Question
Offered Price $12.00

Katie owns 100 shares of ABC stock

Question # 00618620
Subject: Finance
Due on: 11/16/2017
Posted On: 11/16/2017 05:32 AM

Rating:
4.1/5
Expert tutors with experiences and qualities
Posted By
Best Tutors for school students, college students
Questions:
85156
Tutorials:
85123
Feedback Score:

Purchase it
Report this Question as Inappropriate
Question
1. Katie owns 100 shares of ABC stock. Which one of the following terms is used to refer to the return that Katie and the other shareholders require on their investment in ABC?
A. Weighted average cost of capital
B. Pure play cost
C. Cost of equity
D. Subjective cost
E. Cost of debt

2. Lester lent money to The Corner Store by purchasing bonds issued by the store. The rate of return that he and the other lenders require is referred to as the:
A. pure play cost.
B. cost of debt.
C. weighted average cost of capital.
D. subjective cost.
E. cost of equity.

3. The common stock of Modern Interiors has a beta of 1.61 and a standard deviation of 27.4 percent. The market rate of return is 13.2 percent and the risk-free rate is 4.8 percent. What is the cost of equity for this firm?
A. 18.32 percent
B. 19.97 percent
C. 21.08 percent
D. 24.40 percent
E. 26.05 percent

4. The Cracker Mill has a beta of 0.97, a dividend growth rate of 3.2 percent, a stock price of $33 a share, and an expected annual dividend of $1.06 per share next year. The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent. What is the firm's cost of equity?
A. 7.74 percent
B. 8.69 percent
C. 9.30 percent
D. 9.72 percent
E. 10.01 percent

5. Which one of the following terms is inclusive of both direct and indirect bankruptcy costs?
A. Financial distress costs
B. Capital structure costs
C. Financial leverage
D. Homemade leverage
E. Cost of capital

6. Ernst Electrical has 9,000 shares of stock outstanding and no debt. The new CFO is considering issuing $80,000 of debt and using the proceeds to retire 1,500 shares of stock. The coupon rate on the debt is 7.5 percent. What is the break-even level of earnings before interest and taxes between these two capital structure options?
A. $18,500
B. $21,000
C. $24,000
D. $32,500
E. $36,000

7. Shoe Box Stores is currently an all-equity firm with 28,000 shares of stock outstanding. Management is considering changing the capital structure to 40 percent debt. The interest rate on the debt would be 9 percent. Ignore taxes. Jamie owns 300 shares of Shoe Box Stores stock that is priced at $17 a share. What should Jamie do if she prefers the all-equity structure but Shoe Box Stores adopts the new capital structure?
A. Borrow money and buy an additional 120 shares.
B. Borrow money and buy an additional 180 shares.
C. Keep her shares but loan out all of the dividend income at 9 percent.
D. Sell 120 shares and loan out the proceeds at 9 percent.
E. Sell 180 shares and loan out the proceeds at 9 percent.


1. The weighted average cost of capital is defined as the weighted average of a firm's:
A. return on its investments.
B. cost of equity and its aftertax cost of debt.
C. pretax cost of debt and equity securities.
D. bond coupon rates.
E. dividend and capital gains yields.

2. Which of the following features are advantages of the dividend growth model?
I. easy to understand
II. model simplicity
III. constant dividend growth rate
IV. model's applicability to all common stocks
A. II only
B. I and III only
C. II and IV only
D. I and II only
E. I, II, and III only

3. All else constant, an increase in a firm's cost of debt:
A. could be caused by an increase in the firm's tax rate.
B. will result in an increase in the firm's cost of capital.
C. will lower the firm's weighted average cost of capital.
D. will lower the firm's cost of equity.
E. will increase the firm's capital structure weight of debt.

4. Which one of the following is the primary determinant of an investment's cost of capital?
A. Life of investment
B. Initial cash outlay
C. Level of risk
D. Source of funds used for the investment
E. Investment's net present value

5. The aftertax cost of which of the following are affected by a change in a firm's tax rate?
I. preferred stock
II. debt
III. equity
IV. capital
A. I and III only
B. II and IV only
C. I, II, and IV only
D. II, III, and IV only
E. I, II, III, and IV

6. Which one of the following statements is accurate for a levered firm?
A. WACC should be used as the required return for all proposed investments.
B. A firm's WACC will decrease whenever the firm's tax rate decreases.
C. An increase in the market risk premium will decrease a firm's WACC.
D. The subjective approach totally ignores a firm's own WACC.
E. A reduction in the risk level of a firm will tend to decrease the firm's WACC.

7. Judy's Boutique just paid an annual dividend of $1.65 on its common stock. The firm increases its dividend by 2.5 percent annually. What is the rate of return on this stock if the current stock price is $38.20 a share?
A. 6.93 percent
B. 7.37 percent
C. 7.54 percent
D. 8.19 percent
E. 8.33 percent

8. Winter Wear, Inc. has 6 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $993 each. What is the firm's pre-tax cost of debt?
A. 5.97 percent
B. 6.08 percent
C. 6.14 percent
D. 6.31 percent
E. 6.40 percent

Tags stock shares owns katie cost firms percent stock rate dividend shares capital debt return following structure percentd percente increase weighted average percentc percentb bonds decrease shoe level equity market wacc outstanding common loan firm

Tutorials for this Question
Available for
$12.00

Katie owns 100 shares of ABC stock

Tutorial # 00617262
Posted On: 11/16/2017 05:32 AM
Posted By:
Best Tutors for school students, college students katetutor
Expert tutors with experiences and qualities
Questions:
85156
Tutorials:
85123
Feedback Score:
Report this Tutorial as Inappropriate
Tutorial Preview …100 xxxxxx…
Attachments
Katie_owns_100_shares_of_ABC_stock.ZIP (18.96 KB)
Preview not available.
Purchase this Tutorial @ $12.00 *
* - Additional Paypal / Transaction Handling Fee (3.9% of Tutorial price + $0.30) applicable
Loading...