What is the weighted average cost of capital after taxes if the desired capital structure is 40% debt and 60% equity, investors require a 10% pre-tax return from debt and 25% from equity, and the tax rate is 30%? A) 18% B) 20% C) 11% D) 15% E) 19% ANSWER A Learning Outcome: […]
Date: September 19th, 2020
T-bonds are money market securities, while T-bills and T-notes are traded in the capital market. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Referring to Schwety, what are Schwety’s raw materials purchases in January? A) $5.09 B) $5.22 C) $5.76 D) $6.12 E) $6.50 ANSWER A
Date: September 19th, 2020
The capital structure weights used in computing the weighted average cost of capital are: A) constant over time provided that the debt-equity ratio changes in unison with the market values. B) based on the face value of the firm’s debt. C) computed using the book value of the long-term debt and the shareholder’s equity. D) […]
Date: September 19th, 2020
Preferred stock pays a variable dividend. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Referring to Schwety, what are total cash disbursements in February? A) $7.09 B) $8.59 C) $9.75 D) $10.59 E) $11.25 ANSWER D
Date: September 19th, 2020
Your firm uses both preferred and common stock as well as long-term debt to finance its operations. Which one of the following will increase the capital structure weight of the debt, all else equal? A) an increase in the market price of the common stock B) an increase in the number of shares of preferred […]
Date: September 19th, 2020
Referring to Gerald’s Produce, what is Gerald’s ending cash balance expected to be in March? A) $15,400 B) $16,700 C) $17,000 D) $17,700 E) $18,200 ANSWER B
Date: September 19th, 2020
Money market securities have maturities of one year or less. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Jack’s Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5 percent. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4 percent and the […]
Date: September 19th, 2020
