Reference no: EM13478899

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.
• None 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.