what factors you would consider. For example, should we followFed announcements and try to anticipate movement? Should we justrefinance whenever there is a 25 basis point difference? Should weonly refinance when we receive offers of no closing fees oranticipate a return of "X%"?
what factors you would consider. For example, should we followFed announcements and try to anticipate movement? Should we justrefinance whenever there is a 25 basis point difference? Should weonly refinance when we receive offers of no closing fees oranticipate a return of "X%"?
Related questions
Question 13 Your firm has bonds outstanding with 18 years remaining until maturity. The bonds are trading for $1127 and pay a 8.5% coupon rate. Your firm faces a 32% tax rate. Based on this, the after-tax cost of debt financing is
| None of the other answers are correct |
| 7.23% |
| 8.50% |
| 4.92% |
| 5.78% |
Question 14 You have estimated the following values for dividends over the next four years.
D1 = $1.50
D2 = $2.50
D3 = $3.50
D4 = $4.50
In addition, you anticipate that you can sell the stock four years from today (immediately after you receive the year four dividend) for $50. Assuming a 9% required return, the value of the stock today is
| $44.79 |
| $45.64 |
| $41.87 |
| $49.49 |
Question 15 Developed equity markets have seen higher returns than emerging equity markets over the the Nov. 2004 to June 2012 time frame.
| True |
| False |
Question 16 You are evaluating a capital budgeting project that will cost $25,000
Year 1 ==> $12,000
Year 2 ==> $20,000
Year 3 ==> $9,000
The required return is 13% and the critical acceptance level is 1.9 years. Calculate the Internal Rate of Return and determine whether or not the project should be accepted based solely on the Internal Rate of Return.
| The IRR is 21.33% and we should reject the project |
| The IRR is 17.27% and we should accept the project |
| The IRR is 17.27% and we should reject the project |
| The IRR is 21.33% and we should accept the project |
| None of the other answers is correct |
Question 17 Linda is saving for retirement and would like to accumulate $800,000 at her retirement. She currently has $30,000 saved and would like to work for another 25 years. She plans to save $3500 at the end of each year over the next 25 years. What rate of return must she earn on her investments over the next 25 years?
| 10.95% |
| 12.45% |
| 8.76% |
| 7.23% |
| 9.42% |
Question 18 Consider two projects:
Project A Project B
PP 2.8 years 3.0 years
IRR 12.5% 13.3%
NPV -$15,500 -$16,900
Assume that the projects both have a required return of 15% and a critical acceptance level (T) of 3.25 years. If these are independent projects we should
| Take both projects A and B |
| Take project B and reject project A |
| Take neither project |
| Take project A and reject project B |
Question 20 Your firm wants to raise $4924796 by issuing preferred stock. The stock has a par value of $50 and pays a 6% dividend, how many shares must be issued if the required return is 10% (ignore costs associated with issuing the shares known as floatation costs -- round to the nearest share)?
