You are considering buying bonds in ACBB, Inc.

You are considering buying bonds in ACBB, Inc. The bonds have a par value of $1,000 and mature in 30 years. The annual coupon rate is 8.0% and the coupon payments are annual. If you believe that the appropriate discount rate for the bonds is 14.0%, what is the value of the bonds to you?a. $658.27b. $579.84c. $1675.47d. $1801.55e. $622.98Save Answer12.(Points: 3)XZYY, Inc. currently has an issue of bonds outstanding that will mature in 31 years. The bonds have a face value of $1,000 and a stated annual coupon rate of 17% with annual coupon payments. The bond is currently selling for $1189. The bonds may be called in 5 years for 119% of par value. What is your expected quoted annual rate of return if you buy the bonds and hold them until maturity?a. 16.89%b. 14.31%c. 12.99%d. 14.26%e. 18.32%Save Answer13.(Points: 3)XZYY, Inc. currently has an issue of bonds outstanding that will mature in 23 years. The bonds have a face value of $1,000 and a stated annual coupon rate of 10% with semi-annual coupon payments. The bond is currently selling for $1151. The bonds may be called in 5 years for 112% of par value. What is the quoted annual yield-to-maturity for these bonds?a. 8.89%b. 4.25%c. 8.50%d. 8.24%e. 7.81%Save Answer14.(Points: 3)XZYY, Inc. currently has an issue of bonds outstanding that will mature in 26 years. The bonds have a face value of $1,000 and a stated annual coupon rate of 18% with quarterly coupon payments. The bond is currently selling for $821. The bonds may be called in 6 years for 122% of par value. What is the quoted annual yield-to-call for these bonds assuming the company calls the bonds as soon as possible?a. 23.21%b. 41.03%c. 25.56%d. 5.49%e. 21.94%Save Answer15.(Points: 3)Timeless Corporation issued preferred stock with a par value of $300. The stock promised to pay an annual dividend equal to 8% of the par value. If the appropriate discount rate for this stock is 15%, what is the value of the stock?a. $562.50b. $160.00c. $393.45d. $131.36e. $135.04Save Answer16.(Points: 3)You are considering buying common stock in Grow On, Inc. You have projected that the next dividend the company will pay will equal $6.40 and that dividends will grow at a rate of 5.0% per year thereafter. If you would want an annual return of 25.0% to invest in this stock, what is the most you should pay for the stock now?a. $32.00b. $33.60c. $25.60d. $26.88e. $34.96Save Answer17.(Points: 3)You are considering buying common stock in Grow On, Inc. You have calculated that the firm’s free cash flow was $6.40 million last year. You project that free cash flow will grow at a rate of 14.0% per year for the next three years, and then 6.0% per year thereafter. The firm currently has outstanding debt and preferred stock with a total market value of $15.05 million. The firm has 2.39 million shares of common stock outstanding. If the firm’s cost of capital is 19.0%, what is the most you should pay per share for the stock now?a. $68.75b. $26.57c. $6.30d. $63.51e. $20.28Save Answer18.(Points: 3)Grow On, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend of $3.80. You believe that dividends will grow at a rate of 21% per year for two years, and then at a rate of 5% per year thereafter. You expect the stock will sell for $14.60 in two years. You expect an annual rate of return of 25% on this investment. If you plan to hold the stock indefinitely, what is the most you would pay for the stock now?a. $18.74b. $22.19c. $16.59d. $25.93e. $28.07Save Answer19.(Points: 3)Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 16 years, and an annual coupon rate of 19.0%. Flotation costs associated with a new debt issue would equal 7.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 23.0%. The firm’s marginal tax rate is 30%. What will the firm’s true cost of debt be for this new bond issue?a. 14.38%b. 24.76%c. 20.54%d. 17.33%e. 27.80%Save Answer20.(Points: 3)Costly Corporation is considering a new preferred stock issue. The preferred would have a par value of $300 with an annual dividend equal to 8.0% of par. The company believes that the market value of the stock would be $564.00 per share with flotation costs of $34.00 per share. The firm’s marginal tax rate is 40%. What is the firm’s cost of preferred stock?a. 3.59%b. 4.26%c. 4.98%d. 3.96%e. 4.53%Save Answer21.(Points: 3)Costly Corporation is considering using equity financing. Currently, the firm’s stock is selling for $50.00 per share. The firm’s dividend for next year is expected to be $4.70 with an annual growth rate of 7.0% thereafter indefinitely. If the firm issues new stock, the flotation costs would equal 12.0% of the stock’s market value. The firm’s marginal tax rate is 40%. What is the firm’s cost of internal equity?a. 18.43%b. 17.68%c. 17.06%d. 16.40%e. 15.46%Save Answer22.(Points: 3)Marginal Incorporated (MI) has determined that its before-tax cost of debt is 10.0%. Its cost of preferred stock is 14.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 19.0%. Currently, the firm’s capital structure has $325 million of debt, $50 million of preferred stock, and $125 million of common equity. The firm’s marginal tax rate is 45%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $62 million available from retained earnings for investment purposes next period. What is the firm’s marginal cost of capital at a total investment level of $201 million?a. 11.90%b. 9.73%c. 9.35%d. 12.65%e. 8.98%Save Answer23.(Points: 3)Marginal Incorporated (MI) has determined that its before-tax cost of debt is 5.0% for the first $25 million in bonds it issues, and 9.0% for any bonds issued above $25 million. Its cost of preferred stock is 13.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 18.0%. Currently, the firm’s capital structure has $410 million of debt, $80 million of preferred stock, and $510 million of common equity. The firm’s marginal tax rate is 45%. The firm’s managers have determined that the firm should have $53 million available from retained earnings for investment purposes next period. What is the firm’s marginal cost of capital at a total investment level of $43 million?a. 12.25%b. 10.33%c. 11.23%d. 11.35%e. 13.91%f. 12.89%g. 11.25%h. 12.27%Save Answer24.(Points: 3)Marginal Incorporated (MI) has determined that its after-tax cost of debt is 5.0% for the first $198 million in bonds it issues, and 8.0% for any bonds issued above $198 million. Its cost of preferred stock is 11.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 20.0%. Currently, the firm’s capital structure has $310 million of debt, $30 million of preferred stock, and $160 million of common equity. The firm’s marginal tax rate is 35%. The firm’s managers have determined that the firm should have $73 million available from retained earnings for investment purposes next period. What is the firm’s marginal cost of capital at a total investment level of $274 million?a. 8.88%b. 12.02%c. 10.16%d. 10.74%e. 10.28%f. 9.08%g. 7.80%h. 9.00%Save Answer25.(Points: 3)Determine the payback period in years for a project that costs $76,000 and would yield after-tax cash flows of $19,000 the first year, $21,000 the second year, $24,000 the third year, $26,000 the fourth year, $30,000 the fifth year, and $36,000 the sixth year.a. 2.92b. 3.46c. 3.26d. 2.81e. 3.64Save Answer26.(Points: 3)Determine the net present value for a project that costs $39,000 and would yield after-tax cash flows of $6,000 the first year, $8,000 the second year, $11,000 the third year, $13,000 the fourth year, $17,000 the fifth year, and $23,000 the sixth year. Your firm’s cost of capital is 12.00%.a. $8,423.82b. $10,124.78c. $78,000.00d. $39,000.00e. $22,087.79Save Answer27.(Points: 3)Determine the internal rate of return for a project that costs $298,000 and would yield after-tax cash flows of $28,000 per year for the first 5 years, $36,000 per year for the next 5 years, and $49,000 per year fo
r the following 5 years.a. 8.11%b. 6.84%c. 7.65%d. 6.58%e. 8.54%Save Answer28.(Points: 3)Your company has an opportunity to invest in a project that is expected to result in after-tax cash flows of $18,000 the first year, $20,000 the second year, $23,000 the third year, $26,000 the fourth year, $30,000 the fifth year, and $36,000 the sixth year. The project would cost the firm $78,000. If the firm’s cost of capital is 15%, what is the modified internal rate of return?a. 18.05%b. 20.39%c. 17.02%d. 14.64%e. 19.08%Save Answer29.(Points: 3)You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks will be $170,000. The trucks fall in the MACRS 5-year class that allows depreciation of 20% the first year, 32% the second year, 19% the third year, 12% the fourth year, 11% the fifth year, and 6% the sixth year. You expect to sell the trucks for 20,400 at the end of five years. The expected revenue associated with the trucks is $135,000 per year with annual operating costs of $69,000. The firm’s marginal tax rate is 25.0%. What is the after-tax operating cash flow for year 5?a. $54,175b. $35,475c. $49,500d. $47,300e. $18,700Save Answer30.(Points: 3)You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks will be $210,000. The trucks fall in the MACRS 5-year class that allows depreciation of 20% the first year, 32% the second year, 19% the third year, 12% the fourth year, 11% the fifth year, and 6% the sixth year. You expect to sell the trucks for 31,500 at the end of five years. The expected revenue associated with the trucks is $154,000 per year with annual operating costs of $74,000. The firm’s marginal tax rate is 25.0%. What is the after-tax operating cash flow for year 1?a. $38,000b. $28,500c. $60,000d. $70,500e. $42,000Save Answer