Advertising is often designed to add psychological value to a product or brand
Indicate whether the statement is true or false
TRUE
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Free cash flow is cash flow from operations less cash used to purchase fixed assets to maintain productivecapacity
a. True b. False Indicate whether the statement is true or false
A blueprint is like a journey because:
a. it tells the reader the stops along the way b. it lays out the document like a map c. both of the above d. none of the above
When using the effective-interest amortization method, the amount of the interest expense is calculated using the carrying value of the bonds and the market interest rate
Indicate whether the statement is true or false
Tangshan Mining Company must choose its optimal capital structure
Currently, the firm has a 40 percent debt ratio and the firm expects to generate a dividend next year of $4.89 per share and dividends are expected to grow at a constant rate of 5 percent for the foreseeable future. Stockholders currently require a 10.89 percent return on their investment. Tangshan Mining is considering changing its capital structure if it would benefit shareholders. The firm estimates that if it increases the debt ratio to 50 percent, it will increase its expected dividend to $5.24 per share. Because of the additional leverage, dividend growth is expected to increase to 6 percent and this growth will be sustained indefinitely. However, because of the added risk, the required return demanded by stockholders will increase to 11.34 percent. (a) What is the value per share for Tangshan Mining under the current capital structure? (b) What is the value per share for Tangshan Mining under the proposed capital structure? (c) Should Tangshan Mining make the capital structure change? Explain.