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 […]
What is the weighted average cost of capital after taxes for Moss Diet Centers if the target weights are 25% equity and 75% debt, and the costs of equity and after-tax debt are 15% and 12%, respectively? Assume the relevant tax rate is 20%. A) 12.5% B) 11.0% C) 12.8% D) 14.0% E) 13.5% […]
Reservists who experience a drop in income may be able to access retirement accounts without a tax penalty. Indicate whether the statement is true or false ANSWER TRUE
Referring to Cool Looks, what are total cash inflows in September? A) $18,000 B) $20,000 C) $30,000 D) $38,000 E) $50,000 ANSWER D
Which of these is not one of the basic questions for corporate finance? A) How should we raise the money? B) What are we going to make? C) What do we do with our profits? D) How big of a bonus should we get? ANSWER D
The initial outlays and operating costs of large projects can be forecast with great accuracy, but revenues are more uncertain and large errors are not uncommon. Indicate whether the statement is true or false ANSWER FALSE
Peter’s Audio Shop has a cost of debt of 7 percent, a cost of equity of 11 percent, and a cost of preferred stock of 8 percent. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market […]
In making financial decisions, it is more important to know your marginal tax rate than your average tax rate. Indicate whether the statement is true or false ANSWER TRUE
Fury Motor Corp is all equity financed and generates perpetual annual EBIT of $300. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year. Assume that Fury has a 100% payout rate, 1,500 shares outstanding, and that shareholders require a return […]
Referring to Gerald’s Produce, what are Gerald’s collections from customers expected to be in March? A) $2,500 B) $5,000 C) $7,500 D) $10,000 E) $20,000 ANSWER D