A typical involves a campaign among competing groups for the right to cast shareholders’ votes on their behalf in elections for a focal firm’s board directors. a. proxy contest b. shareholder-initiated proposal c. initiation procedure d. takeover contest ANSWER A
To find the after-tax cost of debt for a corporation, one needs to multiply the before-tax cost of debt by (1 + Tc), where Tc = the corporate tax rate. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: To find the after-tax cost of debt for a corporation, one […]
When calculating the after-tax weighted average cost of capital (WACC), which of the following costs is adjusted for taxes in the equation? A) The before-tax cost of equity B) The before-tax cost of debt C) The before-tax cost of preferred stock D) The after-tax cost of debt ANSWER Answer: B Explanation: B) WACCadj […]
Revenue stability affects ________. A) dividend risk B) maturity risk C) business risk D) interest rate risk ANSWER C
Your firm has preferred stock outstanding that pays a current dividend of $2.00 per year and has a current price of $21.50. Currently, preferred stock makes up approximately 15% of your firm’s long-term financing. What is the market required rate of return on your firm’s preferred stock? A) 8.70% B) 9.00% C) 9.30% D) 15.00% […]
Pricing preferred stock is most similar to pricing ________. A) constant growth common stock B) a perpetuity C) a zero-coupon bond D) a three-month Treasury bill ANSWER Answer: B
In working capital management, risk is measured by the probability that a firm will be ________. A) unable to pay annual dividends to stockholders B) unable to pay its bills as they come due C) unable to repay its long-term obligations D) unable to earn profits from day-to-day operations ANSWER B
An investment banker’s fees are part of the ________ realized for issuing new debt or equity. A) flotation costs B) opportunity costs C) revenues D) benefits ANSWER Answer: A
If a firm increases its current assets relative to total assets, ________. A) it increases return and reduces risk B) it increases return and increases risk C) it reduces return and reduces risk D) it reduces return and increases risk ANSWER C
Technological advances allow a firm’s earnings to grow over time because they increase the productivity of: a. labor. b. capital. c. both labor and capital. ANSWER C