Express HelpLine

ExpressHelpLine is the largest online question and Expert answer site.
Thousands of Verified Experts/Tutors are online round the clock.

Question (Category: homework )
41) Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debtndash10% preferred stockndash11% and common stockndash18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged? A. 10.0% B. 13.0% C. 14.2% D. 18.0% 42) The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%? A. 25% B. 8% C. 18% D. 10% 43) Zybeck Corp. projects operating income of $4 million next year. The firmrsquos income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year? A. $2.33 B. $1.67 C. $2.10 D. $2.96 44) Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brothersrsquos present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%? A. $3.25 B. $4.50 C. $1.75 D. $2.00 45) Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brothersrsquos present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%? A. $1.16 B. $0.88 C. $2.12 D. $1.95 46) Capital markets in foreign countries: A. offer lower returns than those obtainable in the domestic capital markets. B. provide international diversification. C. in general are becoming less integrated due to the widespread availability of interest rate and currency swaps. D. all of the choices. 47) Which of the following statements about exchange rates is true? A. Exchange rates were fixed prior to establishing a floating-rate international currency system, and all countries set a specific parity rate for their currency relative either to the Canadian or to the U.S. dollar. B. Day-to-day fluctuations in exchange rates currently are caused by changes in parity rates. C. A floating-rate international currency system has been operating since 1973. D. All of the choices. 48) A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n): A. floating bond. B. Eurobond. C. world bond. D. international capital bond. 49) The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the: A. interest rate parity theory. B. arbitrage markets theory. C. purchasing power parity theory. D. balance of payments quantum theory. 50) If the quote for a forward exchange contract is greater than the computed price, the forward contract is: A. a good buy. B. at equilibrium. C. overvalued. D. undervalued. 51) A spot transaction occurs when one currency is: A. exchanged for another currency at a specified price. B. traded for another at an agreed-upon future price. C. deposited in a foreign bank. D. immediately exchanged for another currency. 52) Buying and selling in more than one market to make a riskless profit is called: A. international trading. B. cannot be determined from the above information. C. profit maximization. D. arbitrage. 53) One reason for international investment is to reduce: A. advantages in a foreign country. B. beta risk. C. portfolio risk. D. price-earnings (PE) ratios. 54) An important (additional) consideration for a direct foreign investment is: A. political risk. B. maximizing the firmrsquos profits. C. attaining a high international PE ratio. D. all of the above.


Answer by Matt D. (Purchased 3 times and rated )