Fin 125 Exam 3
Daenerys Financial has 7,00 bonds outstanding with a face value of $1,000 each that currently sells for $982 on the market. The coupon rate is 6.95%. The interest is paid semiannually. What is the amount of the annual interest tax shield if the tax rate is 23%?
$111,895
A project...
$134,700
Sansa Corp
$75,000,000
Shae Bakery
-623,100
Samwell Sandwiches....
1,661 shares
Cersei Utilities
10,185,000
Stannis Boutique
10.31%
Margery Corp
12.33%
Arya
13.78%
Khal and Jorah
14.47;11.75
Q17 First Debt Issue
2.11%
Q17 Weighted average after tax cost of debt
3.08%
Bran Brands....
8.28%
Joffery Inc
8.91%
Jon Shoppe
9.15%
According to the Pecking Order Theory, what source of capital do companies prefer when they need funds to pursue a new project?
Common Equity
When the yield to maturity is unknown, the coupon rate can be used as the cost of debt
FALSE
Referring to the Modigliani and Miller Proposition I with taxes, optimal capital structure does not exist.
False
The company ___________ the leverage when it issues new debt and uses the proceeds to buy back some of its outstanding stock. The company _________ the leverage when it issues new equity and uses the proceeds to retire of its outstanding debt. Increases; increases Decreases; decreases Increases; Decreases Decreases; Increases
Increases; Decreases
Which of the following four sources of capital has the lowest cost for a typical corporation? Preferred Equity Subordinated Debt Mortgaged-backed security Convertible Debt
Subordinated Debt
Referring to M&M prop II , without taxes the cost of equity capital is increasing as the percentage of debt in the capital structure increases
TRUE
The value of the company depends on:
The overall cash flows
If a company has the optimal amount of debt in its capital structure, then the:
Value of the levered company will exceed the value of the unlevered company
Pro forma financial statements can best be described as financial statements
showing projected values for the future time periods
The discount rate assigned to an individual project should be based on
the risks associated with the use of the funds required by the project