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1. A firm's capital structure consists of which of the following?
A) Common stock
B) Preferred stock
C) Bonds
D) All of the above
2. Which of the following must be adjusted for the firm's tax rate when estimating the weighted average cost of capital WACC?
A) Cost of common equity
B) Cost of preferred stock
C) Cost of debt
3. Which of the following would NOT be considered in calculating a firm's cost of capital?
A) Bonds
B) Accounts payable
C) Preferred Stock
D) common stock
4. Typical steps in the financial planning process include:
A) preparing a sales forecast.
B) analyzing cost data.
C) estimating tax expense.
D) all of the above.
You have purchased a call option contract on Smith & Smith common stock. The option contract is for 100 shares. The option has an exercise price of $ 43.00 and S&S’s stock currently trades at $40.00. The option premium is quoted at $ 2.00.
A freight-hauling firm estimates that it will need a new forklift in six years. The estimated cost of the vehicle is $40,000. The company sets up a sinking fund that pays 8% compounded semi annually, into which it will make semi annual payments to ac..
The expected return on any asset is dependent upon its beta. Explain what Beta is, why it is used and its relevance to investment decisions.
An investment will pay $1283 two years from now, $ 3848 four years from now and $3124 five years from now. If the opportunity rate is 19.57 percent per year, what is the present value of this investment?
Complete the following balance sheet for the Seymour Hoffman Company using the following information:
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The Shome Corporation, a firm in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital, is considering a new project. The project involves the introduction of a new product. Working-capital requirements Ther..
Michael Roddick a 27-year-old bachelor Jiving in Charlottesville Virginia, has been a high-school teacher for five years. For the past four months, he's been thinking about buying a Subaru Outback, but he feels that he can’t afford a brand-new one. D..
An individual plans to buy a stock valued at $135 each and keep it for 5 years at which point the things he can sell it for $155. The stock pays an annual dividend of $3.5. What is equivalent annual interest rate being generated by this investment?
For which situation below would one need to "smooth out" the variation in each set of cash flows so that each becomes perpetuity?
The annual effective interest rate is 12%. A ten-year continuous annuity makes payments totalling $30 during the first year, $40 during the second year, $50 during the third year, and so on. Within each year the payments are level. Calculate the accu..
Clapper Industries reported taxable income of $290,000. What is Clapper’s marginal tax rate based on the corporate tax rate table in this appendix? What is Clapper’s average tax rate? If Clapper’s taxable income increases to $410,000, what will be Cl..
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