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Staryer FIN 534 Homework Chapter 4,5,6,7,8,9, 10,11, 12, 14, 15, 16

CHAPTER 41. Which of the following statements is CORRECT?a. Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.b. A time line is not meaningful unless all cash flows occur annually.c. Time lines are useful for visualizing complex problems prior to doing actual calculations.d. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.e. Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods.2. Which of the following statements is CORRECT?a. Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.b. A time line is not meaningful unless all cash flows occur annually.c. Time lines are not useful for visualizing complex problems prior to doing actual calculations.d. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.e. Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.3. Which of the following statements is CORRECT?a. Time lines cannot be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.b. A time line is not meaningful unless all cash flows occur annually.c. Time lines are not useful for visualizing complex problems prior to doing actual calculations.d. Time lines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.e. Time lines can only be constructed for annuities where the payments occur at the end of the periods, i.e., for ordinary annuities.4. Which of the following statements is CORRECT?a. A time line is not meaningful unless all cash flows occur annually.b. Time lines are not useful for visualizing complex problems prior to doing actual calculations.c. Time lines cannot be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.d. Time lines can only be constructed for annuities where the payments occur at the end of the periods, i.e., for ordinary annuities.e. Time lines can be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.5. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?a. The discount rate decreases.b. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for $20,000 rather than for $10,000.c. The discount rate increases.d. The riskiness of the investment’s cash flows decreases.e. The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years.CHAPTER 5Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.1. Ranger Inc. would like to issue new 20-year bonds. Initially, the plan was to make the bonds non-callable. If the bonds were made callable after 5 years at a 5% call premium, how would this affect their required rate of return?a. There is no reason to expect a change in the required rate of return.b. The required rate of return would decline because the bond would then be less risky to a bondholder.c. The required rate of return would increase because the bond would then be more risky to a bondholder.d. It is impossible to say without more information.e. Because of the call premium, the required rate of return would decline.2. Under normal conditions, which of the following would be most likely to increase the coupon rate required to enable a bond to be issued at par?a. Adding a call provision.b. The rating agencies change the bond’s rating from Baa to Aaa.c. Making the bond a first mortgage bond rather than a debenture.d. Adding a sinking fund.e. Adding additional restrictive covenants that limit management’s actions.3. Which of the following bonds would have the greatest percentage increase in value if all interest rates fall by 1%?a. 20-year, 10% coupon bond.b. 20-year, 5% coupon bond.c. 1-year, 10% coupon bond.d. 20-year, zero coupon bond.e. 10-year, zero coupon bond.4. Assume that all interest rates in the economy decline from 10% to 9%. Which of the following bonds would have the largest percentage increase in price?a. A 1-year bond with a 15% coupon.b. A 3-year bond with a 10% coupon.c. A 10-year zero coupon bond.d. A 10-year bond with a 10% coupon.e. An 8-year bond with a 9% coupon.5. Which of the following bonds has the greatest interest rate price risk?a. A 10-year, $1,000 face value, zero coupon bond.b. A 10-year, $1,000 face value, 10% coupon bond with annual interest payments.c. All 10-year bonds have the same price risk since they have the same maturity.d. A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.CHAPTER 6Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.1. You are considering investing in one of the these three stocks:StockStandard DeviationBetaA 20% 0.59B 10% 0.61C 12% 1.29If you are a strict risk minimizer, you would choose Stock ____ if it is to be held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio.a. A; B.b. B; A.c. C; A.d. C; B.e. A; A.2. Your friend is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. She is highly risk averse and has asked for your advice. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. Potential new Stocks A and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r = 0.75. However, Stock A’s standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice not matter?a. Stock A.b. Stock B.c. Neither A nor B, as neither has a return sufficient to compensate for risk.d. Add A, since its beta must be lower.e. Either A or B, i.e., the investor should be indifferent between the two.3. Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSE?a. Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the “true” or “expected future” beta.b. The beta of an “average stock,” or “the market,” can change over time, sometimes drastically.c. Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.d. All of the statements above are true.e. The fact that a security or project may not have a past history that can be used as the basis for calculating beta.4. Stock A’s beta is 1.7 and Stock B’s beta is 0.7. Which of the following statements must be true about these securities? (Assume market equilibrium.)a. Stock B must be a more desirable addition to a portfolio than A.b. Stock A must be a more desirable addition to a portfolio than B.c. The expected return on Stock A should be greater than that on B.d. The expected return on Stock B should be greater than that on A.e. When held in isolation, Stock A has more risk than Stock B.5. Which of the following statements is CORRECT?a. If you found a stock with a zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio.b. The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. However, this historical beta may differ from the beta that exists in the future.c. The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.d. It is theoretically possible for a stock to have a beta of 1.0. If a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the risk-free (default-free) rate of return, rRF.e. The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.CHAPTER 7Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.1. The preemptive right is important to shareholders because ita. will result in higher dividends per share.b. is included in every corporate charter.c. protects the current shareholders against a dilution of their ownership interests.d. protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.e. allows managers to buy additional shares below the current market price.2. Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?a. All common stocks, regardless of class, must have the same voting rights.b. All firms have several classes of common stock.c. All common stock, regardless of class, must pay the same dividend.d. Some class or classes of common stock are entitled to more votes per share than other classes.e. All common stocks fall into one of three classes: A, B, and C.3. Which of the following statements is CORRECT?a. Two firms with the same expected dividend and growth rates must also have the same stock price.b. It is appropriate to use the constant growth model to estimate a stock’s value even if its growth rate is never expected to become constant.c. If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock’s dividend yield is also 5%.d. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.e. The constant growth model takes into consideration the capital gains investors expect to earn on a stock.4. A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g = ?5%). If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT?a. The company’s dividend yield 5 years from now is expected to be 10%.b. The constant growth model cannot be used because the growth rate is negative.c. The company’s expected capital gains yield is 5%.d. The company’s expected stock price at the beginning of next year is $9.50.e. The company’s current stock price is $20.5. If a stock’s dividend is expected to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium.a. The stock’s dividend yield is 5%.b. The price of the stock is expected to decline in the future.c. The stock’s required return must be equal to or less than 5%.d. The stock’s price one year from now is expected to be 5% above the current price.e. The expected return on the stock is 5% a year.CHAPTER 8Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.1. An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?a. Putb. Nakedc. Coveredd. Out-of-the-moneye. In-the-money2. Cazden Motors’ stock is trading at $30 a share. Call options on the company’s stock are also available, some with a strike price of $25 and some with a strike price of $35. Both options expire in three months. Which of the following best describes the value of these options?a. The options with the $25 strike price will sell for less than the options with the $35 strike price.b. The options with the $25 strike price have an exercise value greater than $5.c. The options with the $35 strike price have an exercise value greater than $0.d. If Cazden’s stock price rose by $5, the exercise value of the options with the $25 strike price would also increase by $5.e. The options with the $25 strike price will sell for $5.3. Braddock Construction Co.’s stock is trading at $20 a share. Call options that expire in three months with a strike price of $20 sell for $1.50. Which of the following will occur if the stock price increases 10%, to $22 a share?a. The price of the call option will increase by more than $2.b. The price of the call option will increase by less than $2, and the percentage increase in price will be less than 10%.c. The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10%.d. The price of the call option will increase by more than $2, but the percentage increase in price will be less than 10%.e. The price of the call option will increase by $2.4. Which of the following statements is CORRECT?a. Call options generally sell at a price greater than their exercise value, and the greater the exercise value, the higher the premium on the option is likely to be.b. Call options generally sell at a price below their exercise value, and the greater the exercise value, the lower the premium on the option is likely to be.c. Call options generally sell at a price below their exercise value, and the lower the exercise value, the lower the premium on the option is likely to be.d. Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.e. If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.5. Which of the following statements is CORRECT?a. Call options generally sell at a price less than their exercise value.b. If a stock becomes riskier (more volatile), call options on the stock are likely to decline in value.c. Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be.d. Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.e. If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock’s price exceeds the strike price by about 10%, because this permits the option holder to lock in an immediate profit.CHAPTER 9Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.1. When working with the CAPM, which of the following factors can be determined with the most precision?a. The beta coefficient, bi, of a relatively safe stock.b. The most appropriate risk-free rate, rRF.c. The expected rate of return on the market, rM.d. The beta coefficient of “the market,” which is the same as the beta of an average stock.e. The market risk premium (RPM).2. Bloom and Co. has no debt or preferred stock? it uses only equity capital, and has two equally-sized divisions. Division X’s cost of capital is 10.0%, Division Y’s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division X’s projects are equally risky, as are all of Division Y’s projects. However, the projects of Division X are less risky than those of Division Y. Which of the following projects should the firm accept?a. A Division Y project with a 12% return.b. A Division X project with an 11% return.c. A Division X project with a 9% return.d. A Division Y project with an 11% return.e. A Division Y project with a 13% return.3. Taylor Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?a. Project C, which is of above-average risk and has a return of 11%.b. Project A, which is of average risk and has a return of 9%.c. None of the projects should be accepted.d. All of the projects should be accepted.e. Project B, which is of below-average risk and has a return of 8.5%.4. Weatherall Enterprises has no debt or preferred stock? it is an all-equity firm?and has a beta of 2.0. The chief financial officer is evaluating a project with an expected return of 14%, before any risk adjustment. The risk-free rate is 5%, and the market risk premium is 4%. The project being evaluated is riskier than an average project, in terms of both its beta risk and its total risk. Which of the following statements is CORRECT?a. The project should definitely be rejected because its expected return (before risk adjustment) is less than its required return.b. Riskier-than-average projects should have their expected returns increased to reflect their higher risk. Clearly, this would make the project acceptable regardless of the amount of the adjustment.c. The accept/reject decision depends on the firm’s risk-adjustment policy. If Weatherall’s policy is to increase the required return on a riskier-than-average project to 3% over rS, then it should reject the project.d. Capital budgeting projects should be evaluated solely on the basis of their total risk. Thus, insufficient information has been provided to make the accept/reject decision.e. The project should definitely be accepted because its expected return (before any risk adjustments) is greater than its required return.5. The Anderson Company has equal amounts of low-risk, average-risk, and high-risk projects. The firm’s overall WACC is 12%. The CFO believes that this is the correct WACC for the company’s average-risk projects, but that a lower rate should be used for lower-risk projects and a higher rate for higher-risk projects. The CEO disagrees, on the grounds that even though projects have different risks, the WACC used to evaluate each project should be the same because the company obtains capital for all projects from the same sources. If the CEO’s position is accepted, what is likely to happen over time?a. The company will take on too many low-risk projects and reject too many high-risk projects.b. Things will generally even out over time, and, therefore, the firm’s risk should remain constant over time.c. The company’s overall WACC should decrease over time because its stock price should be increasing.d. The CEO’s recommendation would maximize the firm’s intrinsic value.e. The company will take on too many high-risk projects and reject too many low-risk projects.CHAPTER 10Which of the following statements is CORRECT?a.The NPV profile graph for a normal project will generally have a positive (upward) slope as the life of the project increases.b.An NPV profile graph is designed to give decision makers an idea about how a project’s risk varies with its life.c.An NPV profile graph is designed to give decision makers an idea about how a project’s contribution to the firm’s value varies with the cost of capital.d.We cannot draw a project’s NPV profile unless we know the appropriate WACC for use in evaluating the project’s NPV.e.An NPV profile graph shows how a project’s payback varies as the cost of capital changes.2. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.a. The higher the WACC used to calculate the NPV, the lower the calculated NPV will be.b. If a project’s NPV is greater than zero, then its IRR must be less than the WACC.c. If a project’s NPV is greater than zero, then its IRR must be less than zero.d. The NPVs of relatively risky projects should be found using relatively low WACCs.e. A project’s NPV is generally found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting the TV at the IRR to find its PV.3. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.a. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV.b. The IRR calculation implicitly assumes that all cash flows are reinvested at the WACC.c. The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.d. If a project has normal cash flows and its IRR exceeds its WACC, then the project’s NPV must be positive.e. If Project A has a higher IRR than Project B, then Project A must have the lower NPV.4. Which of the following statements is CORRECT?a. If two projects are mutually exclusive, then they are likely to have multiple IRRs.b. If a project is independent, then it cannot have multiple IRRs.c. Multiple IRRs can occur only if the signs of the cash flows change more than once.d. If a project has two IRRs, then the smaller one is the one that is most relevant, and it should be accepted and relied upon.e. For a project to have more than one IRR, then both IRRs must be greater than the WACC.5. Which of the following statements is CORRECT?a. The NPV method assumes that cash flows will be reinvested at the risk-free rate, while the IRR method assumes reinvestment at the IRR.b. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the risk-free rate.c. The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period.d. The IRR method does not consider all relevant cash flows, particularly cash flows beyond the payback period.e. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR.CHAPTER 11Directions: Answer the following five questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points for this homework assignment.1. Which of the following statements is CORRECT?a. An example of an externality is a situation where a bank opens a new office, and that new office causes deposits in the bank’s other offices to decline.b. The NPV method automatically deals correctly with externalities, even if the externalities are not specifically identified, but the IRR method does not. This is another reason to favor the NPV.c. Both the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified. However, the payback method does not.d. Identifying an externality can never lead to an increase in the calculated NPV.e. An externality is a situation where a project would have an adverse effect on some other part of the firm’s overall operations. If the project would have a favorable effect on other operations, then this is not an externality.2. Which of the following statements is CORRECT?a. If a firm is found guilty of cannibalization in a court of law, then it is judged to have taken unfair advantage of its customers. Thus, cannibalization is dealt with by society through the antitrust laws.b. If cannibalization exists, then the cash flows associated with the project must be increased to offset these effects. Otherwise, the calculated NPV will be biased downward.c. If cannibalization is determined to exist, then this means that the calculated NPV if cannibalization is considered will be higher than the NPV if this effect is not recognized.d. Cannibalization, as described in the text, is a type of externality that is not against the law, and any harm it causes is done to the firm itself.e. If a firm is found guilty of cannibalization in a court of law, then it is judged to have taken unfair advantage of its competitors. Thus, cannibalization is dealt with by society through the antitrust laws.3. Which of the following statements is CORRECT?a. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.b. Corporations must use the same depreciation method (e.g., straight line or accelerated) for stockholder reporting and tax purposes.c. Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.d. Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project’s projected NPV.e. Using accelerated depreciation rather than straight line would normally have no effect on a project’s total projected cash flows but it would affect the timing of the cash flows and thus the NPV.4. Which of the following statements is CORRECT?a. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.b. Corporations must use the same depreciation method for both stockholder reporting and tax purposes.c. Using accelerated depreciation rather than straight line normally has the effect of speeding up cash flows and thus increasing a project’s forecasted NPV.d. Using accelerated depreciation rather than straight line normally has no effect on a project’s total projected cash flows nor would it affect the timing of those cash flows or the resulting NPV of the project.e. Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.5. Which of the following statements is CORRECT?a. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 3 years or longer.b. If firms use accelerated depreciation, they will write off assets slower than they would under straight-line depreciation, and as a result projects’ forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes.c. If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects’ forecasted NPVs are normally lower than they would be if straight-line depreciation were required for tax purposes.’d. If they use accelerated depreciation, firms can write off assets faster than they could under straight-line depreciation, and as a result projects’ forecasted NPVs are normally higher than they would be if straight-line depreciation were required for tax purposes.e. Since depreciation is not a cash expense, and since cash flows and not accounting income are the relevant input, depreciation plays no role in capital budgeting.CHAPTER 121. F. Marston, Inc. has developed a forecasting model to estimate its AFN for the upcoming year. All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)?a. A switch to a just-in-time inventory system and outsourcing production.b. The company reduces its dividend payout ratio.c. The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35.d. The company discovers that it has excess capacity in its fixed assets.e. A sharp increase in its forecasted sales.2. The term “additional funds needed (AFN)” is generally defined as follows:a. Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.b. The amount of assets required per dollar of sales.c. The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.d. A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.e. Funds that are obtained automatically from routine business transactions.3. The capital intensity ratio is generally defined as follows:a. The percentage of liabilities that increase spontaneously as a percentage of sales.b. The ratio of sales to current assets.c. The ratio of current assets to sales.d. The amount of assets required per dollar of sales, or A0*/S0.e. Sales divided by total assets, i.e., the total assets turnover ratio.4. Which of the following is NOT one of the steps taken in the financial planning process?a. Monitor operations after implementing the plan to spot any deviations and then take corrective actions.b. Determine the amount of capital that will be needed to support the plan.c. Develop a set of forecasted financial statements under alternative versions of the operating plan in order to analyze the effects of different operating procedures on projected profits and financial ratios.d. Consult with key competitors about the optimal set of prices to charge, i.e., the prices that will maximize profits for our firm and its competitors.e. Forecast the funds that will be generated internally. If internal funds are insufficient to cover the required new investment, then identify sources from which the required external capital can be raised.5. Spontaneous funds are generally defined as follows:a. A forecasting approach in which the forecasted percentage of sales for each item is held constant.b. Funds that a firm must raise externally through short-term or long-term borrowing and/or by selling new common or preferred stock.c. Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include immediate increases in accounts payable, accrued wages, and accrued taxes.d. The amount of cash raised in a given year minus the amount of cash needed to finance the additional capital expenditures and working capital needed to support the firm’s growth.Week 8 Chapter 141. Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased. Their argument is based on the assumption thata. investors require that the dividend yield and capital gains yield equal a constant.b. capital gains are taxed at a higher rate than dividends.c. investors view dividends as being less risky than potential future capital gains.d. investors value a dollar of expected capital gains more highly than a dollar of expected dividends because of the lower tax rate on capital gains.e. investors are indifferent between dividends and capital gains.2. Which of the following should not influence a firm’s dividend policy decision?a. A strong preference by most shareholders for current cash income versus capital gains.b. Constraints imposed by the firm’s bond indenture.c. The fact that much of the firm’s equipment has been leased rather than bought and owned.d. The fact that Congress is considering changes in the tax law regarding the taxation of dividends versus capital gains.e. The firm’s ability to accelerate or delay investment projects.3. Which of the following statements about dividend policies is correct?a. One reason that companies tend to avoid stock repurchases is that dividend payments are taxed at a lower rate than gains on stock repurchases.b. One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.c. One ke

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