Reference no: EM133064620

Questions -

Q1. Shang-Chi Inc. just sold a fixed asset for $226,000 when its book value is $352,000. If Shang-Chi's corporate marginal tax rate is 41 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow for this sale)?

$218,970

$269,280

$251,170

$277,660

$289860

Q2. You have been given a job to calculate the CAPM rate for Dominic Toretto. Given the following information, what would be the rate, based on the CAPM approach?

rRF = 4.50%; RPM = 7.00%; and beta = 0.85

12.66%

8.15%

10.27%

11.83%

10.45%

Q3. The Jedi Knights of Las Cruces have asked you to calculate their cost of Equity. Given the following information, what would be the cost of equity from retained earnings, based on the DCF approach?

D1 = $0.77; P0 = $55.00; and g = 7.50% (constant).

8.04%

7.00%

10.51%

8.90%

9.56%

Q4. Commander Adama, from the Battlestar Galactica, would like for you to figure out the cost of debt they have incurred after fighting the Cylons. Given the following information, figure out the cost of debt so that they can calculate their WACC.

Galactica sold a $1,000 par value, noncallable bond that now has 15 years to maturity and an 8.00% annual coupon that is paid semiannually. Their current bond sells for $925 and their tax rate is 35%.

5.75%

5.41%

6.70%

4.61%

5.80%

Q5. Donald Duck would like for you to figure out the WACC for his company. Donald Duck's current target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 12.00%.

So what would Donald Duck's WACC going to be at?

6.69%

8.93%

7.68%

7.59%

 6.96%