Which of the following is NOT a characteristic of management decisions for which decision analysis techniques apply?
a. They must be important.
b. They are probably unique.
c. They are usually deterministic.
d. They are complex.
C
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If the dividend relevance theory is valid, which of the following statements must be correct?
A. Stockholders who prefer to earn capital gains on their investments rather than to receive dividends are not concerned with whether a firm pays dividends because such decisions do not affect the market price of its stock. B. Stockholders who prefer to receive annual dividends rather than to earn capital gains on their investments are not concerned with whether a firm invests in acceptable capital budgeting projects because such decisions do not affect the annual income generated by the firm, and thus the dividends that are paid. C. If most of the stockholders of a firm prefer to receive current income rather than to earn capital gains on their investments, the firm can reduce its required return on equity by increasing the dividend payout. D. Stockholders who prefer to earn capital gains on their investments would like the firm to retain and reinvest any free cash flows that it generates. E. A retired individual is more likely to invest in the stock of a company to earn capital gains than to get paid dividends.
Western Auto Inc. pays a $1.77 preferred dividend every quarter and will maintain this policy forever. What price should you pay for one share of preferred stock if you want an annual return of 9.25% on your investment?
A) $66.54 B) $70.54 C) $74.54 D) $76.54
If you sign a discount note for $2,500 at a bank discount rate of 7%, for 3 months, what is the effective interest rate? (Round to the nearest tenth percent)
A) 7.0% B) 7.1% C) 7.3% D) 7.5%