Reference no: EM13833364
1. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?
- Corporate tax rate: 34%
- Personal tax rate on income from bonds: 20%
- Personal tax rate on income from stocks: 50%
- $-0.050
- $-0.188
- $0.367
- $0.588
- None of these
2. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would the cost of equity be if the debt-to-equity ratio were 0?
- 11.11%
- 12.57%
- 13.33%
- 16.00%
- None of these
3. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?
- Corporate tax rate: 34%
- Personal tax rate on income from bonds: 20%
- Personal tax rate on income from stocks: 0%
- $0.175
- $0.472
- $0.528
- $0.825
- None of the above
4. Suppose the Barges Corporation's common stock has an expected return of 12%. Assume that the risk-free rate is 5%, and the market risk premium is 6%. If no unsystematic influence affected Barges' return, the beta for Barges is ______.
- 1.00
- 1.17
- 1.20
- 2.50
- It is impossible to calculate with the information given.
5. All else equal, a more liquid stock will have a lower ________.
- beta
- market premium
- cost of capital
- Both beta and market premium.
- Both beta and cost of capital.
6. Holden Bicycles has 2,000 shares outstanding each with a par value of $0.50. If they are sold to shareholders at $12 each, what would the capital surplus be?
- $1,000
- $12,000
- $15,000
- $23,000
- $24,000
7. The interest tax shield has no value for a firm when:
- the tax rate is equal to zero.
- the debt-equity ratio is exactly equal to 1.
- the firm is unlevered.
- a firm elects 100% equity as its capital structure.
- I and III only
- II and IV only
- I, III, and IV only
- II, III, and IV only
- I, II, and IV only
8. The returns on your portfolio over the last 5 years were -5%, 20%, 0%, 10% and 5%. What is the standard deviation of your return?
- 5.21%
- 10.12%
- 9.62%
- 12.70%
- 2.74%
9. A stock has returns of 3%, 18%, -24%, and 16% for the past four years. Based on this information, what is the 95% probability range for any one given year?
- -8.4 to 11.7%
- -16.1 to 22.6%
- -24.5 to 34.3%
- -35.4 to 41.9%
- -54.8 to 61.3%
10. Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.
- underestimate; overestimate
- overestimate; overestimate
- underestimate; underestimate
- overestimate; underestimate
- accurately; accurately
11. Rockwell Corporation had net income of $150,000 for the year ending 2008. The company decided to payout 40% of earnings per share as a dividend. Rockwell has 120,000 shares issued and outstanding. What are the retained earnings for 2008?
- $40,000
- $60,000
- $90,000
- $150,000
- None of the above
12. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?
- Corporate tax rate: 34%
- Personal tax rate on income from bonds: 20%
- Personal tax rate on income from stocks: 50%
- $-0.050
- $-0.188
- $0.367
- $0.588
- None of these
13. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would the cost of equity be if the debt-to-equity ratio were 0?
- 11.11%
- 12.57%
- 13.33%
- 16.00%
- None of these
14. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?
- Corporate tax rate: 34%
- Personal tax rate on income from bonds: 20%
- Personal tax rate on income from stocks: 0%
- $0.175
- $0.472
- $0.528
- $0.825
- None of the above
15. Suppose the Barges Corporation's common stock has an expected return of 12%. Assume that the risk-free rate is 5%, and the market risk premium is 6%. If no unsystematic influence affected Barges' return, the beta for Barges is
______.
- 1.00
- 1.17
- 1.20
- 2.50
- It is impossible to calculate with the information given.
16. All else equal, a more liquid stock will have a lower ________.
- beta
- market premium
- cost of capital
- Both beta and market premium.
- Both beta and cost of capital.
17. Holden Bicycles has 2,000 shares outstanding each with a par value of $0.50. If they are sold to shareholders at $12 each, what would the capital surplus be?
- $1,000
- $12,000
- $15,000
- $23,000
- $24,000
18. The interest tax shield has no value for a firm when:
- the tax rate is equal to zero.
- the debt-equity ratio is exactly equal to 1.
- the firm is unlevered.
- a firm elects 100% equity as its capital structure.
- I and III only
- II and IV only
- I, III, and IV only
- II, III, and IV only
- I, II, and IV only
19. The returns on your portfolio over the last 5 years were -5%, 20%, 0%, 10% and 5%. What is the standard deviation of your return?
- 5.21%
- 10.12%
- 9.62%
- 12.70%
- 2.74%
20. A stock has returns of 3%, 18%, -24%, and 16% for the past four years. Based on this information, what is the 95% probability range for any one given year?
- -8.4 to 11.7%
- -16.1 to 22.6%
- -24.5 to 34.3%
- -35.4 to 41.9%
- -54.8 to 61.3%
21. Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.
- underestimate; overestimate
- overestimate; overestimate
- underestimate; underestimate
- overestimate; underestimate
- accurately; accurately
22. Rockwell Corporation had net income of $150,000 for the year ending 2008. The company decided to payout 40% of earnings per share as a dividend. Rockwell has 120,000 shares issued and outstanding. What are the retained earnings for 2008?
- $40,000
- $60,000
- $90,000
- $150,000
- None of the above
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