Which of the following are tax-deductible expenses for corporations? A) Interest expenses B) Preferred stock dividends C) Common stock dividends D) All are tax-deductible for corporations. ANSWER Answer: A
Date: September 19th, 2020
Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt? A) Rd ÷ (1 + Tc) B) Rd ÷ (1 – Tc) C) Rd × (1 – Tc) D) Rd × (1 + Tc) ANSWER Answer: C
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
Revenue stability affects ________. A) dividend risk B) maturity risk C) business risk D) interest rate risk ANSWER C
Date: September 19th, 2020
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% […]
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
In capital budgeting, the appropriate decision rule for an average-risk project is to accept if the ________ is greater than the WACC. A) NPV B) IRR C) cost of equity D) cost of debt ANSWER Answer: B
Date: September 19th, 2020
Which of the following would NOT be considered a cost of debt financing? A) The required return on a bank loan B) The required return on preferred stock C) The yield-to-maturity of a bond issue D) The required return on money borrowed from a venture capitalist ANSWER Answer: B
Date: September 19th, 2020
