Principles of Managerial Finance

CHAPTER 11 The Cost of Capital 503 a. Complete the cost-of-capital schedule by calculating the WACC and the WMCC schedule for th ...

504 PART 4 Long-Term Financial Decisions To estimate the firm’s weighted average cost of capital (WACC), Ms. Jen con- tacted a l ...

CHAPTER 11 The Cost of Capital 505 What has been the highest prime interest rate since you were born? What is the present prime ...

LEARNING GOALS 506 LEVERAGE AND CAPITAL STRUCTURE CHAPTER Across the Disciplines WHY THIS CHAPTER MATTERS TO YOU Accounting:You ...

507 I n April 2000, Krispy Kreme Doughnuts went public at $21 a share. Investors gobbled up the shares as fast as con- sumers di ...

508 PART 4 Long-Term Financial Decisions capital structure The mix of long-term debt and equity maintained by the firm. TABLE 12 ...

breakeven analysis Indicates the level of operations necessary to cover all operating costs and the profitability associ- ated w ...

510 PART 4 Long-Term Financial Decisions Because the firm is assumed to be a single-product firm, its operating breakeven point ...

CHAPTER 12 Leverage and Capital Structure 511 Sales Revenue Total Operating Cost Operating Breakeven Point EBIT Fixed Operating ...

512 PART 4 Long-Term Financial Decisions 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 0 500 1,000 1,500 2,000 2,500 3,000 ...

EXAMPLE Using the data for Cheryl’s Posters (sale price,P$10 per unit; variable operating cost,VC$5 per unit; fixed operating ...

514 PART 4 Long-Term Financial Decisions Because the concept of leverage is linear,positive and negative changes of equal magni ...

CHAPTER 12 Leverage and Capital Structure 515 In Practice Adobe Systems, the second largest PC software company in the United St ...

516 PART 4 Long-Term Financial Decisions As noted in Chapter 7, although preferred stock dividends can be “passed” (not paid) a ...

Case 1 A 40% increasein EBIT (from $10,000 to $14,000) results in a 100% increasein earnings per share (from $2.40 to $4.80). Ca ...

518 PART 4 Long-Term Financial Decisions By using the formula for DFL in Equation 12.7, it is possible to get a negative value ...

CHAPTER 12 Leverage and Capital Structure 519 degree of total leverage (DTL) The numerical measure of the firm’s total leverage. ...

520 PART 4 Long-Term Financial Decisions By using the formula for DTL in Equation 12.9, it is possible to get a negative value ...

CHAPTER 12 Leverage and Capital Structure 521 Of course, although capital structure is financially important, it, like many bus ...

522 PART 4 Long-Term Financial Decisions The various types and characteristics of corporate bonds,a major source of debt capital ...