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 […]
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
Some adjustable rate mortgages contain payment caps that limit monthly mortgage payments. Indicate whether the statement is true or false ANSWER TRUE
Married couples filing a joint return may take two standard deductions. Indicate whether the statement is true or false ANSWER FALSE
Martha’ s Interiors has a current beta of 1.2. The market risk premium is 6 percent and the risk-free rate of return is 4 percent. By how much will the cost of equity increase if the company completes an acquisition such that their company beta rises to 1.4? A) 0.12 percent B) 0.24 percent C) […]
Alyeska salmon Inc, a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flows of $73,306 for eight years. The firm’s management is uncomfortable with the IRR reinvestment assumption and […]
Consider two firms that are identical in every way except that one has $15,000 of debt and 500 shares of stock outstanding, while the other is all-equity and has 650 shares of stock outstanding. Assume that the debt is a perpetuity with annual coupons at the rate of 6%. What is each firms’ earnings per […]
If you wish to double your money in 6 years, you must earn an interest rate of about A) 8%. B) 24%. C) 12%. D) 36%. ANSWER C
What are some of the basic beliefs of the anti-globalists? What will be an ideal response? ANSWER Answer: The anti-globalist movement targets multinational corporations as one of the main villains of the globalization phenomenon that they believe is detrimental to the poor countries, their workers, and to disadvantaged people in developed countries. Laissez-faire […]
Globally why are certain types of firms seeking others with poor corporate governance? What will be an ideal response? ANSWER Answer: Hedge funds and private equity firms are very often looking for these poorly performing firms as potential targets for their value-enhancing activities.
