QUESTION 12 Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was $1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for $28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 8 percent flotation cost will be incurred. Net income in the coming year is projected to be $790,000, and the dividend payout ratio is 8 percent. Calculate WACC A 14.57 percent B. 14.26 percent C. 14.11 percent OD. 15.53 percent E. 14.75 percent QUESTION 13 Which of the following is most CORRECT? a bletex um for the invester discount than the T Alfin motionls bandan saling QUESTION 13 Which of the following is most CORRECT? A. If a corporation's bonds are selling at a discount, then the YTC is probably the expected retum for the investor B. A fixed-rate bond will sell at a premium when its coupon interest rate is equal to the going rate of interest, kd. Zero coupon bonds pay no annual interest and are issued at a premium to their par value. OD. If current interest rates are below the fixed coupon rate of a bond, that bond will sell at a premium. 5. The price of an existing bond moves in the same direction as interest rates (i.e. if interest rates rise, bond prices also rise). QUESTION 14 The Du Pont equations for a corporation and its industry are shown below: Corporation: Industry: ROE 27.30% 30.40% = - - PM 13% 10% x x x AT * EM 1.5 X 1.4 1.9 X 1.6 Which of the following statements is most FALSE? Save AIA Click Save and Submit to save and submit. Click Save All Answers to save all answers. QUESTION 14 The Du Pont equations for a corporation and its industry are shown below: Corporation: Industry: ROE - PMX ATX EM 27.30% - 13% x 1.5 X 1.4 30.40% - 10% * 1.9 * 1.6 Which of the following statements is most FALSE? ^ The industry has a higher return on its equity capital because its better return on assets and greater use of debt (percentage-wise) outweigh its inability to maintain as high of a profit margin compared to the corporation. OB. For every dollar of sales generated by the industry, ten cents of net income is achieved for the industry. C. The lower the equity multiplier, the lower the debt ratio. OU. The corporation is managing to maintain more net income compared to its sales than the industry O E. The industry has a debt ratio of 37.5 percent, whereas the corporation's debt ratio is 28.57 percent. QUESTION 15 Save All Anwen Click Save and Submit to save and submit. Click Save All Answers to save all ans QUESTIUN 12 Bradley Isensee Wholesale wants to expand its operations using only debt and common equity. It can borrow unlimited amounts at a before-tax interest rate of 8 percent as long as it utilizes its target capital structure, which calls for 30 percent debt and 70 percent common equity. Its last dividend was $1.37, its expected constant growth rate for dividends and earnings is 13 percent, and its stock sells for $28. The firm's marginal tax rate is 40 percent. If the company issues new common stock, a 8 percent flotation cost will be incurred. Net income in the coming year is projected to be $790,000, and the dividend payout ratio is 8 percent. Calculate WACC). O A. 14.57 percent B.14.26 percent C. 14.11 percent OD. 15.53 percent E. 14.75 percent Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All
