The market yield on Spice Grills’ bonds is 15%, and the firm’s marginal tax rate is 33%. What is their shareholders’ required return if the equity risk premium is 4%? A) 15% B) 11% C) 14% D) 19% E) 12% ANSWER D
Date: September 19th, 2020
Federal law requires that all lenders use the FHLB Mortgage Contract Rate as the interest rate adjustment index on adjustable-rate mortgages. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The Barby Division at Mattel Toys is considering the acquisition of a laser tattoo applicator that will be able to add custom-designed tattoos to the Barby doll. The machine costs $300M. The addition of tattoos to the iconic toy is expected to increase demand and raise free cash flow by $90 million over the next […]
Date: September 19th, 2020
A firm’s pre-tax cost of debt is 10%. If the firm is of average risk, what is the cost of equity using the bond yield plus premium approach? A) 15% B) 13% C) 14% D) 10% E) 11% ANSWER C
Date: September 19th, 2020
A periodic rate cap limits adjustable-rate movements over only a single adjustment period. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
What is the IRR of the F-22 Raptor project? The Lockheed Martin/Boeing F-22 Raptor is a stealth fighter aircraft. It was designed primarily as an air superiority fighter, but it is also capable of ground attack and other roles. Lockheed Martin Aeronautics is the prime contractor and is responsible for the majority of the airframe, […]
Date: September 19th, 2020
The future value of a $500 annuity due received for three years is $________, assuming an investment rate of 10%. A) 1,655.00 B) 665.50 C) 1,820.50 D) 335.65 ANSWER C
Date: September 19th, 2020
Xtra-Terrestrial Landscapes needs to raise capital to finance an expansion in their business. The company is trying to decide between borrowing or issuing more equity. Selected financial information is provided in the table below. The current capital structure is shown in the column labeled “Current.” Under Option E, they will sell 600 new shares at […]
Date: September 19th, 2020
Which component of a firm’s capital structure is the most difficult to estimate? A) Preferred stock B) Equity C) Bank loans D) Bond-financed debt E) Private placements of debt ANSWER B
Date: September 19th, 2020
Some adjustable rate mortgages contain payment caps that limit monthly mortgage payments. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
