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1. When a firm issues permanent debt, the value of all its securities:
Does not change
Increases by the present value of the tax shield
Increases by the annual interest tax shield
2. Suppose that the weighted average cost of capital of Fett & Co. is 10%. If Fett has a capital structure with equal amounts of debt and equity, a before-tax cost of debt of 5%, and a marginal tax rate of 20%, then its cost of equity capital is closest to:
14%
16%
12%
Optex has an effective tax rate of 30 percent and its post- tax cost of debt is 7 percent. What is the net advantage of leasing (NAL) for Optex?
Although debit cards are convenient to use, they can be risky to use. Why? What is the main way to protect yourself against debit card fraud? What should you do on a regular basis to detect identity theft?
What effect would a decrease of $1 in the variable cost per unit have on the operating cash flow?
Describe how the financial ratios of debt-to-assets, times-earned-interest, and debt-to-equity would be useful to the business leaders of this company.
Wolfson Corporation has decided to purchase a new machine that costs $4.5 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 30 percent. What is the NAL of leasing for W..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $15 per share dividend 10 years from today ..
A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on the S&P index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to achieve the following? Eliminate all systematic ri..
Which of the following about high frequency traders (HFTs) is TRUE? Which of the following is an explicit transaction cost?
Broussard Skateboard's sales are expected to increase by 25% from $9.0 million in 2015 to $11.25 million in 2016. Its assets totaled $4 million at the end of 2015. Broussard is already at full capacity, so its assets must grow at the same rate as pro..
Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. hat is the maximum monthly cha..
Global Technology’s capital structure is as follows: Debt 50 % Preferred stock 35 Common equity 15 The aftertax cost of debt is 6.00 percent; the cost of preferred stock is 10.00 percent; and the cost of common equity (in the form of retained earning..
Maplewood Supply received a $5,390 invoice dated 4/15/10. The $5,390 included $390 freight. Terms were 3/10, 2/30, n/60. a. If Maplewood pays the invoice on April 27, what will it pay? If Maplewood pays the invoice on May 21, what will it pay?
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