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1. The Tip-Top Paving Co. wants to be levered at a debt to value ratio of .6. The cost of debt is 11%, the tax rate is 34%, and the cost of equity for an all equity firm is 14%. What will be Tip-Top's cost of equity?
0.08%
3.06%
14.0%
16.97%
None of the above.
2. An IPO of a firm formerly financed by venture capital is carried out for what primary purposes?
Insiders can sell their shares or cash out
Generate cash to pay down bank indebtedness
To establish a market value for the equity and provide funds for operations
All of the above.
3. The value of a corporation in a levered buyout is composed of which following four parts:
unlevered cash flows and interest tax shields during the debt paydown period, unlevered terminal value, and asset sales.
unlevered cash flows and interest tax shields during the debt paydown period, unlevered terminal value and interest tax shields after the paydown period.
levered cash flows and interest tax shields during the debt paydown period, levered terminal value and interest tax shields after the paydown period.
levered cash flows and interest tax shields during the debt paydown period, unlevered terminal value and interest tax shields after the paydown period.
asset sales, unlevered cash flows during the paydown period, interest tax shields and unlevered terminal value.
what are some of the external and internal factors that affect a firm's stock price? What is the difference between these two types factors?
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