Which of the following is necessary for tailing a hedge?
A. Comparing the size in units of the position being hedged with the size in units of the futures contract
B. Comparing the value of the position being hedged with the value of one futures contract
C. Comparing the futures price of the asset being hedged to its forward price
D. None of the above
B
When tailing a hedge the optimal hedge ratio is applied to the ratio of the value of the position being hedged to the value of one futures contract.
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Which of the following transactions will lower a company's financial leverage?
A) A mortgage loan is obtained and the proceeds are used to pay off existing short-term debt. B) Preferred stock is sold and the proceeds are used to pay off existing short-term debt. C) Short-term debt is obtained to get the company through a period of negative net income and cash flow. D) Common stock is sold and the proceeds are used to pay off existing short-term debt.
A firm has $50 million in equity and $20 million of debt, it pays dividends of 30% of net income, and has a net income of $10 million. What is the firm's internal growth rate?
A) 9% B) 10% C) 11% D) 12%