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QUESTION 1 Which of the following statements is true regarding the relationship between transaction costs, holding costs, and the optimal ordersize C7 Lower holding costs
QUESTION 1 Which of the following statements is true regarding the relationship between transaction costs, holding costs, and the optimal ordersize C7 Lower holding costs or lower transaction costs increase the optimal order size Lower holding costs or higher transaction costs increase the optimal order size Higher transaction costs or lower holding costs decrease the optimal order size Higher transaction costs or higher holding costs increase the optimal order size All of these choices are correct. QUESTION 2 Suppose a company will issue new 20 year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The tax rate is 40%. If the flotation cost is 4% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. 5.74% 5.57% 6.56 5.40N 0 3,40 QUESTION 3 Which of the following is NOT one of the six ways manager behavior might harm a firm's intrinsic value? of a company is generating positive free cash flow, a manager might return it to investors instead of "stockpiling it in the form of marketable securities. Managers might not expend the time and effort required to maximize firm value. Managers might not release all the information that investors desire. Managers might avoid making difficult but value enhancing decisions that harm friends in the company, Managers might take on too much risk OR they might not take on enough risk
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