Question

1a. Debtholders have a "residual claim" on assets. In other words, out of the company's assets,...

1a. Debtholders have a "residual claim" on assets. In other words, out of the company's assets, first the common stockholders are paid and the residual is paid to the debtholders.

True

False

1b.

Which of the following is a cash flow from stocks?

Cash dividends.

Sales price.

Both cash dividends and sales price.

None

1c.

Which of the following is correct?

There is a negative (inverse) relationship between required rate of return on a stock and the price of the stock.

There is a positive (direct) relationship between required rate of return on a stock and the price of the stock.

There is no relationship between the required rate of return on a stock and the price of the stock.

None
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1.a. The given statement is FALSE because equity shareholders will always be having a residual claim and debt holders will always be having a priority claim on asset, so the given statement is completely incorrect.

1b. cash dividend are always a cash flow from stocks because they are paid to the equity shareholders of the company and sales price is not paid to the shareholders.

Correct answer is option (a) cash dividend.

1.(c).there is a positive relationship between required rate of return and the price of the product because the higher the price, the higher would be the required rate of return because it will help the investor in identification of a better opportunity.

Show the correct answer would be option (B) there is a positive (direct) relationship.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following is correct? a.There is a negative (inverse) relationship between required rate of...
Which of the following is correct? a.There is a negative (inverse) relationship between required rate of return on a stock and the price of the stock. b.There is a positive (direct) relationship between required rate of return on a stock and the price of the stock. c.There is no relationship between the required rate of return on a stock and the price of the stock. d.None of the above
1a. As the maturity of the loan increases, the interest rate quoted on that loan increases...
1a. As the maturity of the loan increases, the interest rate quoted on that loan increases because of the increase in maturity premium. True False 1b. Which of the following is correct for the company's bond price when the default risk of that company increases (when the future prospect of the company becomes poor)? YTM increases therefore the price of the bond increases YTM decreases therefore the price of the bond decreases YTM decreases therefore the price of the bond...
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de...
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 126,000 $ 133,000 Accounts receivable 334,000 489,000 Inventory 572,000 478,000 Plant and equipment, net 828,000 800,000 Investment in Buisson, S.A. 402,000 430,000 Land (undeveloped) 249,000 255,000 Total assets $ 2,511,000 $ 2,585,000 Liabilities and Stockholders' Equity Accounts payable $ 374,000 $ 346,000 Long-term debt 1,041,000...
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de...
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 140,000 $ 125,000 Accounts receivable 343,000 473,000 Inventory 567,000 479,000 Plant and equipment, net 820,000 833,000 Investment in Buisson, S.A. 401,000 429,000 Land (undeveloped) 247,000 245,000 Total assets $ 2,518,000 $ 2,584,000 Liabilities and Stockholders' Equity Accounts payable $ 380,000 $ 341,000 Long-term debt 1,041,000...
1A) Risk-averse investors who hold a single stock would require a higher rate of return on...
1A) Risk-averse investors who hold a single stock would require a higher rate of return on a stock whose standard deviation is 0.33 than on a stock whose standard deviation is 0.18. But, if these stocks are held as part of a portfolio, it is possible for the stock with the higher standard deviation to have the lower required return. True/False? 1B) Ceteris paribus, a change in the beta of a firm's stock will change the required rate of return...
Residual Income [LO10-1, LO10-2] Financial data for Joel de Paris, Inc., for last year follow: Joel...
Residual Income [LO10-1, LO10-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 136,000 $ 126,000 Accounts receivable 335,000 486,000 Inventory 561,000 479,000 Plant and equipment, net 838,000 819,000 Investment in Buisson, S.A. 398,000 433,000 Land (undeveloped) 247,000 250,000 Total assets $ 2,515,000 $ 2,593,000 Liabilities and Stockholders' Equity Accounts payable $ 375,000 $ 330,000 Long-term debt 1,007,000 1,007,000 Stockholders' equity 1,133,000 1,256,000 Total liabilities...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 135,000 $ 131,000 Accounts receivable 336,000 489,000 Inventory 577,000 489,000 Plant and equipment, net 842,000 821,000 Investment in Buisson, S.A. 407,000 427,000 Land (undeveloped) 246,000 255,000 Total assets $ 2,543,000 $ 2,612,000 Liabilities and Stockholders' Equity Accounts payable $ 375,000 $ 330,000 Long-term debt 976,000 976,000 Stockholders' equity 1,192,000 1,306,000 Total liabilities and stockholders' equity $...
Assets Liabilities Cash $ 14,000 Accounts payable $ 16,000 Accounts receivable    19,000 Bonds payable 78,000...
Assets Liabilities Cash $ 14,000 Accounts payable $ 16,000 Accounts receivable    19,000 Bonds payable 78,000 Inventory    29,000         Total liabilities $ 94,000 Prepaid Expenses    12,400 Stockholders’ Equity     Total current assets    74,400 Preferred stock $ 24,000 Plant and equipment, net   203,200 Common stock 59,000 Total Assets $ 277,600 Paid-in capital in excess of par 29,000 Retained earnings 71,600        Total stockholders’ equity 183,600 Total liabilities & stockholders’ equity $277,600 You are to calculate the costs of the three...
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de...
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet   Beginning Balance Ending Balance Assets   Cash $ 133,000 $ 139,000   Accounts receivable 339,000 488,000   Inventory 567,000 484,000   Plant and equipment, net 791,000 759,000   Investment in Buisson, S.A. 402,000 427,000   Land (undeveloped) 247,000 247,000   Total assets $ 2,479,000 $ 2,544,000 Liabilities and Stockholders' Equity   Accounts payable $ 372,000 $ 346,000   Long-term debt 1,014,000...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance...
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 133,000 $ 131,000 Accounts receivable 342,000 480,000 Inventory 575,000 471,000 Plant and equipment, net 790,000 798,000 Investment in Buisson, S.A. 391,000 435,000 Land (undeveloped) 253,000 255,000 Total assets $ 2,484,000 $ 2,570,000 Liabilities and Stockholders' Equity Accounts payable $ 389,000 $ 334,000 Long-term debt 951,000 951,000 Stockholders' equity 1,144,000 1,285,000 Total liabilities and stockholders' equity $...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT