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1. When a depreciable asset is sold at whatever market price it was able to be sold for, a tax gain or tax loss on disposal is calculated, based on the ________ of the asset at the time of disposal.
a. difference in market value and salvage value
b. highest difference in book and market value
c. market value only
d. book value only
2. Your firm has preferred stock outstanding that pays a current dividend of $4.50 per year and has a current price of $59.30. You anticipate that the economy will grow steadily at a rate of 2% per year for the foreseeable future. What is the market required rate of return on your firm's preferred stock?
a. 7.59% ; b. 7.74% ; c. 9.74% ; theirs is not enough information to answer this question
3. In capital budgeting, the ________ is the appropriate discount rate to use when calculating the NPV of an average risk project.
a. IRR ; b. WACC ; c. cost of Equity ; d. cost of debt
Patton Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8% and its marginal tax rate is 40%. The current stock price is P0 = $35.00. The last dividend was D0 ..
Caan Corporation will pay a $2.86 per share dividend next year. The company pledges to increase its dividend by 3.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock..
Investment A costs $10,000 today and pays back $11,500 two years from now. Investment B costs $8000 today and pays back $4500 each year for two years. If an interest rate of 5% is used, which alternative is superior?
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. hat is the IRR of this in..
You estimate that your cattle farm will generate $.30 million of profits on sales of $6 million under normal economic conditions and that the degree of operating leverage is 4. (Leave no cells blank - be certain to enter "0" wherever required. What w..
As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011: Nile has an attractive investment opportunity, and to finance it, must decide whether to issue $100 million in new debt or new equity. Assume Nile r..
A firm has 10 million shares outstanding with a market price of $30 per share. The firm has $10 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt. What i..
Describe the active portfolio management process. Assuming you are a portfolio manager with similar portfolio allocation decisions as in the case, but today, in the current market conditions. Which stock you consider adding to your portfolio? Give on..
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Louise Manufacturing uses 2,700 switch assemblies per week and then reorders another 2,700. The relevant carrying cost per switch assembly is $11.00, and the fixed order cost is $1,350. What are the current carrying costs? (Do not round intermediate ..
Identify and briefly describe at least three sources of financial aid that are available to small businesses. Define marketing. Compare and contrast place marketing with cause-related marketing. Define the five major types of organization structure.
Book Depot Inc. sells on terms of 1/15, net 70. What is the implicit cost of trade credit under these terms? Use a 365-day year. Round the answer to two decimal places in percentage form.
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