Since a putable bond gives its holder the right to “put the bond” at specified times or because of specified actions by the issuing firm, the bond’s yield would be lower than that of an otherwise equivalent non-putable bond. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm has determined it can issue preferred stock at $115 per share par value. The stock will pay a $12 annual dividend. The cost of issuing and selling the stock is $3 per share. The cost of the preferred stock is ________. A) 6.4 percent. B) 10.4 percent. C) 10.7 percent. D) 12 percent. […]
Date: September 19th, 2020
Opportunity costs should be included as cash outflows when determining a project’s incremental cash flows. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
________ ratio measures the proportion of total assets financed by the firm’s creditors. A) Total asset turnover B) Inventory turnover C) Current D) Debt ANSWER D
Date: September 19th, 2020
Tangshan Mining is considering issuing preferred stock. The preferred stock would have a par value of $75 and a 5.50 percent dividend. What is the cost of preferred stock for Tangshan if flotation costs would amount to 5.5 percent of par value? A) 5.50% B) 5.27% C) 7.73% D) 5.82% ANSWER D
Date: September 19th, 2020
As a bond approaches maturity, the price of the bond will approach its par value until, the bond is worth its face value at maturity. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The cost of common stock equity may be measured using either the constant-growth valuation model or the capital asset pricing model. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Any bond rated Aaa through Caa according to Moody’s, would be considered investment grade debt. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
________ ratio measures a firm’s ability to pay contractual interest payments. A) Times interest earned B) Fixed-payment coverage C) Debt D) Average payment period ANSWER A
Date: September 19th, 2020
Typically, higher coverage ratios are preferred, but a very high ratio may indicate under-utilization of fixed-payment obligations, which may result in unnecessarily low risk and return. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
