Blueprint Problem – Shareholder Wealth Maximization
Fundamentals of Financial Management, Concise
Brigham and Houston
11th Edition
Given paragraphs of text pertaining to corporations, you are asked to fill in missing terms from dropdown menus.
Given paragraphs of text pertaining to corporations, you are asked to fill in missing terms from dropdown menus.
The _A__ is still one of the most important ideas in finance theory. It states that asset prices are approximately __B__ their intrinsic values. However, the real world seems inconsistent with the hypothesis, which created __C___ finance. Investors and managers behave differently in down markets than they do in up markets and individuals tend to __D___ their true abilities.
If the stock market is __E___, it’s a waste of time for pick individual stocks. Stock prices already reflect all publicly available information and these stocks will be __F____ priced. Most importantly, the portfolio should be ___G__.
Transfers can take place in 3 ways: ____A___ without going through any type of financial institution, __B____ transfers through investment banks that underwrite the securities, and indirect transfers through financial __C__ that create new forms of capital.
The most active secondary market is the market where the prices of stocks are established. The two leading stock markets are the New York Stock Exchange, which is a __A___, and the NASDAQ, which is a __B___market.
Stock market transactions include: (1) outstanding shares are traded in the __C___market, (2) additional shares sold by companies in the ___D___ market, and (3) initial public offerings made by privately held firms in the __E___ market.
Given the coupon rate, yield to maturity, and tax rate… find the after-tax cost of debt.
Your numbers will vary.
Given the preferred stock price and annual dividend… find the company’s cost of preferred stock, rp?
Your numbers will vary.
Given the target capital structure of debt and common equity, yield to maturity, tax rate, and WACC… find the cost of common equity.
Your numbers will vary.
Given common stock, expected dividend paid, and constant growth rate… find the cost of equity from retained earnings and its cost of equity from issuing new common stock.
Your numbers will vary.
Given the estimated WACC, and the project’s size and rate of return… find which set of projects should be accepted.
Your numbers will vary.
Given the growth rate, stock price, last dividend, what the dividend will pay, beta, risk-free rate, and return on the market… find the cost of equity for each scenario using the DCF approach, the CAPM approach, and the bond-yield-plus-risk-premium approach.
Your numbers will vary.