What is nvp and cost of equity , Financial Management

Assignment Help:

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?


Related Discussions:- What is nvp and cost of equity

Degree of operating leverage, Degree of Operating Leverage A measure o...

Degree of Operating Leverage A measure of the firm's operating leverage, which is calculated as the contribution margin distributed by income before taxes. A rigid with a high

Valuation an option-free bond with the tree, Let us construct a binom...

Let us construct a binomial interest rate tree for a 5.5% option free bond taking Table 3 as the binomial interest rate tree. Table 1 shows the various values in

Offshore pension funds, (b) What are the possible advantages of an offshore...

(b) What are the possible advantages of an offshore pension fund?

Define the term- earnings per share, Define the term- Earnings per share (E...

Define the term- Earnings per share (EPS) EPS = Profit available to ordinary shareholders (PAT) / Weighted average number of shares in issue(p per share) This ratio illustra

Index amortizing notes (ina), In the Index Amortizing note, the princ...

In the Index Amortizing note, the principal is repaid according to an amortization schedule linked to a specific reference rate. It is structured in such a manner

Cash flow analysis, Cash flow analysis helps an analyst to identify ...

Cash flow analysis helps an analyst to identify certain financial difficulties which cannot be identified using the above ratios.  A firm may be shown

What is usual approach of capital structure, Q. What is usual Approach of c...

Q. What is usual Approach of capital Structure? Ans. Traditional Approach: - The traditional approach establishes middle among the Net Income approach and the Net Operating Inc

Traditional mortgages, In US, savings and loan associations con...

In US, savings and loan associations constitute the major originating group of the traditional loans. What types of properties can be mortgaged?

Types of mutual funds, Types of Mutual Funds The objectives of a Mutual...

Types of Mutual Funds The objectives of a Mutual Fund are as follows: To provide an opportunity for lower income groups to acquire property without much difficulty in the

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd