28. A firm's current share price is 4. It has 50m shares in issue and plans to sell a further 10m shares in a 1 for 5 rights issues at a price of 3 per share. What is the ex-rights price?

a.

3.53

b.

3.83

c.

4.83

d.

3.50

6. MADA, Inc., needs to purchase office equipment for its 2,000 drive-in therapy centers nationwide. The initial cost of the equipment is $2 million. It is estimated that the after-tax cash inflows from the project will be $210,000 annually forever. MADA has a capital structure which consists of 40 percent debt and 60 percent equity, based on market values. The firm's cost of equity is 13 percent, and its pre-tax cost of debt is 8 percent. The tax rate is 35 percent. What is the net present value of the project if the project's risk level is equal to that of the overall firm?

a.

$103,600

b.

$132,500

c.

120,008

d.

142,008

e.

$157,008

34. Which three of the following are reasons why borrowing from the bank is attractive to companies?

a.

The process is not quick.

b.

If the economic circumstances change during the life of the loan banks are generally more willing to alter the terms.

c.

Banks are more likely to loan large amounts.

d.

Administrative and legal costs are high.