Financial Management

✅ The correct answer is A.
Preferred stock dividends must be paid on common stock and must have fixed amount of dividends. Preferred dividends are the dividends that are accrued paid on a company’s preferred stock. Any time a company pays dividends, preferred shareholders have priority over common shareholders, which means dividends must always be paid to preferred shareholders before they are paid to common shareholders.

✅ The correct answer is A.
Project which is started by firm for increasing sales is classified as new expansion project. These are projects where the firm seeks to profitably increase sales of current products or introduce new products into the market.

✅ The correct answer is A.
In calculation of betas, an adjusted betas are highly dependent on historical unadjusted betas. Betas calculated purely based on historical data are unadjusted betas. However, this beta estimate based on historical estimates is not a good indicator.

✅ The correct answer is B.
A company sells its stock shares for raising more equity capital is classified as seasoned equity offering. A seasoned issue is an issue of additional securities from an established company whose securities already trade in the secondary market. A seasoned issue is also known as a “seasoned equity offering” or “follow-on offering.” New shares issued by blue-chip companies are considered seasoned issues.

✅ The correct answer is B.
An expected dividend yield is added into expected growth rate to calculate expected rate of return. The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR).

✅ The correct answer is A.
In weighted average cost of capital, rising in interest rate leads to increase in cost of debt. Cost of debt is one part of a company’s capital structure, which also includes the cost of equity.

✅ The correct answer is D.
In expected rate of return for constant growth, an expected yield on capital must be equal to expected growth rate. Growth rates typically represent the compounded annualized rate of growth of a company’s revenues, earnings, dividends or even macro concepts, such as gross domestic product (GDP) and retail sales. Expected forward-looking or trailing growth rates are two common kinds of growth rates used for analysis.

✅ The correct answer is B.
The central issue of efficient markets concerns information.

✅ The correct answer is A.
Money market funds were a financial innovation partly inspired to circumvent Regulation Q, which is no longer in existence. A money market fund is a kind of mutual fund that invests only in highly liquid instruments such as cash, cash equivalent securities, and high credit rating debt-based securities with a short-term, maturity less than 13 months. As a result, these funds offer high liquidity with a very low level of risk.

✅ The correct answer is A.
Return on equity = Return on assets × Equity multiplier
= 6.7% × 2.5% = 16.75%