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1. Counts Accounting has a beta of 1.45. The tax rate is 35%, and Counts is financed with 60% debt. What is Court's unlevered beta? Round your answer to two decimal places.
2. Shapland Inc. has fixed operating costs of $750,000 and variable costs of $50 per unit. If it sells the product for $75 per unit, what is the break-even quantity?
3. According to the Miller Modigliani Prop I, the value of the levered firm:
(A) is greater than the value of the unlevered firm by the amount of the debt tax shield.
(B) is lower than the value of the unlevered firm by the amount of the debt tax shield.
(c) is equal to the amount of the debt tax shield.
(D) is equal to the value of the unlevered firm in the world with taxes.
(E) A and D are true.
Apocalyptica Corp. pays a constant $7.85 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever. If the required return on this stock is 9 percent, what is the current share p..
Both Bond Huell and Bond Kuby have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Huell has six years to maturity, whereas Bond Kuby has 15 years to maturity. If interest rates suddenly rise by 2 percent, what is the p..
You buy a share of The Ludwig Corporation stock for $21.80. You expect it to pay dividends of $1.01, $1.16, and $1.3323 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $28.02 at the end of 3 years. Calculate the growth rat..
Lohn Corporation is expected to pay the following dividends over the next four years: $20, $16, $15, and $8.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 1..
What is the stock’s intrinsic value if g= 20% for 3 years before achieving long-term growth of 5%. Its required rate of return is 10%. Last dividend was $2. What is its terminal price?
A stock is currently selling for $56 per share. A call option with an exercise price of $60 sells for$6.56 and expires in three months. If the risk-free rate of interest is 2.60%per year, compounded continuously, What is the price of a put option wit..
Ramona and Pablo Valdez are a dual-career couple who just had their first child. Pablo, age 29, already has a group life insurance policy, but Ramona's employer does not offer life insurance. Help Ramona evaluate this advice and decide on an appropri..
Let’s assume that you have just taken out a mortgage loan for $200,000 with an origination fee of 2 points due upfront. The mortgage term is 30 years and the mortgage rate is fixed at 4%. What is the cost of the origination fee in dollar terms?? How ..
The stock of Uptown Men's Wear is expected to produce the following returns given the various states of the economy. What is the expected return on this stock? Probabilities: Recession:0.4 Normal:0.4 Boom:0.2 Returns: Recession:-11% Normal:12% Boom:2..
Central Systems, Inc. desires a weighted average cost of capital of 8 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted aver..
During your review of the sales accounts at 120340 Ontario Inc., you enquired of management about sales to customer account 23-524. The account accumulates sales to a related company. The customer is a related company pays more than market value for ..
A 7.50 percent coupon bond with 13 years left to maturity is priced to offer a 8.2 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.8 percent. What is the change in price the bond will experience in dollars?
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