Question
can someone finish all , cuz i don't have enough questions remaining. 8. XYZ Company declared a dividend of $5.00 at the last board meeting.
can someone finish all , cuz i don't have enough questions remaining.
8. XYZ Company declared a dividend of $5.00 at the last board meeting. The current price of XYZ is $48.00 per share. If the average stockholder is in the 25% tax bracket, what would you expect the ex-dividend price to be?
a. $48.00
b. 43.00
c. 46.75
d. 44.25
e. 51.75
9. If the flotation cost of equity is 1%, the flotation cost of debt is 2%, and the weighted average flotation cost is 1.5%, then it follows that the portfolio weights for equity and debt are
a. 25% and 75%
b. 40% and 60%
c. 30% and 70%
d. 10% and 90%
e. 50% and 50%
10. If an all equity company has $800,000 in equity and is thinking about taking on $250,000 in debt, the amount of equity under the proposed structure would be :
a. $1,050,000
b. 550,000
c. 950,000
d. 475,000
e. 525,000
11. The Static Theory of Capital Structure says that firms will increase their leverage (debt) until what happens?
a. The firm goes bankrupt.
b. the firm cannot borrow any more.
c. the value of the tax break is offset by the disadvantage of financial distress.
d. the amount of debt exceeds the amount of equity.
e. None of the above.
12. When a company stock gets down to a price of $1.75, and the popular trading range is considered to be $20 $50, the company would probably do a:
a. 4-1 forward split.
b. 10% stock dividend
c. 1-3 reverse split
d. 12-1 reverse split
e. 3-7 straight split
13. Jeremiah owns 200 shares of TLC stock, which has 9000 shares outstanding at a current price of $28.00 per share. TLC has just declared a 7% stock dividend. How many shares will Jeremiah have AFTER the stock dividend and what will the price be?
a. 214 shares; $26.17
b. 9,630 shares, $28.00
c. 186 shares; $29.96
d. 8,370 shares; $26.04
e. 214 shares; $29.96
14. If Saras Inc pays $4.00 annually on its preferred stock and the stock sells for $36.00, what is the cost of preferred stock?
a. 7.78%
b. 9.00%
c. 9.72%
d. 11.11%
e. Not enough information to tell.
15. Rank the following groups from first to last to be paid in a bankruptcy:
I. Common Stockholders
II. Bondholders
III. Employees
III, II, I
II, III, I
I, II, III
I, III, II
III, I, II
16. If long term corporate bonds have been earning an average of 6.25% over the past 10 years, and the risk free rate is 3.81%, what is the risk premium?
a. 3.81%
b. 2.44%
c. 13.95%
d. 6.25%
e. 10.06%
17. You own a portfolio that has $1,200 in Stock A and $1,900 in Stock B. If the expected returns on the two stocks are 9% and 11%, respectively, what is the expected return on the portfolio?
a. 10.22%
b. 11.44%
c. 10%
d. 8.89%
e. 9.23%
18. The value of the firm is MAXIMIZED when
a. the WACC is minimized.
b. interest rates are expected to increase
c. equity markets are depressed
d. the firm has mostly equity in its capital structure
e. WACC is maximized
19. The difference between the WACC formula and the WAFC formula is
a. WACC uses preferred stock as the middle part.
b. WAFC does not have the tax break on debt.
c. WACC uses smaller numbers than WAFC.
d. The portfolio weights on WACC have to total to one, but not on WAFC.
e. WAFC combines common and preferred, but WACC accounts for them separately.
20. Rank the following from first to last as guidelines for the Compromise Dividend Policy:
I. Avoid cutting the dividend
II. Maintain a target debt/equity ratio.
III. Avoid rejecting positive NPV projects in order to pay a dividend.
III, II, I
I, III, II
III, I, II
II, III, I
II, I, III
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