Recent Question

Which of the following investments would have the highest future value CORRECT? a. The periodic rate of interest is 2% and the effective rate of interest is 4%. b. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%. c. The periodic rate of interest is 4% and the effective rate of interest is less than 8%. d. The periodic rate of interest is 2% and the effective rate of interest is greater than 8% ...

Other / Other 27 Apr 2016

What is the equipment’s after-tax salvage value for use in a capital budgeting 1. A company is considering a proposed new plant that would increase productive capacity. Which of the following statements is CORRECT? a. In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are accounted for by discounting at the WACC. If interest were deducte ...

Other / Other 27 Apr 2016

Which of followings is NOT the characteristics of a perpetuity 1. Which of followings is NOT the characteristics of a perpetuity? a. A perpetuity continues for a fixed time period. b. Value of a perpetuity can be calculated as “PMT/i” c. In a perpetuity, returns are earned in the form of a series of cash flows. d. A perpetuity is a constant infinite stream of identical cash flows. e. Real estate and preferred stock are eff ...

Other / Other 27 Apr 2016

What is the 12 month trailing EPS and P/E ratio 1. Which one (s) is (are) an external financing and has the flotation cost? a. Retained earnings b. Bonds c. Preferred stock d. a & b e. b & c 2. The costs of financing from different sources are as follows: IEF = 5%, EEF=6%, cost of debt before tax = 5%, tax rate=20%, the size of retained earnings=$30m. The capital structure is: We=40% and Wd=60%. Determine the WAMCC before and ...

Other / Other 27 Apr 2016

Lasik Vision Inc. recently analyzed the project whose cash flows 1. What would you do for capital budgeting if you have limited resources? a. Focus on the projects the firm has already invested in b. Reduce short-term and long-term debt. c. Rank good looking projects and choose from the most “profitable” ones d. evaluate to determine good projects e. Determine the size, timing, and risk of a firm's future cash flows. ...

Other / Other 27 Apr 2016

Bonds sell at a discount from par value when market rates for similar bonds are 1. The real risk-free rate is 3.05%, inflation is expected to be 2.75% this year, and the maturity risk premium is zero. IBM stock has a risk premium of 0.9%. What is the equilibrium rate of return on a 1-year Treasury bond? a. 5.51% b. 5.80% c. 6.09% d. 6.39% e. 6.71% 2. Suppose the real risk-free rate is 3.25%, the average future inflation rate is ...

Other / Other 27 Apr 2016

Bill has below portfolio consists of two stocks 1. A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT? a. The bond’s coupon rate exceeds its current yield. b. The bond’s current yield exceeds its yield to maturity. c. The bond’s yield to maturity is greater than its coupon rate. d. The bond’s current yield is equal to its coupon rate. e. If ...

Other / Other 27 Apr 2016

What is the required rate of return on the new portfolio 1. Which of the following statements best describes what you should expect if you randomly select stocks and add them to your portfolio? a. Adding more such stocks will reduce the portfolio's unsystematic, or diversifiable, risk. b. Adding more such stocks will increase the portfolio's expected rate of return. c. Adding more such stocks will reduce the portfolio's beta coeffici ...

Other / Other 27 Apr 2016

What is the % of total financing by equity 1. You must estimate the intrinsic value of Noe Technologies’ stock. The end-of-year free cash flow (FCF1) is expected to be $27.50 million, and it is expected to grow at a constant rate of 7.0% a year thereafter. The company’s WACC is 10.0%, it has $125.0 million of long-term debt plus preferred stock outstanding, and there are 15.0 million shares of common stock outstanding. What ...

Other / Other 27 Apr 2016

C. F. Lee Inc. has the following income statement 1. C. F. Lee Inc. has the following income statement . How much after-tax operating income does the firm have ? Sales $2,850.00 Costs 1,850.00 Depreciation 192.00 EBIT $ 808.00 Interest expense 285.00 EBT $ 523.00 Taxes (35%) 183.05 Net income $ 339.95 a.$427.78 b. $450.29 c.$473.99 d. $498.94 e. $525.20 2. Hartzell Inc. had the following data ...

Other / Other 27 Apr 2016