QUESTION For a typical corporation, which of the following capital structures will result in the lowest weighted average cost of capital?Answer40% debt, 20% preferred stock, 40% common equity50% debt, 10% preferred stock, 40% common equity60% debt, 10% preferred stock, 30% common equity60% debt, 15% preferre Let us assume for example,Cost of debt (Kd) = 8%Cost […]
QUESTION 11. Companies E and P each reported the same earnings per share (EPS), but Company Es stock trades at a higher price. Which of the following statements is CORRECT?A) Company E probably has fewer growth opportunities.B) Company E is probably judged by investors to be riskier.C) Company E must 11. EPS = Earnings avalible […]
QUESTION What is the expected rate of return on a bond that matures in 8 years, has a par value of $1,000, a coupon rate of 12%, and is currently selling for $976? Assume annual coupon payments. Bond solution: Interest payments = Par value * coupon rate Interest payments = $1,000 * 14% Interest payments […]
QUESTION A bakery company is considering one capital budgeting project involving the replacement of a sophisticated brick oven, and another capital budgeting project involving research and development into synthetic food substitutes. Which of the following statements is most correct concerning the risk-adjus Generally we have two types of projects. 1. Replacement projects 2. Expansion projects […]
QUESTION What are the benefits and disadvantages of a company that increase s the spread between ROIC and WACC? There is no disadvantage of increasing the spread between ROIC and WACC (assuming ROIC is greater than WACC) sans illegal activities, or increasing short-term spreads at the expense of future returns. Simply put, WACC is the […]
QUESTION 1. Consider the $50,000 excess cash.Assume that Gary invests the funds in a one year CDa.What is the CD s value at maturity( future calue)if it pays 10 percent(annual) interest?b. What will its future value be if the CD pays 5 percent interest? If it pays 15 percent interest?c.BankSouth offers CDs w a) FV= […]
QUESTION Thorley Inc. is considering a project that has the following cash flow data. What is the projects IRR? Note that a projects projected IRR can be less than the WACC or negative, in both cases it will be rejected.Year 0 1 2 3 4 5Cash flows -$1,375 $325 $325 $325 $325 $325a. 7.30%b. 5.55%c. […]
QUESTION Suppose you borrow $15000. The loans annual interest rate is 8%, and it requires four equal end-of year payments. Set up an amortization schedule that shows the annual payments, interest payments, principal repayments, and beginning and ending loan balances. 15000*.08=1200 interest payment1 year 15000/4=3750 principal —1 year 15000-3750=11250 11250*.08=900 interest payment 2 year 3750 […]
QUESTION 8) The marketing mixA. Includes four variablesPeople, Place, Promotion, and Price.B. Includes the target marketC. Helps to organize the marketing strategy decision areas.D. Includes four variablesadvertising, personal selling, customer service, and sales promotion.9) Product is NOT con 8) T he marketing mix A. Includes four variablesPeople, Place, Promotion, and Price. B. Includes the target […]
QUESTION You are discussing stock valuation techniques with your broker. You mention that yourFinance professor stated that a stock that will never pay a dividend is valueless. Yourbroker says this is not true because you can always sell the stock to someone else (thus, a capital gain is We cant argue with “a” . before […]
