31: A firm expects to have net income of $5,000,000 during the next year.The company's target capital structure is 60% debt and 40% equity.The company's director of capital budgeting has determined that the optimal capital budget for the coming year is $5,000,000.If MSL Tech follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is the firm's expected dividend payments?

$2,000,000

$3,000,000

$5,000,000

$6,000,000

32: Using the data from Question 31, find the dividend payout ratio for the company.

20%

40%

60%

50%

33: There are two firms: Firm U and Firm L. Both firms have $100M total assets and $16M EBIT (earnings before interest and taxes). Firm U is an unleveraged firm without debt. Firm L is a leveraged firm with 50% of debt and 50% of common equity. The pre-tax cost of debt for Firm L is 8%. Both firms have 30% corporate tax rate. Calculate the return on equity (ROE) for firm U

9.6%

11.2%

12.0%

15.2%

34: Based on the information from Question 33, what's the return on equity (ROE) for firm L

9.6%

13.2%

16.8%

19.2%

35: based on the information from Question 33, what's the difference of the total dollars paid to all investors in Firm L and Firm U

$1.0 million

$4.8 million

$5.8 million

$1.2 million

36: A company has daily purchases of $10,000 from its supplier.The supplier offers trade credit under the following terms:3/20, net 50 days.The company finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company's free trade credit?

$30,000

$170,000

$200,000

$300,000

37: Based on the information from Question 36, what is the average level of the company's total trade credit?

$170,000

$200,000

$300,000

$500,000

38: Based on the information from Question 36, what is the average level of the company's costly trade credit?

$170,000

$200,000

$300,000

$500,000

39 Based on the information from Question 36, what is the nominal annual cost of the firm's costly trade credit?

28.6%

29.3%

33.5%

37.6%

40: Based on the information from Question 36, what is the effective annual cost of the firm's costly trade credit?

35.8%

37.6%

39.5%

44.9%