Question Details

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- 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 is the firm's estimated intrinsic value per share of common stock?

a.	$48.64
b.	$50.67
c.	$52.78
d.	$54.89
e.	$57.08
	
2.	Carter's preferred stock pays a dividend of $1.00 per quarter.  If the price of the stock is $45.00, what is its nominal (not effective) annual rate of return?

a.	8.03%
b.	8.24%
c.	8.45%
d.	8.67%
e.	8.89%
	
3.	 Capital structure refers to 

a.	The types of projects a firm invests in.
b.	The mixture of short-term and long-term debt. 
c.	The amount of debt and equity a firm has
d.	Short-term assets and short-term liabilities. 
e.	The size, timing, and risk 

4.	Which of the following statements is CORRECT?

a.	When calculating the cost of debt, a company needs to adjust for taxes, because interest payments are deductible by the paying corporation.
b.	When calculating the cost of preferred stock, companies must adjust for taxes, because dividends paid on preferred stock are deductible by the paying corporation.
c.	Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock as measured by the CAPM.
d.	If a company- beta increases, this will increase the cost of equity used to calculate the WACC, but only if the company does not have enough retained earnings to take care of its equity financing and hence must issue new stock.
e.	Higher flotation costs reduce investors' expected returns, and that leads to a reduction in a company- WACC.

5.	What is the % of total financing by equity if the total $12m funding include  $7.5m from debt?

a.     35%
b.     37.5%
c.     46.5%
d.     50%
e.     62.5%


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