Operating cash flows. Sales. Phillips Equipment has 75,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 7.5 percent. The company also has 750,000 shares of 6 percent preferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for $ 64 a share. The common stock has a beta of 1.21 and sells for $ 44 a share. The U. S. Treasury bill is yielding 2.3 percent and the return on the market is 11.2 percent. The corporate tax rate is 34 percent. What is the firm’ s weighted average cost of capital? 11.56 percent 11.30 percent 11.18 percent 10.64 percent 9.69 percent Andy deposited $ 3,000 this morning into an account that pays 5 percent interest, compounded annually. Barb also deposited $ 3,000 this morning into an account that pays 5 percent interest, compounded annually. Andy will withdraw his interest earnings and spend it as soon as possible. Barb will reinvest her interest earnings into her account. Given this, which one of the following statements is true? Barb will earn more interest the second year than Andy. Barb will earn more interest the first year than Andy will. Andy will earn compound interest. Andy will earn more interest in year three than Barb will. After five years, Andy and Barb will both have earned the same amount of interest. When utilizing the percentage of sales approach, managers:
1. Estimate company sales based on a desired level of net income and the current profit margin.
2. Consider only those assets that vary directly with sales.
III. Consider the current production capacity level. 1. Can project both net income and net cash flows.
III and IV only