need help on these 10 muiltiple choice questions. They need to be done within 4 hours, Let me know if u can help? Thanks
1. Kinslow Manufacturing Company paid a dividend yesterday of $2.50 per share. The dividend is expected to grow at a constant rate of 5% per year. The price of Kinslow’s common stock today is $25 per share. If Kinslow decides to issue new common stock, flotation costs will equal $2.00 per share. Key’s marginal tax rate is 34 %. Based on the above information, the cost of retained earnings is ______(Points : 1)
16.14%
15.50%
15.00%
10.55 %
2. The capital budgeting manager for XYZ Corporation, a very profitable high technology company, completed her analysis of Project A assuming 5 year depreciation. He accountant reviews the analysis and change the depreciation method to 3 year depreciation. This change will, ______(Points : 1)
Increase the present value of the net cash flow
Decrease the present value of the net cash flow
Have no effect on the net cash flow because depreciation is a non cash expense
Only change the net cash flows if the useful life of the depreciable asset is greater than five years.
3. Jiffy Wax Corp. Can sell common stock for $15 per share and its investors require a 14 % return. However, the administrative or flotation costs associated with selling the stock amount to $2.40 per share. What is the cost of capital for Jiffy Wax if the corporation raises money by selling preferred stock? (Points : 1)
30.00%
21.50%
16.67%
14.00%
There is a typo in question 3- it should read “by selling common stock”
4. Nargo Inc. Wants to replace a 7 year old machine with a new machine that is more efficient. The old machine cost $50,000 when new and has a current book value of $10,000. Margo can sell the machine to a foreign buyer for $12,000. Margo’s tax rate is 30%. The effect of the sale of the old machine on the initial outlay for the new machine is ______(Points : 1)
[$12,600]
[$11,400]
[$8,400]
$0
5. A corporate bond has a face value of $1,000 and a coupon rate of 6.5%. The bond matures in 10 years and has a current market price of $985. If the corporation sells more bonds it will incur flotation costs of $36 per bond. If the corporate tax rate is 34 %, what is the after tax cost of debt capital? (Points : 1)
5.71%
5.45%
5.18%
4.78%
6. The net present value always provides the correct decision provided that ______(Points : 1)
Cash flow are constant over the asset’s life
The required rate of return is greater than the internal rate of return
Capital rationing is not imposed
The internal rate of return is positive
7. Zellar’s, Inc. Is considering two mutually exclusive projects, A and B. Project A costs
$ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.’s required rate of return for these projects is 10%. The net present value for Project B is ______(Points : 1)
$18,097
$21,378
$34,238
$42,000
8. Zellar’s, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellar, Inc.’s required rate of return for these projects is 10%. The internal rate of return for Project B is ______(Points : 1)
26.74%
20.79%
18.64%
16.77%
9. The risk free rate of return is 3% and the market risk premium is 12%. Penn Trucking has a beta of 1.8 an a standard deviation of returns of 24 %. Penn Trucking’s marginal tax rate is 40%. Analyst expect Penn Trucking’s dividends to grow by 5% per year for the foreseeable future. Using the capital asset pricing model, what is Penn Trucking’s cost of retained earnings? (Points : 1)
17.4%
19.2%
24.6%
27.0%
10. A capital budgeting project has a net present value of $10,000 and a modified internal rate of return of 13%. The project's required rate of return is 11 %. The internal rate of return is ______(Points : 1)
Greater than 13 %
Less than 11 %
Between 11% and 13%
Less than $10,000