Working capital includes all of the following items except:

		Notes payables.
		Inventory.
		Retained earnings.
		Account payables.

 Which of the following statements about Capital Asset Pricing Model (CAPM) equation "E(RA) = Rf +BA(E(RM) - Rf) " is true ______

E(RA) is the required rate of return for stock A.

Rf is the real risk-free rate.

E(RM) is the required rate of return on the individual security.

BA is the beta coefficient for the market portfolio.

 A firm's optimal capital structure ______

		is generally a mix of 40% debt and 60% equity.
		exists when the debt-equity ratio is 0.5.
		is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized.
		is the debt-equity ratio that results in the lowest possible weighted average cost of capital and the largest firm value

 Business risk is defined as the:______

		equity risk that comes from the nature of a firm's operating activities.
		equity risk associated with the capital structure of a firm.
		probability that a firm will file bankruptcy.
		situation in which a firm causes its creditors to suffer a financial loss.

Announcements and news contain both an expected component and a surprise component. It is the surprise component that affects a stock's price and therefore its return____

True

False

 We want to choose the optimal capital structure for a firm that will maximize the stockholder wealth _______

True

False

A company can buy back its own shares of stock (stock repurchase) on the open market, and the company can also make a tender offer to buy back its shares. _______

True

False

 Which one of the following is the prime objective of a residual dividend policy? _______

Maintaining a stable dividend

Increasing the dividend at a steady pace

Meeting the firm's investment needs

Maintaining a stable dividend payout ratio

  bankruptcy, which one of the following will have the lowest priority when a bankrupt firm's assets are distributed if the absolute priority rule is followed?

		preferred stockholders
		secured creditors
		unsecured creditors
		common shareholders

(36) Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9% and coupons are paid annually. The bond is currently selling for $968.72 per $1,000 bond. What is the before-tax cost of debt (YTM)?

		5.00%
		9.33%
		10.0%
		9.00%

 Based on the information from Question 36, if the firm's marginal tax rate is 20%. What's the firm's after-tax cost of debt?________

		3.58%
		5.08%
		6.32%
		7.46%

 If a firm's before-tax cost of common equity is 6.5% and the firm has a 20% marginal tax rate, what is the firm's after-tax cost of preferred stock?

		6.5%
		5.2%
		10.0%
		None of above is correct.

 A firm has a $10 million bond outstanding with a coupon rate of 6%. The tax rate is 35%. What is the present value of the tax shield?______

		$3.5 million
		0.18 million
		$10 million
		$13.5 million