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1. A standard arrangement for the orderly retirement of long-term debt calls for the corporation to make regular payments into a(n): A) custodial account. B) sinking fund. C) retirement fund. D) irrevocable trust fund. E) None of the above
2. Hi-Jack Truck Line has 80,000 bonds outstanding that are selling at the par value of $1000. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The risk-free rate is 4% and the market risk premium is 8%. Hi-Jack's tax rate is 35%.
3. What is Hi-Jack's weighted average cost of capital (WACC)?
4. The interest tax shield has no value for a firm when: I. the tax rate is equal to zero. II. the debt-equity ratio is exactly equal to 1. III. the firm is unlevered. IV. the firm elects 100% equity as its capital structure. A) I and III only B) II and IV only C) I, III, and IV only D) II, III, and IV only E) I, II, and IV only
5. The GeKay Company has a potential investment whose cost is expected to be 60 million dollars and will return $13.50 million forever in annual (after-tax) free cash flow. The appropriate ratio of debt to equity is 1 to 1.
The cost of equity is 13%, the (pre-tax) cost of debt is 9%, and the tax rate is 34%. What is the NPV of the project?
Q. Major objective of working capital management? The major objective of working capital management is to decide the optimum amount of working capital required. Usually managem
(a) Find the nominal rate of interest j compounded quarterly which is equivalent to a 5% e ective rate of interest. (b) Which one will deliver a higher future value on a deposit
Explain official reserve assets and its major components. Answer: Official reserve assets are those financial assets which can be employed as international means of payments.
Benefits of Going private company A public company has its shares purchased by a small group of people and ceases to be listed on stock exchange. This has many benefits includ
The actual risk-free rate is 4%. Inflation is likely to be 3% this year and 4% during the next 2 years. We suppose that the maturity risk premium is zero. What is the yield on 2
Q. What do you mean by Sarbanes-Oxley? Sarbanes-Oxley (SOX) - Sarbanes-Oxley Act was signed into law on 30 July 2002 by President Bush. Act is designed to oversee the financial
Lee Sun's has sales of $6,000, total assets of $5,000, and a profit margin of 10 percent. The firm has a total debt ratio of 40 percent. What is the return on equity?
Q. Define the Constructive Receipt? Constructive Receipt - A taxpayer is considered to have received income even though monies are not in hand, it may have been set aside or ot
The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31,
The purchase price is expected to be in the region of £30m - £40m now (year 0 ?? 2003) and further cash flow effects might include: ?? Annual cash inflows from New You ?? in a rang
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