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1. Terrell Corp. has a capital budget of $6,000,000. The company's target capital structure is 45% debt and 55% equity. Its forecasted net income is $4,000,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out?
A. $0 $700,000
B. $1,300,000
C. $2,000,000
D. None of the above
2. Jordan Imports' recent IPO had terms of 20 million shares, offer price $10 per share, proceeds to the company $180 million. The investment banker incurred out-of-pocket expenses of $10 million and the company incurred expenses of $1 million. This is an example of a:
A. Best efforts deal
B. Hybrid deal
C. Negotiated deal
D. Private placement
E. None of the above
Assume you are employed as an investment advisor. who would benefit in terms of increased fees. What would you do?
Which one of the following will result from a stock repurchase?
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Consider the following information regarding the performance of a money manager in a recent month.
Assume that over 85 years, the total annual returns on large company common stocks averaged 18.4%, long term government bonds averaged 6.7%, & U.S. T-Bills averaged 3.8%. What was the average annual risk premium earned by long term government bonds &..
Your friends malcom and tony are debating the investment quality of the stocks of two companies.
Company B is a project and has raised floating-rate funds. It is looking into swapping its floating payment liabilities for fixed rate payment liability to manage its interest rate risk.
If the cost of capital on both projects is 5%, which project, if any, would you choose? Why?- If the cost of capital on both projects is 8%, which project, if any, would you choose? Why?
An educational saving account is created. The account is set up such that the beneficiary will receive all money in the account (principal as well as all accrued interest) after 16 years from the present. Please create a cash flow diagram of the savi..
Johnny Cake Ltd. has 12 million shares of stock outstanding selling at $21 per share and an issue of $60 million in 8 percent annual coupon bonds with a maturity of 17 years, selling at 94.5 percent of par. What is its WACC?
How would you advise him regarding the deductions and expenses he may be able to claim?
Calculate the company's weighted average cost of capital. Use the dividend discount model.
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