1.A firm is analyzing two possible capital structures-30 and 50 percent debt ratios. The firm has total assets of $5,000.000 and common stock valued at $50 per share. The firm has a marginal tax rate of 40 percent on ordinary income. Assuming the total assets remain constant, the number of common shares outstanding for each of the capital structures would be

(a)30 percent debt ratio: 30,000 shares and 50 percent debt ratio: 50,000 shares

(b)(b) 30 percent debt ratio: 50,000 shares and 50 percent debt ratio: 70,000 shares

(c)(c) 30 percent debt ratio: 70,000 shares and 50 percent debt ratio: 100,000 shares

(d)(d) 30 percent debt ratio: 70,000 shares and 50 percent debt ratio: 50,000 shares

2.Shipbuilding Company is considering relaxing credit standards, which will result in annual sales increasing from $1.5 million to $1.75 million, the cost of annual sales increasing from $1,000,000 to $1.125.000, and the average collection period increasing from 40 to 55 days. The bad debt loss is expected to increase from 1 percent of sales to 1.5 percent of sales. The firm's required return on investments is 20 percent. The firm's cost of marginal investment in accounts receivable (assuming a 360-day year) is

(a)$5,556

(b)$9,943

(c)$12,153

(d)$152,778

3.a man owns two bonds that are identical in every way expect one has 3 years left to maturity and one has 10 years left to maturity. If there is a change in market interest rates, which bonds` market price will change the most?

A.The market price of the bond with 3 years to maturity will change the most

B.The market price of the bond with 10 years to maturity will change the most

C.Both bond`s market prices will change by the same amount

D.The market price of the bonds will not change

need solution details for Q4

4. A manufacturing firm is contemplating shortening its credit period from 40 to 30 days. The firm's management believes that as a result of this change, the company's average collection period will decline from 45 to 36 days. Bad-debt expenses are expected to decrease from 1.5% to 1% of sales. The firm is currently selling 12,000 units but believes that as a result of the proposed change, sales will decline to 10,000 units. The sale price per unit is $56, and the variable cost per unit is $45. The firm has a required return on equal-risk investments of 25%. Assuming a 365-day year, evaluate this decision and make a recommendation to the firm.