Posted: January 2nd, 2017

A firm has issued preferred stock at its $125 per share par value. The stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share. The cost of the preferred stock is ________.

Question 24.24. A firm has issued preferred stock at its $125 per share par value. The stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share. The cost of the preferred stock is ________. (Points : 2.5) 12.4 percent 7.2 percent 12 percent 15 percent Question 25.25. Which of the following is a fixed cost? (Points : 2.5) inventory rent delivery costs direct labor Question 26.26. ________ projects have the same function; the acceptance of one ________ the others from consideration. (Points : 2.5) Capital; eliminates Independent; does not eliminate Mutually exclusive; eliminates Replacement; eliminates Question 27.27. A firm has fixed operating costs of $525,000. The sales price per unit is $35 and its variable costs per unit is $22.50. The firm’s operating breakeven point in units is ________. (Points : 2.5) 23,330 32,000 42,000 52,000 Question 28.28. ________ is the potential use of fixed financial charges to magnify the effects of changes in earnings before interest and taxes on a firm’s earnings per share. (Points : 2.5) Financial leverage Operating leverage Total leverage Degree of operating leverage Question 29.29. What is the IRR for the following project if its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3, and $1,300,000 in year 4? (Points : 2.5) 15.57% 0.00% 13.57% 12.25% Question 30.30.What is the profitability index of a project that has an initial cash outflow of $600, an inflow of $250 for the next 3 years and a cost of capital of 10 percent?(Points : 2.5) 0.66 2.036 1.036 2.739 Question 31.31.The payment of cash dividends to corporate stockholders is decided by the ________.(Points : 2.5) creditors stockholders SEC board of directors Question 32.32. ________ is the process of evaluating and selecting long-term investments that are consistent with a firm’s goal of maximizing owners’ wealth. (Points : 2.5) Recapitalizing assets Capital budgeting Ratio analysis Securitization Question 33.33. A firm has common stock with a market price of $25 per share and an expected dividend of $2 per share at the end of the coming year. The growth rate in dividends has been 5 percent. The cost of the firm’s common stock equity is ________. (Points : 2.5) 5 percent 8 percent 10 percent 13 percent Question 34.34. Which of the following would be used in the computation of an initial investment? (Points : 2.5) the annual after-tax inflow expected from the investment the initial purchase price of the investment the historic cost of the existing investment the profits from the new investment Question 35.35. According to the residual theory of dividends, if a firm’s equity need exceeds the amount of retained earnings, the firm would ________. (Points : 2.5) borrow to pay the cash dividend sell additional stock to pay the cash dividend pay no cash dividends pay less dividends Question 36.36.Tangshan Mining has common stock at par of $200,000, paid-in capital in excess of par of $400,000, and retained earnings of $280,000. In states where the firm’s legal capital is defined as the par value of common stock, the firm could pay out ________ in cash dividends without impairing its capital(Points : 2.5) $200,000 $680,000 $600,000 $880,000 Question 37.37.A tax adjustment must be made in determining the cost of ________.(Points : 2.5) long-term debt common stock preferred stock retained earnings Question 38.38. The change in net working capital when evaluating a capital budgeting decision is ________. (Points : 2.5) the change in fixed liabilities minus the change in fixed assets the increase in current assets the increase in current liabilities the change in current assets minus the change in current liabilities Question 39.39. The ________ is a weighted average of the cost of funds which reflects the interrelationship of financing decisions. (Points : 2.5) internal rate of return sunk cost cost of capital risk-free rate Question 40.40. A firm has determined its cost of each source of capital and optimal capital structure, which is composed of the following sources and target market value proportions: Target Market Source of Capital Proportions After-Tax Cost Long-Term Debt 40% 6% Preferred Stock 10% 11% Common Stock 50% 15% The weighted average cost of capital is ________. (Points : 2.5) 6 percent 10.7 percent 11 percent 15 percent