$0$

Q$.$No$.4$

$(10,10)$

What role do financial markets play in our economy? What are primary and secondary markets? What relationship exists between financial institutions and financial markets?

Discuss Tax deductible expenses and Tax loss carryback & forward

Q$.$ No$.5$

Firm R has sales of $100,000$ units at $$2\mathrm{.}00$ per unit, variable operating costs of $$1\mathrm{.}70$ per unit, and fixed operating costs of $$6,000.$ Interest is $$10,000$ per year. Firm W has sales of $100,000$ units at $$2\mathrm{.}50$ per unit, variable operating costs of $$1\mathrm{.}00$ per unit, and fixed operating costs of $$62,500.$ Interest is $$17,500$ per year. Assume that both firms are in the $40\%$ tax bracket.

i$.$ Compute the degree of operating, financial, and total leverage for firm R$.$

ii$.$ Compute the degree of operating, financial, and total leverage for firm W$.$

iii. Compare the relative risks of the two firms.

iv$.$ Discuss the principles of leverage that your answers illustrate.

Q$.$ No$.6$

a$)$ Benefits and drawbacks of merger

b$)$ What are stock splits

c$)$ Why Dividend policy is irrelevant?

d$)$ Operating leverage vs$.$ financial leverage.

Q$.$ No$.7$

$(5$ each$)$

Samuels Manufacturing is considering the purchase of a new machine to replace one they feel is obsolete. The firm has total current assets of $$920,000$ and total current liabilities of $$640,000.$ As a result of the proposed replacement, the following changes are anticipated in the levels of the current asset and current liability accounts noted.

$\backslash$table$[[$Account$,$Change$],[$Accruals$,+$$$40,000$