To study changes in ROA, the analyst can disaggregate ROA into the product of two other ratios:
a. the gross profit for ROA ratio and the total assets turnover ratio.
b. the profit margin for ROA ratio and the inventory turnover ratio
c. the gross margin for ROA ratio and the inventory turnover ratio.
d. the profit margin for ROA ratio and the total assets turnover ratio
e. the gross margin for ROA ratio and the total assets turnover ratio.
D
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Trent owns and manages a small electronics repair store. He determines the time required by his employees to complete each task assigned by him. When employees complete the repairs in less time, they receive an amount of pay equal to that time determined by him. In this scenario, Trent is using a
A. differential piecework plan. B. straight piecework plan. C. Scanlon plan. D. merit pay plan. E. standard hour plan.
Purchasing an online ad on a CPA basis means that the advertiser:
A. pays for impressions in 1,000 unit lots. B. pays a pre-negotiated fee for each click an ad receives. C. pays only for those users who perform a specific action, such as registering, purchasing, etc. D. exchanges something of equal value for the ad space.
It is generally perceived that utilities that have cash flow problem will not be increasing their dividend
Indicate whether the statement is true or false
Readable Materials Inc., a manufacturer of coated freshet and coated ground-wood paper used in catalogs, magazines, and commercial printing applications, has three bond issues outstanding. The following table describes these issues:
In addition, the firm’s 100,000 preferred shares of stock pay $0.75 per share quarterly and currently have a market price of $30 per share and a book value of $20 per share. The flotation costs for debt, preferred, and common equity are 3%, 5%, and 7%, respectively. The current price per share of the firm’s 200,000 shares of common stock is $50, but they have book value of $30 per share. The firm expects an average common dividend growth rate of 3% indefinitely and a dividend yield of 12% for the next year. The firm’s beta coefficient is 1.5 and its marginal tax rate is 40%. If the current risk free rate and market risk premium are 3% and 7% respectively, answer the following:
a) What are the book and market value weights for each source of capital?
b) What are the component costs of capital (i.e., debt, preferred equity, retained earnings, and new common equity)? Use the weighted average of the bond market values to determine the cost of debt and the arithmetic average of the dividend discount model and CAPM model for the cost of retained earnings.
c) What is the weighted average cost of capital using both the market and book value weights?