To estimate the market value of a publicly traded bond that has a broad market with frequent trading, it is usually best to multiply the number of bonds outstanding by the bond par value. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: To estimate the market value of a […]
Date: September 19th, 2020
Rogers’ Rotors has debt with a market value of $250,000, preferred stock with a market value of $50,000, and common stock with a market value of $750,000. If debt has a cost of 7%, preferred stock a cost of 9%, common stock a cost of 13%, and the firm has a tax rate of 30%, […]
Date: September 19th, 2020
A corporation borrows $1,000,000 at 10 percent annual rate of interest. The firm has a 40 percent tax rate. The yearly, after-tax cost of this debt is ________. A) $40,000 B) $60,000 C) $100,000 D) $166,667 ANSWER B
Date: September 19th, 2020
Shareholders have sued board directors for losses arising from alleged mismanagement. Over the years 1984-87, a director liability crisis emerged in the U.S. because of accelerating litigation against corporate directors. The threat of litigation severely decreased the supply of qualified outside directors nationwide. In response to this crisis, many states have passed (i) statutes, which […]
Date: September 19th, 2020
The following market information was gathered for the ACME corporation. The common stock is selling for $40.00 per share and there are 100,000 shares outstanding. Retained earnings equal $400,000, preferred stock has 1,000 shares outstanding selling at $120.00 per share, and 500 outstanding long-term bonds are selling for $1,035.00 each. For purposes of estimating the […]
Date: September 19th, 2020
The following information comes from the Galaxy Construction balance sheet. The value of common stock is $10,000, retained earnings equals $7,000, total common equity equals $17,000, preferred stock has a value of $3,000, and long-term debt totals $15,000. If the cost of debt is 8.00%, preferred stock has a cost of 10.00%, common stock has […]
Date: September 19th, 2020
The following market information was gathered for the Blender Corporation. The firm has 1,000 bonds outstanding, each selling for $1,100.00 with a required rate of return of 8.00%. Blenders has 5,000 shares of preferred stock outstanding, selling for $40.00 per share and 50,000 shares of common stock outstanding, selling for $18.00 per share. If the […]
Date: September 19th, 2020
A corporation has $5,000,000 of 8 percent preferred stock outstanding and a 40 percent tax rate. The after-tax cost of the preferred stock is ________. A) $400,000 B) $240,000 C) $666,667 D) $160,000 ANSWER A
Date: September 19th, 2020
A firm’s operating cycle (OC) is simply the sum of the average age of inventory (AAI) and the average payment period (APP). Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The _ of a firm’s management hierarchy is defined in terms of the allocation of decision- making power among senior managers versus lower-level managers. a. steepness b. composition c. sharpness d. structure ANSWER A
Date: September 19th, 2020
