’s change in NWC be negative in a given year? (Hint: Yes.) Explain how this might come about. What about net capital spending?
