A risk for a firm that tries to attain both cost and differentiation advantages is that it can be stuck in the middle. An example of this is supermarkets because their ________ structure is ________ than discount retailers, and customers do not value their products and services as being high-end such as those offered by Whole Foods.
A. cost; higher
B. price; lower
C. price; higher
D. cost; lower
Answer: A
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Imagine you are the founder of a company that provides shelter for pets that have neither homes nor owners to return to after a major weather disaster such as a fire, hurricane, or flood. What moral case could you provide to your staff as to why your company should engage in socially responsible actions and environmentally sustainable business practices?
What will be an ideal response?
Tangerine Inc.'s target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm's marginal tax rate is 40 percent. The firm's policy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium method to find the cost of retained earnings. Which of the following is Tangerine's component cost of retained earnings??
A. ?8 percent B. ?10 percent C. ?12 percent D. ?14 percent E. ?16 percent
Suppose IBM decided to issue commercial paper in denominations of $5,000 to raise a large sum of money. Since the commercial paper is secured only by IBM's reputation,
A. IBM does not have to pay back the principal. B. IBM has to pay interest rates higher than those charged by commercial banks for short-term loans. C. no interest is paid. D. no collateral is involved. E. the commercial paper can be issued only in $1,500 or $10,000 denominations.
One year ago Indigo Company paid a $4 dividend, and during the current year it has experienced a 10% growth rate. The company just paid a dividend of $4.40, i.e., D(o) = 4.40
Due to a new, advanced production technique, Indigo expects to achieve a dramatic increase in its short-term growth rate, to 25% annually for the next 3 years. After this time, growth is expected to return to the long-run constant rate of 10%. If investors require a 15% rate of return, at what price should the stock of Indigo Company be selling today? (Round to the nearest whole dollar.) A) $140 B) $181 C) $126 D) $110 E) $157