What is nvp and cost of equity , Financial Management

1. A standard arrangement for the orderly retirement of long-term debt calls for the corporation to make regular payments into a(n): 

    A)  custodial account.
    B)  sinking fund.
    C)  retirement fund.
    D)  irrevocable trust fund.
    E)  None of the above

2. Hi-Jack Truck Line has 80,000 bonds outstanding that are selling at the par value of $1000. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The risk-free rate is 4% and the market risk premium is 8%. Hi-Jack's tax rate is 35%.

3. What is Hi-Jack's weighted average cost of capital (WACC)? 

4.  The interest tax shield has no value for a firm when:
I.   the tax rate is equal to zero.
II.  the debt-equity ratio is exactly equal to 1.
III. the firm is unlevered.
IV.  the firm elects 100% equity as its capital structure. 

    A)   I and III only
    B)   II and IV only
    C)   I, III, and IV only
    D)   II, III, and IV only
    E)   I, II, and IV only

5.     The GeKay Company has a potential investment whose cost is expected to be 60 million dollars and will return $13.50 million forever in annual (after-tax) free cash flow.  The appropriate ratio of debt to equity is 1 to 1. 

The cost of equity is 13%, the (pre-tax) cost of debt is 9%, and the tax rate is 34%.  What is the NPV of the project?

Posted Date: 2/19/2013 6:16:33 AM | Location : United States

Related Discussions:- What is nvp and cost of equity , Assignment Help, Ask Question on What is nvp and cost of equity , Get Answer, Expert's Help, What is nvp and cost of equity Discussions

Write discussion on What is nvp and cost of equity
Your posts are moderated
Related Questions
Can a corporation have too much working capital?  Explain. A firm can have very much working capital if it is losing the opportunity to invest in high returning fixed assets and

Q. What is Unsanctioned Expenditure? The expenditure, which is regularly incurred without the sanction of the competent authority or beyond the sanctioned limit of funds provid

Floating Rate Notes (FRNs): When interest rates are high and the general outlook is either stable or indicating the possibility of a downward trend in return, then an investor

Once capital markets are integrated, it is hard for a country to maintain a fixed exchange rate. Explain why this may be so. Answer: one time capital markets are integrated int

Determine about the Shareholders Shareholders, being the owners of the company, elect board of directors and vote on major issues that affect functioning and long term plans of

Leveraged Buyouts (LBOs) A leveraged buyout is a financing technique where debt is used to purchase the stock of a corporation and it frequently involves taking a public compan

The Selling Process The four key elements that constitute the selling process are: (i) identification of prospective buyers, (ii) selection of the type of selling process to be

Example of Company Objectives Divide from the problem of which goal a company ought to pursue are the questions of which goals companies claim to pursue and which goals they a

Under treasuries, there exist different types of securities like treasury bills, treasury notes, treasury bonds, inflation protection securities

XYZ Ltd is a group of doctors, dentists, professional sports players and celebrities with excess funds who wish to find small companies with great innovative ideas and invest in th