Question
need help with some problems on a test I am currently taking. I have three hours left and need results quick. Here are the questions:
need help with some problems on a test I am currently taking. I have three hours left and need results quick. Here are the questions:
1.Double taxation is a drawback for which of the following types of business organization except?
S corporationC corporation
Limited partnership
Limited liability company
2.A bond currently sells for $887 even though it has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM?
3.A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital?
4.A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
Year | A | B | C |
0 | -300 | -100 | -300 |
1 | 100 | -50 | 100 |
2 | 100 | 100 | 100 |
3 | 100 | 100 | 100 |
4 | 100 | 100 | 100 |
5 | 100 | 100 | 100 |
6 | 100 | 100 | 100 |
7 | -100 | -200 | 0 |
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