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Open Question: capital.. financial statement.. target… help please?
refer to web site: http://investors.target.com/phoenix.zhtml?p=irol-irhome&ref=nav%5Ffooter%5Finvestors&c=65828

Target Corporation is currently seeking additional capital to expand its operations. Two companies have shown interest in providing additional capital.

Company #1 is interested in investing in the organization and, therefore, would like to have part ownership through the sale of new stock.
Company #2 is interested in providing a loan to the Target Corporation.
Both organizations need to know more about the financial stability of Target.

As an employee of Target, your supervisor needs you to write a memo in which you explain what information from the Target Corporation’s financial statements will be highlighted when representatives of Target meet with each of these companies. In your memo, be sure to explain which information will be highlighted to Company #1 and which information will be highlighted to Company #2 and why. Explain any differences in the information that you have chosen to highlight

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Open Question: Will the Treasury Department have problems finding enough investors?
Many countries around the world are selling government securities in order to keep current spending levels. Can the US keep up with all this spending without resorting to printing money?

http://news.yahoo.com/s/ap/20100205/ap_on_bi_ge/eu_europe_financial_crisis
Governments around the world are going to issue huge amounts of debt this year, making it hard even for countries with good prospects to attract investors who can pick and choose bonds to buy.

  read more…

Open Question: New common stock is more expensive than Ke:?
1.New common stock is more expensive than Ke:
a. to compensate for risk.
b.to compensate for more dividends.
c.to compensate for expansionary problems.
to cover distribution costs.

2. In computing the cost of common equity, if D1 goes downward and Po goes up, Ke will: go up.
a.go down.
b.stay the same.
c. slowly increase.

3. In determining the cost of retained earnings:
the dividend valuation model is inappropriate.
flotation costs are included.
growth is not considered.
the capital asset pricing model can be used.

4. Within the capital asset pricing model:
the risk-free rate is usually higher than the return in the market.
the higher the beta the lower the required rate of return.
beta measures the volatility of an individual stock relative to a stock market index.
None of the above

5. Using the constant growth model, a firm’s expected (D1) dividend yield is 3% of the stock price, and it’s growth rate is 7%. If the tax rate is .35%, what is the firm’s cost of equity?
a. 10%
b. 6.65%
c. 8.95%
d. More information is required.

6. For many firms, the cheapest and most important source of equity capital is in the form of:
a. debt.
b. common stock.
c. preferred stock.
d. retained earnings.

7. The reason cash flow is used in capital budgeting is because:
a. cash rather than income is used to purchase new machines.
b. cash outlays need to be evaluated in terms of the present value of the resultant cash inflows.
c. to ignore the tax shield provided from depreciation ignores the cash flow provided by the machine d. which should be reinvested to replace old worn out machines.
e. All of the above

8. The first step in the capital budgeting process is:
a. collection of data.
b. idea development.
c. assign probabilities.
d. determine cashflow.

9. Capital budgeting is primarily concerned with:
a. capital formation in the economy.
b. planning future financing needs.
c. evaluating investment alternatives.
d. minimizing the cost of capital.

10. The longer the life of an investment:
a. the more significant the discount rate.
b. the less significant the discount rate.
c. makes no difference.
d. None of the above

11. If projects are mutually exclusive:
a. they can only be accepted under capital rationing.
b. the selection of one alternative precludes the selection of other alternatives.
c. the payback method should be used.
d. the net present-value should be used.

12. The internal rate of return and net present value methods:
a. always give the same investment decision answer.
b.never give the same investment decision answer.
c.usually give the same investment decision answer.
d. always give answers different from the payback method.

13. A characteristic of capital budgeting is:
a. a large amount of money is always involved.
b. the internal rate of return must be less than the cost of capital.
c. the internal rate of return must be greater than the cost of capital.
d. the time horizon is at least five years.

14. The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method:
a. assumes that cash flows are reinvested at the project’s internal rate of return.
b.concentrates on the liquidity aspects of investment projects.
c. assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
d. None of the above

15. The __________ assumes returns are reinvested at the cost of capital.
a.payback method
b.internal rate of return
c.net present value
d. capital rationing

16. In using the internal rate of return method, it is assumed that cash flows can be reinvested at:
a.the cost of equity.
b.the cost of capital.
c. the internal rate of return.
d.the prevailing interest rate.

17. The term “risk averse” means that:
a. an individual refuses to take risks.
b. most investors and businessmen seek risk.
c. an individual will seek either to avoid risk or to be compensated with a higher return.
d.only investment proposals with no risk should be accepted.

18. The coefficient of variation (V) can be defined as the:
a expected value multiplied by the standard deviation.
b standard deviation divided by the expected value.
c expected value divided by the standard deviation.
d standard deviation squared, divided by the expected value.

19. In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the:
a expected value.
b internal rate of return.
c standard deviation.
d coefficient of variation.

20. Which of the following is a characteristic of beta?
a. Beta measures only the volatility of returns on an individual bond relative to a bond market index.
b. A beta of 1.0 is of equal risk with the market.
c. beta

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