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1. Which of the following statements about the cost of capital is INCORRECT?
The amount of debt affects firm's weighted average cost of capital.
Weighted average cost of capital calculations should be based on the after-tax-costs of all the individual capital components.
If a company's tax rate increases, then, all else equal, its weighted average cost of capital will increase.
Flotation costs can increase the cost of preferred stock.
2. Lowells Inc plans to issue a $1,000 par value, 20-year noncallable bond at a yield of 5%. The company's marginal tax rate is 30.00%, but Congress is considering a change in the corporate tax rate to 20.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?
0.5%
-0.5%
0.6%
-0.6%
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,138,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $275,000 per year. Both machines will be..
How many times per year does Palmer Enterprises turn over its inventory?
If the discount rate is 16 percent and the current dividend is $2, what is the value of the stock?
Which of the following is considered a use of cash in a cash flow statement??
What was your REAL average per year percentage raise ?
The risk-free rate of return is 2%, the required rate of return on market is 10%, USE CAPM to calculate the required rate of return
Consider the following premerger information about Firm A and Firm T. Find the value of synergy from the merger. Compute the cost of Firm A of each alternative,
Choose an investment strategy and explain why you have chosen that strategy.
What motivated regulators decades ago to impose interest rate ceilings on bank savings accounts? What effect did these ceilings eventually have on money markets? Explain briefly (2-3 sentences).
In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public.
Analysts believe that Safeco will hit their price target of $92.50 in three years. What is the value of Safeco stock if your required return is 10.25 percent?
He explains that the CDs are 100 percent government insured and that you are taking unnecessary risks by being in the stock market. How would you respond?
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