Other than dividend growth model, we can employ Market Multiple Analysis method for stock valuation. We suppose a firms estimated earnings per share is $1.5. The average price to earnings (P/E) ratio for similarly publicly traded firms is 20. Whats the firms expected stock price?

		$10
		$15
		$22.5
		$30

The before-tax cost of debt, which is lower than the after-tax cost, is used as the component cost of debt for purposes of developing the firm's WACC.

True

False

Which of the following statements about sinking fund is true?

		Sinking funds are designed to protect bondholders, so it never hurts the bondholders in any situations.
		A company would use sinking fund for open market purchase of bond if the interest rate is much higher than its coupon rate.
		A company would prefer to use sinking fund to call bond if bond sells at a discount.

Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 2.7%; A = 4.6%; AAA = 3.7%; BBB = 5.2%. The differences in rates among these issues were most probably caused primarily by: ______

		Tax effects.
		Default risk premium.
		Maturity risk premium
		Liquidity risk premium.