罗斯公司理财题库cha16
公司理财罗斯习题集
财务综合分析
通过分析净资产收益率、总资产周转率和权益乘数等指标，评估企业的财务状况和经营绩效。
杜邦分析法
通过对流动比率、存货周转率、应收账款周转率等指标进行加权平均，评估企业的财务状况和经营绩效。
沃尔评分法
通过计算税后净营业利润减去资本成本后的剩余经济价值，评估企业的价值创造能力。
有效市场假说
有效市场假说认为市场是有效的，即市场价格反映了所有可获得的信息，因此无法通过分析信息获资金管理
现金管理
交易动机、预防动机、投机动机。 持有现金的动机 现金管理的目标 现金管理的方法 安全性、流动性、收益性。 建立最佳现金余额、加速收款、延迟付款。
财务趋势分析
衡量企业营业收入的增长情况，计算公式为（本期营业收入-上期营业收入）除以上期营业收入。
营业收入增长率
净利润增长率
总资产增长率
股东权益增长率
衡量企业净利润的增长情况，计算公式为（本期净利润-上期净利润）除以上期净利润。
衡量企业资产规模的增长情况，计算公式为（本期总资产-上期总资产）除以析
财务比率分析
流动比率 速动比率 资产负债率 利息保障倍数 衡量企业短期偿债能力，计算公式为流动资产除以流动负债。 衡量企业长期偿债能力，计算公式为负债总额除以资产总额。 衡量企业快速偿债能力，计算公式为（流动资产-存货）除以流动负债。 衡量企业支付利息的能力，计算公式为息税前利润除配与股利政策
利润分配的原则与程序
依法分配原则、弥补亏损原则、先提取法定公积金原则、提取任意公积金原则、股东平等原则。
利润分配原则
弥补亏损提取法定公积金、提取任意公积金、支付股利。
公司理财罗斯习题集
• IRR(Project B) = C0 + C1 / (1+IRR) + C2 / (1+IRR)2
•0
= -$100,000 + $65,000 / (1+IRR) + $65,000 /
(1+IRR)2
• IRR
= 0.1943
• The IRR of project B is 19.43%.
The price of the coupon bond is too low, so there is an arbitrage opportunity. To take advantage of it:
11
课堂练习6
• 考虑两个互斥投资项目，现金流如下：
• 年份
项目A 项目B
•0
-5000 -100000
•1
3500
65000
•2
3500
65000
12
课堂练习6
• （1）两个项目的IRR分别是多少？ • （2）仅仅根据IRR，你会选择哪个项目？ • （3）你根据（2）做出决策时忽略了什么？ • （4）如何克服这一问题？请计算。 • （5）根据（4）的结果，你会选择哪一个项目？
罗斯公司理财题库全集
Chapter 19 Dividends and Other Payouts Answer KeyMultiple Choice Questions1. Payments made out of a firm's earnings to its owners in the form of cash or stock are called:A. dividends.B. distributions.C. share repurchases.D. payments-in-kind.E. stock splits.Difficulty level: EasyTopic: DIVIDENDSType: DEFINITIONS2. Payments made by a firm to its owners from sources other than current or accumulated earnings are called:A. dividends.B. distributions.C. share repurchases.D. payments-in-kind.E. stock splits.Difficulty level: EasyTopic: DISTRIBUTIONSType: DEFINITIONS3. A cash payment made by a firm to its owners in the normal course of business is called a:A. share repurchase.B. liquidating dividend.C. regular cash dividend.D. special dividend.E. extra cash dividend.Difficulty level: EasyTopic: REGULAR CASH DIVIDENDSType: DEFINITIONS4. A cash payment made by a firm to its owners when some of the firm's assets are sold off is called a:A. liquidating dividend.B. regular cash dividend.C. special dividend.D. extra cash dividend.E. share repurchase.Difficulty level: EasyTopic: LIQUIDATING DIVIDENDSType: DEFINITIONS5. The date on which the board of directors passes a resolution authorizing payment of a dividend to the shareholders is the _____ date.A. ex-rightsB. ex-dividendC. recordD. paymentE. declarationDifficulty level: EasyTopic: DECLARATION DATEType: DEFINITIONS6. The date before which a new purchaser of stock is entitled to receive a declared dividend, but on or after which she does not receive the dividend, is called the _____ date.A. ex-rightsB. ex-dividendC. recordD. paymentE. declarationDifficulty level: EasyTopic: EX-DIVIDEND DATEType: DEFINITIONS7. The date by which a stockholder must be registered on the firm's roll as having share ownership in order to receive a declared dividend is called the:A. ex-rights date.B. ex-dividend date.C. date of record.D. date of payment.E. declaration date.Difficulty level: EasyTopic: DATE OF RECORDType: DEFINITIONS8. The date on which the firm mails out its declared dividends is called the:A. ex-rights date.B. ex-dividend date.C. date of record.D. date of payment.E. declaration date.Difficulty level: EasyTopic: DATE OF PAYMENTType: DEFINITIONS9. The ability of shareholders to undo the dividend policy of the firm and create an alternative dividend payment policy via reinvesting dividends or selling shares of stock is called (a):A. perfect foresight model.B. MM Proposition I.C. capital structure irrelevancy.D. homemade leverage.E. homemade dividends.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: DEFINITIONS10. The market's reaction to the announcement of a change in the firm's dividend payout is likely the:A. information content effect.B. clientele effect.C. efficient markets hypothesis.D. MM Proposition I.E. MM Proposition II.Difficulty level: MediumTopic: INFORMATION CONTENT EFFECTType: DEFINITIONS11. The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the:A. information content effect.B. clientele effect.C. efficient markets hypothesis.D. MM Proposition I.E. MM Proposition II.Difficulty level: Easy Topic: CLIENTELE EFFECT Type: DEFINITIONS12. A _____ is an alternative method to cash dividends which is used to pay out a firm's earnings to shareholders.A. mergerB. acquisitionC. payment-in-kindD. stock splitE. share repurchaseDifficulty level: EasyTopic: SHARE REPURCHASEType: DEFINITIONS13. A payment made by a firm to its owners in the form of new shares of stock is called a _____ dividend.A. stockB. normalC. specialD. extraE. liquidatingDifficulty level: EasyTopic: STOCK DIVIDENDSType: DEFINITIONS14. An increase in a firm's number of shares outstanding without any change in owners' equity is called a:A. special dividend.B. stock split.C. share repurchase.D. tender offer.E. liquidating dividend.Difficulty level: EasyTopic: STOCK SPLITSType: DEFINITIONS15. The difference between the highest and lowest prices at which a stock has traded is called its:A. average price.B. bid-ask spread.C. trading range.D. opening price.E. closing price.Difficulty level: EasyTopic: TRADING RANGEType: DEFINITIONS16. In a reverse stock split:A. the number of shares outstanding increases and owners' equity decreases.B. the firm buys back existing shares of stock on the open market.C. the firm sells new shares of stock on the open market.D. the number of shares outstanding decreases but owners' equity is unchanged.E. shareholders make a cash payment to the firm.Difficulty level: EasyTopic: REVERSE SPLITSType: DEFINITIONS17. The last date on which you can purchase shares of stock and still receive the dividend is the date _____ business day(s) prior to the date of record.A. zeroB. oneC. threeD. fiveE. sevenDifficulty level: EasyTopic: DIVIDEND PAYMENTSType: CONCEPTS18. Leslie purchased 100 shares of GT, Inc. stock on Wednesday, June 7th. Marti purchased 100 shares of GT, Inc. stock on Thursday, July 8th. GT declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information?A. Neither Leslie nor Marti are entitled to the dividend.B. Leslie is entitled to the dividend but Marti is not.C. Marti is entitled to the dividend but Leslie is not.D. Both Marti and Leslie are entitled to the dividend.E. Both Marti and Leslie are entitled to one-half of the dividend amount. Difficulty level: MediumTopic: DIVIDEND PAYMENTSType: CONCEPTS19. All else equal, the market value of a stock will tend to decrease by roughly the amount of the dividend on the:A. dividend declaration date.B. ex-dividend date.C. date of record.D. date of payment.E. day after the date of payment.Difficulty level: MediumTopic: DIVIDEND PAYMENTSType: CONCEPTS20. Which one of the following is an argument in favor of a low dividend policy?A. the tax on capital gains is deferred until the gain is realizedB. few, if any, positive net present value projects are available to the firmC. a preponderance of stockholders have minimal taxable incomeD. a majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristicsE. corporate tax rates exceed personal tax rates Difficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS21. The fact that flotation costs can be significant is justification for:A. a firm to issue larger dividends than its closest competitors.B. a firm to maintain a constant dividend policy even if it frequently has to issue new shares of stock to do so.C. maintaining a constant dividend policy even when profits decline significantly.D. maintaining a high dividend policy.E. maintaining a low dividend policy and rarely issuing extra dividends. Difficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS22. Which of the following may tend to keep dividends low?I. a state law restricting dividends in excess of retained earningsII. a term contained in bond indenture agreementsIII. the desire to maintain constant dividends over timeIV. flotation costsA. II and III onlyB. I and IV onlyC. II, III, and IV onlyD. I, II, and III onlyE. I, II, III, and IVDifficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS23. Ignoring capital gains as an alternative, the tax law changes in 2003 tend to favor a:A. lower dividend policy.B. constant dividend policy.C. zero-dividend policy.D. higher dividend policy.E. restrictive dividend policy.Difficulty level: EasyTopic: FACTORS FOR HIGH DIVIDENDS Type: CONCEPTS24. Which of the following are factors that favor a high dividend policy?I. stockholders desire for current incomeII. tendency for higher stock prices for high dividend paying firmsIII. investor dislike of uncertaintyIV. high percentage of tax-exempt institutional stockholdersA. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS25. An investor is more likely to prefer a high dividend payout if a firm:A. has high flotation costs.B. has few, if any, positive net present value projects.C. has lower tax rates than the investor.D. has a stock price that is increasing rapidly.E. offers high capital gains which are taxed at a favorable rate.Difficulty level: EasyTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS26. The information content of a dividend increase generally signals that:A. the firm has a one-time surplus of cash.B. the firm has few, if any, net present value projects to pursue.C. management believes that the future earnings of the firm will be strong.D. the firm has more cash than it needs due to sales declines.E. future dividends will be lower.Difficulty level: MediumTopic: INFORMATION CONTENT Type: CONCEPTS27. Of the following factors, which one is considered to be the primary factor affecting a firm's dividend decision?A. personal taxes of company stockholdersB. consistent dividend policyC. attracting retail investorsD. attracting institutional investorsE. sustainable changes in earningsDifficulty level: MediumTopic: DIVIDEND SURVEY RESULTSType: CONCEPTS28. Financial managers:A. are reluctant to cut dividends.B. tend to ignore past dividend policies.C. tend to prefer cutting dividends every time quarterly earnings decline.D. prefer cutting dividends over incurring flotation costs.E. place little emphasis on dividend policy consistency.Difficulty level: EasyTopic: DIVIDEND SURVEY RESULTSType: CONCEPTS29. If you ignore taxes and transaction costs, a stock repurchase will:I. reduce the total assets of a firm.II. increase the earnings per share.III. reduce the PE ratio more than an equivalent stock dividend.IV. reduce the total equity of a firm.A. I and III onlyB. II and IV onlyC. I, II, and IV onlyD. I, III, and IV onlyE. I, II, III, and IVDifficulty level: Medium Topic: STOCK REPURCHASE Type: CONCEPTS30. From a tax-paying investor's point of view, a stock repurchase:A. is equivalent to a cash dividend.B. is more desirable than a cash dividend.C. has the same tax effects as a cash dividend.D. is more highly taxed than a cash dividend.E. creates a tax liability even if the investor does not sell any of the shares he owns.Difficulty level: MediumTopic: STOCK REPURCHASEType: CONCEPTS31. All else equal, a stock dividend will _____ the number of shares outstanding and _____ the value per share.A. increase; increaseB. increase; decreaseC. not change; increaseD. decrease; increaseE. decrease; decreaseDifficulty level: EasyTopic: STOCK DIVIDENDSType: CONCEPTS32. A small stock dividend is defined as a stock dividend of less than_____%.A. 10 to 15B. 15 to 20C. 20 to 25D. 25 to 30E. 30 to 35Difficulty level: EasyTopic: STOCK DIVIDENDSType: CONCEPTS33. Nu Tech, Inc. is a technology firm with good growth prospects. The firm wishes to do something to acknowledge the loyalty of its shareholders but needs all of its available cash to fund its rapid growth. The market price of its stock is currently trading in the middle of its preferred trading range. The firm could consider:A. issuing a liquidating dividend.B. a stock split.C. a reverse stock split.D. issuing a stock dividend.E. a special cash dividend.Difficulty level: MediumTopic: STOCK DIVIDENDType: CONCEPTS34. Which of the following are valid reasons for a firm to reduce or eliminate its cash dividends?I. The firm is on the verge of violating a bond restriction which requires a current ratio of 1.8 or higher.II. A firm has just received a patent on a new product for which there is strong market demand and it needs the funds to bring the product to the marketplace.III. The firm can raise new capital easily at a very low cost.IV. The tax laws have recently changed such that dividends are taxed at an investor's marginal rate while capital gains are tax exempt.A. I and III onlyB. II and IV onlyC. II, III, and IV onlyD. I, II, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK DIVIDENDSType: CONCEPTS35. A stock split:A. increases the total value of the common stock account.B. decreases the value of the retained earnings account.C. does not affect the total value of any of the equity accounts.D. increases the value of the capital in excess of par account.E. decreases the total owners' equity on the balance sheet.Difficulty level: MediumTopic: STOCK SPLITSType: CONCEPTS36. Stock splits are often used to:A. adjust the market price of a stock such that it falls within a preferred trading range.B. decrease the excess cash held by a firm.C. increase both the number of shares outstanding and the market price per share simultaneously.D. increase the total equity of a firm.E. adjust the debt-equity ratio such that it falls within a preferred range. Difficulty level: EasyTopic: STOCK SPLITSType: CONCEPTS37. Which of the following tend to increase the appeal of a firm's stock to the average investor?I. a cessation of dividends by a firm which has a long history of increasing dividendsII. the distribution of a special dividend by a dividend-paying firmIII. a reverse stock split for a low-priced stockIV. the declaration of a stock dividend by a growth firmA. I and III onlyB. II and IV onlyC. I, II, and IV onlyD. II, III, and IV onlyE. I, II, III, and IV Difficulty level: Medium Topic: STOCK SPLITS Type: CONCEPTS38. Wydex, Inc. stock is currently trading at $82 a share. The firm feels that its primary clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares. The firm should consider a:A. reverse stock split.B. liquidating dividend.C. stock dividend.D. stock split.E. special dividend.Difficulty level: MediumTopic: STOCK SPLITType: CONCEPTS39. A one-for-four reverse stock split will:A. increase the par value by 25%.B. increase the number of shares outstanding by 400%.C. increase the market value but not affect the par value per share.D. increase a $1 par value to $4.E. increase a $1 par value by $4.Difficulty level: MediumTopic: REVERSE STOCK SPLITSType: CONCEPTS40. A reverse stock split is sometimes used as a means of:A. decreasing the liquidity of a stock.B. decreasing the market value per share of stock.C. increasing the number of stockholders.D. keeping a firm's stock eligible for trading on a stock exchange.E. raising cash from current stockholders.Difficulty level: EasyTopic: REVERSE STOCK SPLITSType: CONCEPTS41. Which of the following lists events in chronological order from earliest to latest?A. date of record, declaration date, ex-dividend date.B. date of record, ex-dividend date, declaration date.C. declaration date, date of record, ex-dividend date.D. declaration date, ex-dividend date, date of record.E. ex-dividend date, date of record, declaration date.Difficulty level: MediumTopic: DIVIDEND DATESType: CONCEPTS42. In an efficient market, ignoring taxes and time value, the price of stock should:A. decrease by the amount of the dividend immediately on the declaration date.B. decrease by the amount of the dividend immediately on the ex-dividend date.C. increase by the amount of the dividend immediately on the declaration date.D. increase by the amount of the dividend immediately on the ex-dividend date.E. Both B and C.Difficulty level: MediumTopic: EX-DIVIDEND DATESType: CONCEPTS43. On the date of record the stock price drop is:A. a full adjustment for the dividend payment.B. a partial adjustment for the dividend payment because of the tax effect.C. zero because it happens on the ex-dividend date.D. zero because it happens on the payment date.E. None of the above.Difficulty level: Medium Topic: DATE OF RECORD Type: CONCEPTS44. The use of homemade dividends allows stockholders to change the:A. return pattern of the firm by leveraging their position like the firm.B. cash payout received by selling off shares to receive current dividends or purchasing additional shares with the dividends, as desired.C. value of the company by sending dividend requirement letters to the home office of the corporation.D. Both A and C.E. Both B and C.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: CONCEPTS45. Homemade dividends are described by Modigliani and Miller to be the:A. dividend one pays oneself to avoid risky stocks.B. re-arrangement of the firm's dividend stream as management needs.C. re-arrangement of the firm's dividend stream by investors buying or selling their holdings in the stock.D. present value of all dividends to be paid.E. None of the above.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: CONCEPTS46. The dividend-irrelevance proposition of Miller and Modigliani depends on the following relationship between investment policy and dividend policy:A. The level of investment does not influence or matter to the dividend decision.B. Once dividend policy is set the investment decision can be made as desired.C. The investment policy is set before the dividend decision and not changed by dividend policy.D. Since dividend policy is irrelevant there is no relationship betweeninvestment policy and dividend policy.E. Miller and Modigliani were only concerned about capital structure. Difficulty level: MediumTopic: DIVIDEND IRRELEVANCEType: CONCEPTS47. Dividends are relevant and dividend policy irrelevant when:A. cash dividends are always constant and dividend policy is changed as management needs.B. cash dividends are increased for one year while others are held constant, thus causing an increase in stock price, and dividend policy establishes the trade-off between dividends at different dates.C. cash dividends are always constant and dividend policy establishes the trade-off between dividends at different dates.D. cash dividends are increased for one payment while others are held constant and dividend policy is changed as management needs.E. None of the above.Difficulty level: MediumTopic: DIVIDEND RELEVANCEType: CONCEPTS48. A reverse split is when:A. the stock price gets too high for investors to purchase in round lots.B. the stock becomes too liquid and highly marketable.C. the stock price moves into the popular trading range.D. several old shares, such as 4, are replaced by 1 new share.E. None of the above.Difficulty level: EasyTopic: REVERSE SPLITType: CONCEPTS49. A firm announces that it is willing to purchase a number of shares back at various prices and shareholders have the option to indicate how many shares they are willing to sell at various prices. This process is called a:A. dividend creation model.B. secondary market transaction.C. free market sale.D. Dutch auction.E. None of the above.Difficulty level: Easy Topic: DUTCH AUCTION Type: CONCEPTS50. Characteristics of a sensible dividend policy include:A. over time pay out all free cash flowsB. set the current regular dividend consistent with a long-run target payout ratioC. use repurchases to distribute transitory cash flow increasesD. A and BE. All of the aboveDifficulty level: EasyTopic: CHARACTERISTICS OF SENSIBLE DIVIDEND POLICYType: CONCEPTS51. You owned 200 shares last year and received a stock dividend of 5% at the end of last year. The number of shares you now have is _____ and your wealth has increased by ______%.A. 10; 5B. 210; 5C. 210; 0D. 50,000; 5E. 50,000; 0# shares = 200(1.05) = 210The only change is in value per share.Difficulty level: EasyTopic: STOCK DIVIDENDSType: PROBLEMS52. The Rent It Company declared a dividend of $.60 a share on October 20th to holders of record on Monday, November 1st. The dividend is payable on December 1st. You purchased 100 shares of Rent It Company stock on Wednesday, October 27th. How much dividend income will you receive on December 1st from the Rent It Company?A. $0B. $1.50C. $6.00D. $15.00E. $60.00Dividend received = $.60 100 = $60.00Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS53. You purchased 200 shares of ABC stock on July 15th. On July 20th, you purchased another 100 shares and then on July 22st you purchased your final 200 shares of ABC stock. The company declared a dividend of $1.10 a share on July 5th to holders of record on Friday, July 23rd. The dividend is payable on July 31st. How much dividend income will you receive on July 31st from ABC?A. $0B. $220C. $330D. $440E. $550Dividend received = $1.10 (200 + 100) = $330Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS54. The KatyDid Co. is paying a $1.25 per share dividend today. There are 120,000 shares outstanding with a par value of $1.00 per share. As a result of this dividend, the:A. retained earnings will decrease by $150,000.B. retained earnings will decrease by $120,000.C. common stock account will decrease by $150,000.D. common stock account will decrease by $120,000.E. capital in excess of par value account will decrease by $120,000. Decrease in retained earnings = $1.25 120,000 = $150,000Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS55. On May 18th, you purchased 1,000 shares of BuyLo stock. On June 5th, you sold 200 shares of this stock for $21 a share. You sold an additional 400 shares on July 8th at a price of $22.50 a share. The company declared a $.50 per share dividend on June 25th to holders of record as of Thursday, July 10th. This dividend is payable on July 31st. How much dividend income will you receive on July 31st as a result of your ownership of BuyLo stock?A. $100B. $200C. $300D. $400E. $500Dividend received = $.50 (1,000 - 200) = $400Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS56. You own 300 shares of Abco, Inc. stock. The company has stated that it plans on issuing a dividend of $.60 a share one year from today and then issuing a final liquidating dividend of $2.20 a share two years from today. Your required rate of return is 9%. Ignoring taxes, what is the value of one share of this stock today?A. $2.36B. $2.40C. $2.62D. $2.80E. $2.85Value per share = ($.60 1.091) + ($2.20 1.092) = $2.40Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: PROBLEMS57. Priscilla owns 500 shares of Delta stock. It is January 1, 2006, and the company recently issued a statement that it will pay a $1.00 per share dividend on December 31, 2006 and a $.50 per share dividend on December 31, 2007. Priscilla does not want any dividend this year but does want as much dividend income as possible next year. Her required return on this stock is 12%. Ignoring taxes, what will Priscilla's homemade dividend per share be in 2007?A. $0B. $.50C. $1.50D. $1.62E. $1.68Homemade dividend = ($1.00 1.12) + $.50 = $1.62Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: PROBLEMS58. A firm has a market value equal to its book value. Currently, the firm has excess cash of $600 and other assets of $5,400. Equity is worth $6,000. The firm has 500 shares of stock outstanding and net income of $900. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?A. $1.20B. $1.50C. $1.80D. $2.00E. $2.40Price per share = $6,000 500 = $12; Number of shares repurchased = $600 $12 = 50 shares; New EPS = $900 (500 - 50) = $2.00Difficulty level: MediumTopic: STOCK REPURCHASEType: PROBLEMS59. A firm has a market value equal to its book value. Currently, the firm has excess cash of $800 and other assets of $5,200. Equity is worth $6,000. The firm has 600 shares of stock outstanding and net income of $700. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?A. 480 sharesB. 500 sharesC. 520 sharesD. 540 sharesE. 560 sharesPrice per share = $6,000 600 = $10; Number of shares repurchased = $800 $10 = 80; New number of shares outstanding = 600 - 80 = 520Difficulty level: MediumTopic: STOCK REPURCHASEType: PROBLEMS60. A firm has a market value equal to its book value. Currently, the firm has excess cash of $500 and other assets of $9,500. Equity is worth $10,000. The firm has 250 shares of stock outstanding and net income of $1,400. What will the stock price per share be if the firm pays out its excess cash as a cash dividend?A. $36B. $38C. $40D. $42E. $44Price per share = ($10,000 - $500) 250 = $38Difficulty level: MediumTopic: CASH DIVIDENDType: PROBLEMS61. A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and net income of $900. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?A. $0.25B. $0.45C. $2.50D. $3.80E. $4.50Earnings per share = $900 200 = $4.50Difficulty level: MediumTopic: CASH DIVIDENDType: PROBLEMS62. Murphy's, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account, and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the balance in the retained earnings account be after the dividend?A. $34,700B. $35,700C. $42,700D. $49,700E. $50,700Retained earnings = [(10,000 shares .10) $8 -1] + $42,700 = $34,700Difficulty level: MediumTopic: SMALL STOCK DIVIDENDType: PROBLEMS63. Murphy's, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the market price per share be after the dividend?A. $7.20B. $7.27C. $7.33D. $8.00E. $8.80Market price per share = (10,000 shares $8) (10,000 shares 1.10) = $7.27; Note that the total market value of the firm does not change.Difficulty level: MediumTopic: SMALL STOCK DIVIDEND。
罗斯公司理财题库cha16
共享知识分享快乐Chapter 16Capital Structure: Basic ConceptsMultiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to which anindividual is exposed is called:A. homemade leverage.B. dividend recapture.C. the weighted average cost of capital.D. private debt placement.E. personal offset.2. The proposition that the value of the firm is independent of its capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.3. The proposition that the cost of equity is a positive linear function of capital structure iscalled:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.4. The tax savings of the firm derived from the deductibility of interest expense is called the:A. interest tax shield.B. depreciable basis.C. financing umbrella.D. current yield.E. tax-loss carry forward savings.卑微如蝼蚁、坚强似大象．共享知识分享快乐5. The unlevered cost of capital is:A. the cost of capital for a firm with no equity in its capital structure.B. the cost of capital for a firm with no debt in its capital structure.C. the interest tax shield times pretax net income.D. the cost of preferred stock for a firm with equal parts debt and common stock in its capitalstructure.E. equal to the profit margin for a firm with some debt in its capital structure.6. The cost of capital for a firm, rWACC, in a zero tax environment is:A. equal to the expected earnings divided by market value of the unlevered firm.B. equal to the rate of return for that business risk class.C. equal to the overall rate of return required on the levered firm.D. is constant regardless of the amount of leverage.E. All of the above.7. The difference between a market value balance sheet and a book value balance sheet is that amarket value balance sheet:A. places assets on the right hand side.B. places liabilities on the left hand side.C. does not equate the right hand with the left hand side.D. lists items in terms of market values, not historical costs.E. uses the market rate of return.8. The firm's capital structure refers to:A. the way a firm invests its assets.B. the amount of capital in the firm.C. the amount of dividends a firm pays.D. the mix of debt and equity used to finance the firm's assets.E. how much cash the firm holds.卑微如蝼蚁、坚强似大象．共享知识分享快乐9. A general rule for managers to follow is to set the firm's capital structure such that:A. the firm's value is minimized.B. the firm's value is maximized.C. the firm's bondholders are made well off.D. the firms suppliers of raw materials are satisfied.E. the firms dividend payout is maximized.10. A levered firm is a company that has:A. Accounts Payable as the only liability on the balance sheet.B. some debt in the capital structure.C. all equity in the capital structure.D. All of the above.E. None of the above.11. A manager should attempt to maximize the value of the firm by:A. changing the capital structure if and only if the value of the firm increases.B. changing the capital structure if and only if the value of the firm increases to the benefit ofinside management.C. changing the capital structure if and only if the value of the firm increases only to thebenefits of the debtholders.D. changing the capital structure if and only if the value of the firm increases although itdecreases the stockholders' value.E. changing the capital structure if and only if the value of the firm increases and stockholderwealth is constant.12. The effect of financial leverage depends on the operating earnings of the company. Whichof the following is not true?A. Below the indifference or break-even point in EBIT the non-levered structure is superior.B. Financial leverage increases the slope of the EPS line.C. Above the indifference or break-even point the increase in EPS for all equity structures isless than debt-equity structures.D. Above the indifference or break-even point the increase in EPS for all equity structures isgreater than debt-equity structures.E. The rate of return on operating assets is unaffected by leverage.卑微如蝼蚁、坚强似大象．共享知识分享快乐13. The Modigliani-Miller Proposition I without taxes states:A. a firm cannot change the total value of its outstanding securities by changing its capitalstructure proportions.B. when new projects are added to the firm the firm value is the sum of the old value plus thenew.C. managers can make correct corporate decisions that will satisfy all shareholders if they selectprojects that maximize value.D. the determination of value must consider the timing and risk of the cash flows.E. None of the above.14. MM Proposition I without taxes is used to illustrate:A. the value of an unlevered firm equals that of a levered firm.B. that one capital structure is as good as another.C. leverage does not affect the value of the firm.D. capital structure changes have no effect on stockholders' welfare.E. All of the above.15. A key assumption of MM's Proposition I without taxes is:A. that financial leverage increases risk.B. that individuals can borrow on their own account at rates less than the firm.C. that individuals must be able to borrow on their own account at rates equal to the firm.D. managers are acting to maximize the value of the firm.E. All of the above.16. In an EPS-EBI graphical relationship, the slope of the debt ray is steeper than the equity ray.The debt ray has a lower intercept because:A. more shares are outstanding for the same level of EBI.B. the break-even point is higher with debt.C. a fixed interest charge must be paid even at low earnings.D. the amount of interest per share has only a positive effect on the intercept.E. the higher the interest rate the greater the slope.卑微如蝼蚁、坚强似大象．共享知识分享快乐17. In an EPS-EBI graphical relationship, the debt ray and equity ray cross. At this point theequity and debt are:A. equivalent with respect to EPS but above and below this point equity is always superior.B. at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPSbelow this point.C. equal but away from breakeven equity is better as fewer shares are outstanding.D. at breakeven and MM Proposition II states that debt is the better choice.E. at breakeven and debt is the better choice below breakeven because small payments can bemade.18. When comparing levered vs. unlevered capital structures, leverage works to increase EPSfor high levels of EBIT because:A. interest payments on the debt vary with EBIT levels.B. interest payments on the debt stay fixed, leaving less income to be distributed over lessshares.C. interest payments on the debt stay fixed, leaving more income to be distributed over lessshares.D. interest payments on the debt stay fixed, leaving less income to be distributed over moreshares.E. interest payments on the debt stay fixed, leaving more income to be distributed over moreshares.19. Financial leverage impacts the performance of the firm by:A. maintaining the same level of volatility of the firm's EBIT.B. decreasing the volatility of the firm's EBIT.C. decreasing the volatility of the firm's net income.D. increasing the volatility of the firm's net income.E. None of the above.20. The increase in risk to equityholders when financial leverage is introduced is evidenced by:A. higher EPS as EBIT increases.B. a higher variability of EPS with debt than all equity.C. increased use of homemade leverage.D. equivalence value between levered and unlevered firms in the presence of taxes.E. None of the above.卑微如蝼蚁、坚强似大象．共享知识分享快乐21. The reason that MM Proposition I does not hold in the presence of corporate taxation isbecause:A. levered firms pay less taxes compared with identical unlevered firms.B. bondholders require higher rates of return compared with stockholders.C. earnings per share are no longer relevant with taxes.D. dividends are no longer relevant with taxes.E. All of the above.22. MM Proposition I with corporate taxes states that:A. capital structure can affect firm value.B. by raising the debt-to-equity ratio, the firm can lower its taxes and thereby increase its totalvalue.C. firm value is maximized at an all debt capital structure.D. All of the above.E. None of the above.23. The change in firm value in the presence of corporate taxes only is:A. positive as equityholders face a lower effective tax rate.B. positive as equityholders gain the tax shield on the debt interest.C. negative because of the increased risk of default and fewer shares outstanding.D. negative because of a reduction of equity outstanding.E. None of the above.24. A firm should select the capital structure which:A. produces the highest cost of capital.B. maximizes the value of the firm.C. minimizes taxes.D. is fully unlevered.E. has no debt.卑微如蝼蚁、坚强似大象．共享知识分享快乐25. In a world of no corporate taxes if the use of leverage does not change the value of thelevered firm relative to the unlevered firm is known as:A. MM Proposition III that the cost of stock is less than the cost of debt.B. MM Proposition I that leverage is invariant to market value.C. MM Proposition II that the cost of equity is always constant.D. MM Proposition I that the market value of the firm is invariant to the capital structure.E. MM Proposition III that there is no risk associated with leverage in a no tax world.26. Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firmis now utilizing debt in its capital structure. To unlever his position, Bryan needs to:A. borrow some money and purchase additional shares of Bryco stock.B. maintain his current position as the debt of the firm did not affect his personal leverageposition.C. sell some shares of Bryco stock and hold the proceeds in cash.D. sell some shares of Bryco stock and loan it out such that he creates a personal debt-equityratio equal to that of the firm.E. create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of thefirm.27. The capital structure chosen by a firm doesn't really matter because of:A. taxes.B. the interest tax shield.C. the relationship between dividends and earnings per share.D. the effects of leverage on the cost of equity.E. homemade leverage.28. MM Proposition I with no tax supports the argument that:A. business risk determines the return on assets.B. the cost of equity rises as leverage rises.C. it is completely irrelevant how a firm arranges its finances.D. a firm should borrow money to the point where the tax benefit from debt is equal to the costof the increased probability of financial distress.E. financial risk is determined by the debt-equity ratio.卑微如蝼蚁、坚强似大象．共享知识分享快乐29. The proposition that the value of a levered firm is equal to the value of an unlevered firm isknown as:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.30. The concept of homemade leverage is most associated with:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.31. Which of the following statements are correct in relation to MM Proposition II with notaxes?I. The required return on assets is equal to the weighted average cost of capital.II. Financial risk is determined by the debt-equity ratio.III. Financial risk determines the return on assets.IV. The cost of equity declines when the amount of leverage used by a firm rises.A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only32. MM Proposition I with taxes supports the theory that:A. there is a positive linear relationship between the amount of debt in a levered firm and itsvalue.B. the value of a firm is inversely related to the amount of leverage used by the firm.C. the value of an unlevered firm is equal to the value of a levered firm plus the value of theinterest tax shield.D. a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.E. a firm's weighted average cost of capital increases as the debt-equity ratio of the firm rises.卑微如蝼蚁、坚强似大象．共享知识分享快乐33. MM Proposition I with taxes is based on the concept that:A. the optimal capital structure is the one that is totally financed with equity.B. the capital structure of the firm does not matter because investors can use homemadeleverage.C. the firm is better off with debt based on the weighted average cost of capital.D. the value of the firm increases as total debt increases because of the interest tax shield.E. the cost of equity increases as the debt-equity ratio of a firm increases.34. MM Proposition II with taxes:A. has the same general implications as MM Proposition II without taxes.B. reveals how the interest tax shield relates to the value of a firm.C. supports the argument that business risk is determined by the capital structure employed by afirm.D. supports the argument that the cost of equity decreases as the debt-equity ratio increases.E. reaches the final conclusion that the capital structure decision is irrelevant to thevalue of afirm.35. MM Proposition II is the proposition that:A. supports the argument that the capital structure of a firm is irrelevant to the value of the firm.B. the cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.C. a firm's cost of equity capital is a positive linear function of the firm's capital structure.D. the cost of equity is equivalent to the required return on the total assets of a firm.E. supports the argument that the size of the pie does not depend on how the pie is sliced.36. The interest tax shield has no value for a firm when:I. the tax rate is equal to zero.II. the debt-equity ratio is exactly equal to 1.III. the firm is unlevered.IV. a firm elects 100% equity as its capital structure.A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, and IV only卑微如蝼蚁、坚强似大象．共享知识分享快乐37. The interest tax shield is a key reason why:A. the required rate of return on assets rises when debt is added to the capital structure.B. the value of an unlevered firm is equal to the value of a levered firm.C. the net cost of debt to a firm is generally less than the cost of equity.D. the cost of debt is equal to the cost of equity for a levered firm.E. firms prefer equity financing over debt financing.38. Which of the following will tend to diminish the benefit of the interest tax shield given aprogressive tax rate structure?I. a reduction in tax ratesII. a large tax loss carryforwardIII. a large depreciation tax deductionIV. a sizeable increase in taxable incomeA. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV39. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding.The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000shares of the outstanding stock. What is the value of this firm if you ignore taxes?A. $20.0 millionB. $20.8 millionC. $21.0 millionD. $21.2 millionE. $21.3 million40. Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding.The company has decided to borrow $1 million to buy out the shares of a deceased stockholderwho holds 2,500 shares. What is the total value of this firm if you ignore taxes?A. $15.5 millionB. $15.6 millionC. $16.0 millionD. $16.8 millionE. $17.2 million卑微如蝼蚁、坚强似大象．共享知识分享快乐41. You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell yourshares in this closely held, all equity firm. The other shareholders have agreed to have the firmborrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firmtoday if you ignore taxes?A. $4.8 millionB. $5.1 millionC. $5.4 millionD. $5.7 millionE. $6.0 million42. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your requiredreturn on assets is 15%. What is your cost of equity if you ignore taxes?A. 11.25%B. 12.21%C. 16.67%D. 19.88%E. 21.38%43. Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The requiredreturn on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition IIwith no taxes?A. .60B. .64C. .72D. .75E. .8044. The Backwoods Lumber Co. has a debt-equity ratio of .80. The firm's required return onassets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on MMProposition II with no taxes?A. 6.76%B. 7.00%C. 7.25%D. 7.40%E. 7.50%卑微如蝼蚁、坚强似大象．共享知识分享快乐45. The Winter Wear Company has expected earnings before interest and taxes of $2,100, anunlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debtthat carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A. $9,900B. $10,852C. $11,748D. $12,054E. $12,70046. Gail's Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% andthe taxrate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to hercapital structure. The debt will be sold at par value. What is the levered value of the equity?A. $2.4 millionB. $2.7 millionC. $3.3 millionD. $3.7 millionE. $3.9 million47. The Montana Hills Co. has expected earnings before interest and taxes of $8,100, anunlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debthas an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A. $48,600B. $50,000C. $52,680D. $56,667E. $60,60048. Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000.The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?A. $567,600B. $781,818C. $860,000D. $946,000E. $1,152,400卑微如蝼蚁、坚强似大象．共享知识分享快乐49. An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of$150,000. A levered firm with the same operations and assets has both a book value and a facevalue of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is thevalue of the levered firm?A. $696,429B. $907,679C. $941,429D. $1,184,929E. $1,396,42950. The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, anda tax rateof 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?A. .44B. .49C. .51D. .56E. .6251. Hey Guys!, Inc. has debt with both a face and a market value of $3,000. This debt has acoupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is$1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is thefirm's cost ofequity?A. 13.25%B. 13.89%C. 13.92%D. 14.14%E. 14.25%卑微如蝼蚁、坚强似大象．共享知识分享快乐52. Anderson's Furniture Outlet has an unlevered cost of capital of 10%, a tax rate of 34%, andexpected earnings before interest and taxes of $1,600. The company has $3,000 in bondsoutstanding that have an 8% coupon and pay interest annually. The bonds are selling at parvalue. What is the cost of equity?A. 8.67%B. 9.34%C. 9.72%D. 9.99%E. 10.46%53. Walter's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%.The company has $5,000 in debt that is selling at par value. The levered value of the firm is$12,000 and the tax rate is 34%. What is the pre-tax cost of debt?A. 7.92%B. 8.10%C. 8.16%D. 8.84%E. 9.00%54. Rosita's has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. Thedebt-equityratio is .60 and the tax rate is .34. What is Rosita's unlevered cost of capital?A. 8.83%B. 12.30%C. 13.97%D. 14.08%E. 14.60%55. Your firm has a pre-tax cost of debt of 7% and an unlevered cost of capital of 13%. Your taxrate is 35% and your cost of equity is 15.26%. What is your debt-equity ratio?A. .43B. .49C. .51D. .54E. .58卑微如蝼蚁、坚强似大象．共享知识分享快乐56. Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while theunlevered cost of capital is 14%. What is the cost of equity if the tax rate is 34%?A. 7.52%B. 8.78%C. 15.98%D. 16.83%E. 17.30%57. Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, payinterest semiannually, and have a current market price equal to 103% of face value. What is theamount of the annual interest tax shield given a tax rate of 35%?A. $6,125B. $6,309C. $9,500D. $17,500E. $18,02558. Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and acoupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interesttax shield if the tax rate is 34%?A. $58,500B. $60,100C. $60,750D. $61,200E. $62,25059. Juanita's Steak House has $12,000 of debt outstanding that is selling at par and hasa couponrate of 8%. The tax rate is 34%. What is the present value of the tax shield?A. $2,823B. $2,887C. $4,080D. $4,500E. $4,633卑微如蝼蚁、坚强似大象．共享知识分享快乐60. A firm has debt of $5,000, equity of $16,000, a leveraged value of $8,900, a cost of debt of8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost ofcapital?A. 7.29%B. 7.94%C. 8.87%D. 10.40%E. 11.05%61. A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm isconsidering a new capital structure with 60% debt. The interest rate on the debt would be 8%.Assuming there are no taxes or other imperfections, its cost of equity capital with the newcapital structure would be _____.A. 9%B. 10%C. 13%D. 14%E. None of the above.62. A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is12%. What is its cost of equity if there are no taxes or other imperfections?A. 10.0%B. 13.5%C. 14.4%D. 18.0%E. None of the above.63. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. Ifthere are no taxes or other imperfections, what would be its cost of equity if thedebt-to-equityratio were 0?A. 8%B. 10%C. 12%D. 14%E. 16%卑微如蝼蚁、坚强似大象．共享知识分享快乐64. A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%.Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?A. 10%B. 15%C. 18%D. 21%E. None of the above.65. If a firm is unlevered and has a cost of equity capital of 12%, what would its cost of equitybe if its debt-equity ratio became 2? The expected cost of debt is 8%.A. 14.0%B. 14.67%C. 16.0%D. 20.0%E. None of the above.66. A firm has zero debt in its capital structure. Its overall cost of capital is 9%. The firm isconsidering a new capital structure with 40% debt. The interest rate on the debt would be 4%.Assuming that the corporate tax rate is 34%, what would its cost of equity capital with the newcapital structure be?A. 10.3%B. 11.0%C. 11.2%D. 13.9%E. None of the above.67. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. Ifthe corporate tax rate is 25%, what would its cost of equity be if the debt-to-equity ratio were0?A. 11.11%B. 12.57%C. 13.33%D. 16.00%E. None of the above.卑微如蝼蚁、坚强似大象．共享知识分享快乐68. A firm has a debt-to-equity ratio of .5. Its cost of equity is 22%, and its cost of debt is 16%.If the corporate tax rate is .40, what would its cost of equity be if the debt-to-equity ratio were0?A. 14.00%B. 20.61%C. 21.07%D. 22.00%E. None of the above.69. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 14%.Its cost of debt is 10%. What is its cost of equity if the corporate tax rate is 50%?A. 14.0%B. 16.0%D. 21.0%E. None of the above.70. What is the cost of equity for a firm if the corporate tax rate is 40%? The firm has adebt-to-equity ratio of 1.5. If it had no debt, its cost of equity would be 16%. Its current cost ofdebt is 10%.A. 17.4%B. 18.4%C. 19.6%D. 21.4%E. None of the above.71. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Itscost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?A. 7.73%B. 10.00%C. 10.75%D. 12.50%E. None of the above.卑微如蝼蚁、坚强似大象．共享知识分享快乐72. Batter's Home has 3,000 bonds outstanding with a face value of $1,000 each and a couponrate of 8%. The interest is paid semi-annually. What is the amount of the annual interest taxshield if the tax rate is 30%?A. $52,000B. $60,000C. $62,500D. $68,000E. $72,00073. Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rateof 7%. The tax rate is 34%. What is the present value of the tax shield?A. $2,800B. $3,000C. $3,400D. $3,80074. A firm has debt of $7,000, equity of $12,000, a leveraged value of $8,900, a cost of debt of7%, a cost of equity of 14%, and a tax rate of 30%. What is the firm's weighted average cost ofcapital?A. 8.45%B. 9.90%C. 10.65%D. 12.50%E. 14.00%Essay Questions卑微如蝼蚁、坚强似大象．共享知识分享快乐75. Based on MM with taxes and without taxes, how much time should a financial managerspend analyzing the capital structure of his firm? What if the analysis is based on the statictheory?76. Explain homemade leverage and why it matters.77. In each of the theories of capital structure the cost of equity rises as the amount of debtincreases. So why don't financial managers use as little debt as possible to keep the cost ofequity down? After all, isn't the goal of the firm to maximize share value and。
罗斯《公司理财》英文习题答案DOCchap
30.1 The new corporation issues $300,000 in new debt. The merger creates $100,000 ofgoodwill because the merger is a purchase.Balance SheetLager Brewing(in $ thousands)Current assets $480 Current liabilities $200Other assets 140 Long-term debt 400Net fixed assets 580 Equity 700Goodwill 100Total assets $1,300 Total liabilities $1,300 30.2 If the balance sheet for Philadelphia Pretzel shows assets at book value instead of marketvalue, the goodwill will be only $60,000 (=$300,000 - $240,000). Thus, the net fixed assetsare $620,000 (=$1,300,000 - $480,000 - $140,000 - $60,000).Balance SheetLager Brewing(in $ thousands)Current assets $480 Current liabilities $200Other assets 140 Long-term debt 400Net fixed assets 620 Equity 700Goodwill 60Total assets $1,300 Total liabilities $1,300 30.3Balance SheetLager Brewing(in $ thousands)Current assets $480 Current liabilities $280Other assets 140 Long-term debt 100Net fixed assets 580 Equity 820Total assets $1,200 Total liabilities $1,200 30.4 a. False. Although the reasoning seems correct, the Stillman-Eckbo data do not supportthe monopoly power theory.b. True. When managers act in their own interest, acquisitions are an important controldevice for shareholders. It appears that some acquisitions and takeovers are theconsequence of underlying conflicts between managers and shareholders.c. False. Even if markets are efficient, the presence of synergy will make the value ofthe combined firm different from the sum of the values of the separate firms.Incremental cash flows provide the positive NPV of the transaction.d. False. In an efficient market, traders will value takeovers based on “Fundamentalfactors” regardless of the time horizon. Recall that the evidence as a whole suggestsefficiency in the markets. Mergers should be no different.e. False. The tax effect of an acquisition depends on whether the merger is taxable ornon-taxable. In a taxable merger, there are two opposing factors to consider, thecapital gains effect and the write-up effect. The net effect is the sum of these twoeffects.f. True. Because of the coinsurance effect, wealth might be transferred from thestockholders to the bondholders. Acquisition analysis usually disregards this effectand considers only the total value.30.530.6 a. The weather conditions are independent. Thus, the joint probabilities are theproducts of the individual probabilities.Possible states Joint probabilityRain Rain 0.1 x 0.1=0.01Rain Warm 0.1 x 0.4=0.04Rain Hot 0.1 x 0.5=0.05Warm Rain 0.4 x 0.1=0.04Warm Warm 0.4 x 0.4=0.16Warm Hot 0.4 x 0.5=0.20Hot Rain 0.5 x 0.1=0.05Hot Warm 0.5 x 0.4=0.20Hot Hot 0.5 x 0.5=0.25Since the state Rain Warm has the same outcome (revenue) as Warm Rain, theirprobabilities can be added. The same is true of Rain Hot, Hot Rain and Warm Hot,Hot Warm. Thus the joint probabilities arePossibleJoint probabilitystatesRain Rain 0.01Rain Warm 0.08Rain Hot 0.10Warm Warm 0.16Warm Hot 0.40Hot Hot 0.25The joint values are the sums of the values of the two companies for the particularstate.Possible states Joint valueRain Rain $200,000Rain Warm 300,000Warm Warm 400,000Rain Hot 500,000Warm Hot 600,000Hot Hot 800,000b. Recall, if a firm cannot service its debt, the bondholders receive the value of the assets.Thus, the value of the debt is the value of the company if the face value of the debt isgreater than the value of the company. If the value of the company is greater than the value of the debt, the value of the debt is its face value. Here the value of the common stock is always the residual value of the firm over the value of the debt.Joint Prob. Joint Value Debt Value Stock Value0.01 $200,000 $200,000 $00.08 300,000 300,000 00.16 400,000 400,000 00.10 500,000 400,000 100,0000.40 600,000 400,000 200,0000.25 800,000 400,000 400,000c. To show that the value of the combined firm is the sum of the individual values, youmust show that the expected joint value is equal to the sum of the separate expected values.Expected joint value= 0.01($200,000) + 0.08($300,000) + 0.16($400,000) + 0.10($500,000) +0.40($600,000) + 0.25($800,000)= $580,000Since the firms are identical, the sum of the expected values is twice the expectedvalue of either.Expected individual value = 0.1($100,000) + 0.4($200,000) + 0.5($400,000) = $290,000 Expected combined value = 2($290,000) = $580,000d. The bondholders are better off if the value of the debt after the merger is greater thanthe value of the debt before the merger.Value of the debt before the merger:The value of debt for either company= 0.1($100,000) + 0.4($200,000) + 0.5($200,000) = $190,000Total value of debt before the merger = 2($190,000) = $380,000Value of debt after the merger= 0.01($200,000) + 0.08($300,000) + 0.16($400,000) + 0.10($400,000) +0.40($400,000) +0.25($400,000)= $390,000The bondholders are $10,000 better off after the merger.30.7 The decision hinges upon the risk of surviving. The final decision should hinge on thewealth transfer from bondholders to stockholders when risky projects are undertaken.High-risk projects will reduce the expected value of the bondholders’ claims on the firm.The telecommunications business is riskier than the utilities business. If the total value of the firm does not change, the increase in risk should favor the stockholder. Hence,management should approve this transaction. Note, if the total value of the firm dropsbecause of the transaction and the wealth effect is lower than the reduction in total value, management should reject the project.30.8 If the market is “smart,” the P/E ratio will not be constant.a. Value = $2,500 + $1,000 = $3,500b. EPS = Post-merger earnings / Total number of shares=($100 + $100)/200 =$1c. Price per share = Value/Total number of shares=$3,500/200 =$17.50d. If the market is “fooled,” the P/E ratio will be constant at $25.Value = P/E * Total number of shares= 25 * 200 = $5,000EPS = Post-merger earnings / Total number of shares=$5,000/200 = $25.0030.9 a. After the merger, Arcadia Financial will have 130,000 [=10,000 + (50,000)(6/10)]shares outstanding. The earnings of the combined firm will be $325,000. The earningsper share of the combined firm will be $2.50 (=$325,000/130,000). The acquisition will increase the EPS for the stockholders from $2.25 to $2.50.b. There will be no effect on the original Arcadia stockholders. No synergies exist in thismerger since Arcadia is buying Coldran at its market price. Examining the relativevalues of the two firms sees the latter point.Share price of Arcadia = (16 * $225,000) / 100,000=$36Share price of Coldran = (10.8 * $100,000) / 50,000=$21.60The relative value of these prices is $21.6/$36 = 0.6. Since Coldran’s shareholdersreceive 0.6 shares of Arcadia for every share of Coldran, no synergies exist.30.10 a. The synergy will be the discounted incremental cash flows. Since the cash flows areperpetual, this amount isb. The value of Flash-in-the-Pan to Fly-by-Night is the synergy plus the current marketvalue of Flash-in-the-Pan.V = $7,500,000 + $20,000,000= $27,500,000c. Cash alternative = $15,000,000Stock alternative = 0.25($27,500,000 + $35,000,000)= $15,625,000d. NPV of cash alternative = V - Cost=$27,500,000 - $15,000,000=$12,500,000NPV of stock alternative = V - Cost=$27,500,000 - $15,625,000=$11,875,000e. Use the cash alternative, its NPV is greater.30.11 a. The value of Portland Industries before the merger is $9,000,000 (=750,000x12). Thisvalue is also the discounted value of the expected future dividends.$9,000,000 =r = 0.1025 = 10.25%r is the risk-adjusted discount rate for Portland’s expected future dividends.the value of Portland Industries after the merger isThis is the value of Portland Industries to Freeport.b. NPV = Gain - Cost= $14,815,385 - ($40x250, 000)= $4,815,385c. If Freeport offers stock, the value of Portland Industries to Freeport is the same, but thecost differs.Cost = (Fraction of combined firm owned by Portland’s stockholders)x(Value of the combined firm)Value of the combined firm = (Value of Freeport before merger)+ (Value of Portland to Freeport)= $15x1,000,000 + $14,815,385= $29,815,385Cost = 0.375x$29,815,385= $11,180,769NPV= $14,815,385 - $11,180,769=$3,634,616d. The acquisition should be attempted with a cash offer since it provides a higher NPV.e. The value of Portland Industries after the merger isThis is the value of Portland Industries to Freeport.NPV = Gain-Cost=$11,223,529 - ($40x250,000)=$1,223,529If Freeport offers stock, the value of Portland Industries to Freeport is the same, but the cost differs.Cost = (Fraction of combined firm owned by Portland’s stockholders)x(Value of the combined firm)Value of the combined firm = (Value of Freeport before merger)+ (Value of Portland to Freeport)= $15x1,000,000 + $11,223,529= $26,223,529Cost = 0.375 * $26,223,529=$9,833,823NPV = $11,223,529 - $9,833,823=$1,389,706The acquisition should be attempted with a stock offer since it provides a higher NPV.30.12 a. Number of shares after acquisition=30 + 15 = 45 milStock price of Harrods after acquisition = 1,000/45=22.22 poundsb. Value of Selfridge stockholders after merger:α * 1,000 = 300α = 30%New shares issued = 12.86 mil12.86:20 = 0.643:1The proper exchange ratio should be 0.643 to make the stock offer’s value to Selfridgeequivalent to the cash offer.30.13 To evaluate this proposal, look at the present value of the incremental cash flows.Cash Flows to Company A(in $ million)Year 0 1 2 3 4 5Acquisition of B -550Dividends from B 150 32 5 20 30 45Tax-loss carryforwards 25 25Terminal value 600Total -400 32 30 45 30 645 The additional cash flows from the tax-loss carry forwards and the proposed level of debt should be discounted at the cost of debt because they are determined with very littleuncertainty.The after-tax cash flows are subject to normal business risk and must be discounted at anormal rate.Beta coefficient for the bond = 0.25 = [(8%-6%)/8%].Beta coefficient for the company = 1 = [(0.25)2 + (1.25)(0.75)]Discount rate for normal operations:r = 6% + 8% (1) = 14%Discount rate for dividends:The new beta coefficient for the company, 1, must be the weighted average of the debtbeta and the stock beta.1 = 0.5(0.25) + 0.5(βs)βs = 1.75r = 6% + 8%(1.75) = 20%Because the NPV of the acquisition is negative, Company A should not acquireCompany B.30.14 The commonly used defensive tactics by target-firm managers include:i. corporate charter amendments like super-majority amendment or staggering theelection of board members.ii. repurchase standstill agreements.iii. exclusionary self-tenders.iv. going private and leveraged buyouts.v. other devices like golden parachutes, scorched earth strategy, poison pill, ..., etc.Mini Case: U.S.Steel’s case.You have 3 choices: tender, or do not tender or sell in the market. If you do sell your shares in the market, at some point, somebody else would need to make a decision in “tender” or “not tender” as well.It is important to recognize that the firm has about 60 million shares outstanding (since 30 million shares will give US Steel 50.1% of Marathon shares). Let’s consider the possible sellingthe market price.If you choose not to tender, and 30 million shares were tendered US Steel succeeds to gain50.1% control, you will only receive $85 a share. If you do tender, the price you will receive will be no worse than $85 a share and can be as high as $125 a share. Depending on the number of shares tendered, you will receive one of the following prices.If only 50.1% tendered, you will get $125 per share.If the shares tendered exceed 50.1% but less than 100%, you will get more than $105 ashare.If all 60 million shares were tendered, you will get $105 per share. (which is )It is clear that, in the above 3 cases, when you are not sure about whether US Steel will succeed or not, you will be better off to tender your shares than not tender. This is because at best, you will only receive $85 per share if you choose not to tender.版权申明本文部分内容，包括文字、图片、以及设计等在网上搜集整理。
罗斯《公司理财》（第11版）笔记和课后习题详解-第16~19章【圣才出品】
罗斯《公司理财》（第11版）笔记和课后习题详解-第16~19章【圣才出品】第16章资本结构：基本概念16.1 复习笔记资本结构是指企业资本的组成要素与⽐例关系，⼀般指公司资本中负债与股权所占的⽐例。
总的来说，有众多的资本结构可供企业选择。
企业可发⾏⼤量的或极少的债务，亦可发⾏优先股、认股权证、可转换债券、可赎回债券，还可计划租赁融资、债券互换及远期合约。
1．公司的价值（1）公司价值的定义公司价值是指公司全部资产的市场价值，即负债和所有者权益之和。
它是以⼀定期间归属于投资者的现⾦流量，按照资本成本或投资机会成本贴现的现值表⽰的。
公司价值不同于利润。
利润只是新创造的价值的⼀部分，⽽公司价值不仅包含了新创造的价值，还包含了公司潜在的或预期的获利能⼒。
根据定义，公司的价值V可以表⽰为：V≡B＋S其中，B为负债的市场价值，S为所有者权益的市场价值。
（2）公司价值最⼤化⽬标公司价值最⼤化⽬标是指企业的股东关注整个企业价值的最⼤化，即企业的负债和所有者权益之和最⼤化，⽽并不偏爱仅仅使他们的利益最⼤化的策略。
这种观点的优点包括：①考虑了货币时间价值和投资风险价值，有利于选择投资⽅案，统筹安排长短期规划，有效筹措资⾦，合理制定股利政策；②反映了资产保值增值的要求；③有利于克服管理上的⽚⾯性和短期⾏为。
这⼀⽬标存在的问题在于：①对⾮上市公司不能⽤股票价格来衡量其价值；②对上市公司，股价不⼀定能反映企业获利能⼒，股票价格受多种因素的影响。
（3）企业价值最⼤化与股东利益最⼤化追求股东利益的最⼤化和追求企业价值最⼤化是企业财务管理的两⼤基本⽬标，是企业理财活动所希望实现的结果，是评价企业理财活动的基本标准。
①股东利益最⼤化。
股东利益最⼤化⽬标存在两种不同的表现形式：⼀是企业利润最⼤化；⼆是股东财富最⼤化。
前者是企业所有权与经营权没有分离情况下，作为企业的出资⼈，从⽽⼜是企业经营者，所确定的追求财产使⽤价值最⼤化的财务管理⽬标。
罗斯公司理财题库全集
Chapter 16Capital Structure: Basic Concepts Multiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:A. homemade leverage.B. dividend recapture.C. the weighted average cost of capital.D. private debt placement.E. personal offset.2. The proposition that the value of the firm is independent of its capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.3. The proposition that the cost of equity is a positive linear function of capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.4. The tax savings of the firm derived from the deductibility of interest expense is called the:A. interest tax shield.B. depreciable basis.C. financing umbrella.D. current yield.E. tax-loss carry forward savings.5. The unlevered cost of capital is:A. the cost of capital for a firm with no equity in its capital structure.B. the cost of capital for a firm with no debt in its capital structure.C. the interest tax shield times pretax net income.D. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.E. equal to the profit margin for a firm with some debt in its capital structure.6. The cost of capital for a firm, rWACC, in a zero tax environment is:A. equal to the expected earnings divided by market value of the unlevered firm.B. equal to the rate of return for that business risk class.C. equal to the overall rate of return required on the levered firm.D. is constant regardless of the amount of leverage.E. All of the above.7. The difference between a market value balance sheet and a book value balance sheet is that a market value balance sheet:A. places assets on the right hand side.B. places liabilities on the left hand side.C. does not equate the right hand with the left hand side.D. lists items in terms of market values, not historical costs.E. uses the market rate of return.8. The firm's capital structure refers to:A. the way a firm invests its assets.B. the amount of capital in the firm.C. the amount of dividends a firm pays.D. the mix of debt and equity used to finance the firm's assets.E. how much cash the firm holds.9. A general rule for managers to follow is to set the firm's capital structure such that:A. the firm's value is minimized.B. the firm's value is maximized.C. the firm's bondholders are made well off.D. the firms suppliers of raw materials are satisfied.E. the firms dividend payout is maximized.10. A levered firm is a company that has:A. Accounts Payable as the only liability on the balance sheet.B. some debt in the capital structure.C. all equity in the capital structure.D. All of the above.E. None of the above.11. A manager should attempt to maximize the value of the firm by:A. changing the capital structure if and only if the value of the firm increases.B. changing the capital structure if and only if the value of the firm increases to the benefit of inside management.C. changing the capital structure if and only if the value of the firm increases only to the benefits of the debtholders.D. changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.E. changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.12. The effect of financial leverage depends on the operating earnings of the company. Which of the following is not true?A. Below the indifference or break-even point in EBIT the non-levered structure is superior.B. Financial leverage increases the slope of the EPS line.C. Above the indifference or break-even point the increase in EPS for all equity structures is less than debt-equity structures.D. Above the indifference or break-even point the increase in EPS for all equity structures is greater than debt-equity structures.E. The rate of return on operating assets is unaffected by leverage.13. The Modigliani-Miller Proposition I without taxes states:A. a firm cannot change the total value of its outstanding securities by changing its capital structure proportions.B. when new projects are added to the firm the firm value is the sum of the old value plus the new.C. managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value.D. the determination of value must consider the timing and risk of the cash flows.E. None of the above.14. MM Proposition I without taxes is used to illustrate:A. the value of an unlevered firm equals that of a levered firm.B. that one capital structure is as good as another.C. leverage does not affect the value of the firm.D. capital structure changes have no effect on stockholders' welfare.E. All of the above.15. A key assumption of MM's Proposition I without taxes is:A. that financial leverage increases risk.B. that individuals can borrow on their own account at rates less than the firm.C. that individuals must be able to borrow on their own account at rates equal to the firm.D. managers are acting to maximize the value of the firm.E. All of the above.16. In an EPS-EBI graphical relationship, the slope of the debt ray is steeper than the equity ray. The debt ray has a lower intercept because:A. more shares are outstanding for the same level of EBI.B. the break-even point is higher with debt.C. a fixed interest charge must be paid even at low earnings.D. the amount of interest per share has only a positive effect on the intercept.E. the higher the interest rate the greater the slope.17. In an EPS-EBI graphical relationship, the debt ray and equity ray cross. At this point the equity and debt are:A. equivalent with respect to EPS but above and below this point equity is always superior.B. at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPS below this point.C. equal but away from breakeven equity is better as fewer shares are outstanding.D. at breakeven and MM Proposition II states that debt is the better choice.E. at breakeven and debt is the better choice below breakeven because small payments can be made.18. When comparing levered vs. unlevered capital structures, leverage works to increase EPS for high levels of EBIT because:A. interest payments on the debt vary with EBIT levels.B. interest payments on the debt stay fixed, leaving less income to be distributed over less shares.C. interest payments on the debt stay fixed, leaving more income to be distributed over less shares.D. interest payments on the debt stay fixed, leaving less income to be distributed over more shares.E. interest payments on the debt stay fixed, leaving more income to be distributed over more shares.19. Financial leverage impacts the performance of the firm by:A. maintaining the same level of volatility of the firm's EBIT.B. decreasing the volatility of the firm's EBIT.C. decreasing the volatility of the firm's net income.D. increasing the volatility of the firm's net income.E. None of the above.20. The increase in risk to equityholders when financial leverage is introduced is evidenced by:A. higher EPS as EBIT increases.B. a higher variability of EPS with debt than all equity.C. increased use of homemade leverage.D. equivalence value between levered and unlevered firms in the presence of taxes.E. None of the above.21. The reason that MM Proposition I does not hold in the presence of corporate taxation is because:A. levered firms pay less taxes compared with identical unlevered firms.B. bondholders require higher rates of return compared with stockholders.C. earnings per share are no longer relevant with taxes.D. dividends are no longer relevant with taxes.E. All of the above.22. MM Proposition I with corporate taxes states that:A. capital structure can affect firm value.B. by raising the debt-to-equity ratio, the firm can lower its taxes and thereby increase its total value.C. firm value is maximized at an all debt capital structure.D. All of the above.E. None of the above.23. The change in firm value in the presence of corporate taxes only is:A. positive as equityholders face a lower effective tax rate.B. positive as equityholders gain the tax shield on the debt interest.C. negative because of the increased risk of default and fewer shares outstanding.D. negative because of a reduction of equity outstanding.E. None of the above.24. A firm should select the capital structure which:A. produces the highest cost of capital.B. maximizes the value of the firm.C. minimizes taxes.D. is fully unlevered.E. has no debt.25. In a world of no corporate taxes if the use of leverage does not change the value of the levered firm relative to the unlevered firm is known as:A. MM Proposition III that the cost of stock is less than the cost of debt.B. MM Proposition I that leverage is invariant to market value.C. MM Proposition II that the cost of equity is always constant.D. MM Proposition I that the market value of the firm is invariant to the capital structure.E. MM Proposition III that there is no risk associated with leverage in a no tax world.26. Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:A. borrow some money and purchase additional shares of Bryco stock.B. maintain his current position as the debt of the firm did not affect his personal leverage position.C. sell some shares of Bryco stock and hold the proceeds in cash.D. sell some shares of Bryco stock and loan it out such that he creates a personal debt-equity ratio equal to that of the firm.E. create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the firm.27. The capital structure chosen by a firm doesn't really matter because of:A. taxes.B. the interest tax shield.C. the relationship between dividends and earnings per share.D. the effects of leverage on the cost of equity.E. homemade leverage.28. MM Proposition I with no tax supports the argument that:A. business risk determines the return on assets.B. the cost of equity rises as leverage rises.C. it is completely irrelevant how a firm arranges its finances.D. a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.E. financial risk is determined by the debt-equity ratio.29. The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.30. The concept of homemade leverage is most associated with:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.31. Which of the following statements are correct in relation to MM Proposition II with no taxes?I. The required return on assets is equal to the weighted average cost of capital.II. Financial risk is determined by the debt-equity ratio.III. Financial risk determines the return on assets.IV. The cost of equity declines when the amount of leverage used by a firm rises.A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only32. MM Proposition I with taxes supports the theory that:A. there is a positive linear relationship between the amount of debt in a levered firm and its value.B. the value of a firm is inversely related to the amount of leverage used by the firm.C. the value of an unlevered firm is equal to the value of a levered firm plus the value of the interest tax shield.D. a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.E. a firm's weighted average cost of capital increases as the debt-equity ratio of the firm rises.33. MM Proposition I with taxes is based on the concept that:A. the optimal capital structure is the one that is totally financed with equity.B. the capital structure of the firm does not matter because investors can use homemade leverage.C. the firm is better off with debt based on the weighted average cost of capital.D. the value of the firm increases as total debt increases because of the interest tax shield.E. the cost of equity increases as the debt-equity ratio of a firm increases.34. MM Proposition II with taxes:A. has the same general implications as MM Proposition II without taxes.B. reveals how the interest tax shield relates to the value of a firm.C. supports the argument that business risk is determined by the capital structure employed by a firm.D. supports the argument that the cost of equity decreases as the debt-equity ratio increases.E. reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.35. MM Proposition II is the proposition that:A. supports the argument that the capital structure of a firm is irrelevant to the value of the firm.B. the cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.C. a firm's cost of equity capital is a positive linear function of the firm's capital structure.D. the cost of equity is equivalent to the required return on the total assets of a firm.E. supports the argument that the size of the pie does not depend on how the pie is sliced.36. The interest tax shield has no value for a firm when:I. the tax rate is equal to zero.II. the debt-equity ratio is exactly equal to 1.III. the firm is unlevered.IV. a firm elects 100% equity as its capital structure.A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, and IV only37. The interest tax shield is a key reason why:A. the required rate of return on assets rises when debt is added to the capital structure.B. the value of an unlevered firm is equal to the value of a levered firm.C. the net cost of debt to a firm is generally less than the cost of equity.D. the cost of debt is equal to the cost of equity for a levered firm.E. firms prefer equity financing over debt financing.38. Which of the following will tend to diminish the benefit of the interest tax shield given a progressive tax rate structure?I. a reduction in tax ratesII. a large tax loss carryforwardIII. a large depreciation tax deductionIV. a sizeable increase in taxable incomeA. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV39. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?A. $20.0 millionB. $20.8 millionC. $21.0 millionD. $21.2 millionE. $21.3 million40. Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares. What is the total value of this firm if you ignore taxes?A. $15.5 millionB. $15.6 millionC. $16.0 millionD. $16.8 millionE. $17.2 million41. You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firm today if you ignore taxes?A. $4.8 millionB. $5.1 millionC. $5.4 millionD. $5.7 millionE. $6.0 million42. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes?A. 11.25%B. 12.21%C. 16.67%D. 19.88%E. 21.38%43. Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The required return on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition II with no taxes?A. .60B. .64C. .72D. .75E. .8044. The Backwoods Lumber Co. has a debt-equity ratio of .80. The firm's required return on assets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on MM Proposition II with no taxes?A. 6.76%B. 7.00%C. 7.25%D. 7.40%E. 7.50%45. The Winter Wear Company has expected earnings before interest and taxes of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A. $9,900B. $10,852C. $11,748D. $12,054E. $12,70046. Gail's Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% and the tax rate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?A. $2.4 millionB. $2.7 millionC. $3.3 millionD. $3.7 millionE. $3.9 million47. The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A. $48,600B. $50,000C. $52,680D. $56,667E. $60,60048. Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?A. $567,600B. $781,818C. $860,000D. $946,000E. $1,152,40049. An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of $150,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is the value of the levered firm?A. $696,429B. $907,679C. $941,429D. $1,184,929E. $1,396,42950. The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rate of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?A. .44B. .49C. .51D. .56E. .6251. Hey Guys!, Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm's cost of equity?A. 13.25%B. 13.89%C. 13.92%D. 14.14%E. 14.25%52. Anderson's Furniture Outlet has an unlevered cost of capital of 10%, a tax rate of 34%, and expected earnings before interest and taxes of $1,600. The company has $3,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?A. 8.67%B. 9.34%C. 9.72%D. 9.99%E. 10.46%53. Walter's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of debt?A. 7.92%B. 8.10%C. 8.16%D. 8.84%E. 9.00%54. Rosita's has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. The debt-equity ratio is .60 and the tax rate is .34. What is Rosita's unlevered cost of capital?A. 8.83%B. 12.30%C. 13.97%D. 14.08%E. 14.60%55. Your firm has a pre-tax cost of debt of 7% and an unlevered cost of capital of 13%. Your tax rate is 35% and your cost of equity is 15.26%. What is your debt-equity ratio?A. .43B. .49C. .51D. .54E. .5856. Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is the cost of equity if the tax rate is 34%?A. 7.52%B. 8.78%C. 15.98%D. 16.83%E. 17.30%57. Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, pay interest semiannually, and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?A. $6,125B. $6,309C. $9,500D. $17,500E. $18,02558. Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 34%?A. $58,500B. $60,100C. $60,750D. $61,200E. $62,25059. Juanita's Steak House has $12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. The tax rate is 34%. What is the present value of the tax shield?A. $2,823B. $2,887C. $4,080D. $4,500E. $4,63360. A firm has debt of $5,000, equity of $16,000, a leveraged value of $8,900, a cost of debt of 8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost of capital?A. 7.29%B. 7.94%C. 8.87%D. 10.40%E. 11.05%61. A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 60% debt. The interest rate on the debt would be 8%. Assuming there are no taxes or other imperfections, its cost of equity capital with the new capital structure would be _____.A. 9%B. 10%C. 13%D. 14%E. None of the above.62. A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections?A. 10.0%B. 13.5%C. 14.4%D. 18.0%E. None of the above.63. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0?A. 8%B. 10%C. 12%D. 14%E. 16%64. A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?A. 10%B. 15%C. 18%D. 21%E. None of the above.65. If a firm is unlevered and has a cost of equity capital of 12%, what would its cost of equity be if its debt-equity ratio became 2? The expected cost of debt is 8%.A. 14.0%B. 14.67%C. 16.0%D. 20.0%E. None of the above.66. A firm has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would its cost of equity capital with the new capital structure be?A. 10.3%B. 11.0%C. 11.2%D. 13.9%E. None of the above.67. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would its cost of equity be if the debt-to-equity ratio were 0?A. 11.11%B. 12.57%C. 13.33%D. 16.00%E. None of the above.68. A firm has a debt-to-equity ratio of .5. Its cost of equity is 22%, and its cost of debt is 16%. If the corporate tax rate is .40, what would its cost of equity be if the debt-to-equity ratio were 0?A. 14.00%B. 20.61%C. 21.07%D. 22.00%E. None of the above.69. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 14%. Its cost of debt is 10%. What is its cost of equity if the corporate tax rate is 50%?A. 14.0%B. 16.0%C. 17.5%D. 21.0%E. None of the above.70. What is the cost of equity for a firm if the corporate tax rate is 40%? The firm has adebt-to-equity ratio of 1.5. If it had no debt, its cost of equity would be 16%. Its current cost of debt is 10%.A. 17.4%B. 18.4%C. 19.6%D. 21.4%E. None of the above.71. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?A. 7.73%B. 10.00%C. 10.75%D. 12.50%E. None of the above.72. Batter's Home has 3,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 30%?A. $52,000B. $60,000C. $62,500D. $68,000E. $72,00073. Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield?A. $2,800B. $3,000C. $3,400D. $3,800E. $7.00074. A firm has debt of $7,000, equity of $12,000, a leveraged value of $8,900, a cost of debt of 7%, a cost of equity of 14%, and a tax rate of 30%. What is the firm's weighted average cost of capital?A. 8.45%B. 9.90%C. 10.65%D. 12.50%E. 14.00%Essay Questions75. Based on MM with taxes and without taxes, how much time should a financial manager spend analyzing the capital structure of his firm? What if the analysis is based on the static theory?76. Explain homemade leverage and why it matters.77. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, isn't the goal of the firm to maximize share value and minimize shareholder costs?Consider two firms, U and L, both with $50,000 in assets. Firm U is unlevered, and firm L has $20,000 of debt that pays 8% interest. Firm U has 1,000 shares outstanding, while firm L has 600 shares outstanding. Mike owns 20% of firm L and believes that leverage works in his favor. Steve tells Mike that this is an illusion, and that with the possibility of borrowing on his own account at 8% interest, he can replicate Mike's payout from firm L.78. Given a level of operating income of $2,500, show the specific strategy that Mike has in mind.79. After seeing Steve's analysis, Mike tells Steve that while his analysis looks good on paper, Steve will never be able to borrow at 8%, but would have to pay a more realistic rate of 12%. If Mike is right, what will Steve's payout be?80. Suppose the tax authorities allow firms to deduct their interest expense from operating income. Both firm U and firm L are in the 34% tax bracket. Show what happens to the market value of both firms if the debt held by firm L is permanent. Assume MM with taxes.。
英文版罗斯公司理财习题答案Chap016
CHAPTER 16DIVIDENDS AND DIVIDEND POLICYAnswers to Concepts Review and Critical Thinking Questions1.Dividend policy deals with the timing of dividend payments, not the amounts ultimately paid.Dividend policy is irrelevant when the timing of dividend payments doesn’t affect the present value of all future dividends.2. A stock repurchase reduces equity while leaving debt unchanged. The debt ratio rises. A firm could,if desired, use excess cash to reduce debt instead. This is a capital structure decision.3.The chief drawback to a strict dividend policy is the variability in dividend payments. This is aproblem because investors tend to want a somewhat predictable cash flow. Also, if there is information content to dividend announcements, then the firm may be inadvertently telling the market that it is expecting a downturn in earnings prospects when it cuts a dividend, when in reality its prospects are very good. In a compromise policy, the firm maintains a relatively constant dividend. It increases dividends only when it expects earnings to remain at a sufficiently high level to pay the larger dividends, and it lowers the dividend only if it absolutely has to.4.Friday, December 29 is the ex-dividend day. Remember not to count January 1 because it is aholiday, and the exchanges are closed. Anyone who buys the stock before December 29 is entitled to the dividend, assuming they do not sell it again before December 29.5.No, because the money could be better invested in stocks that pay dividends in cash which benefitthe fundholders directly.6.The change in price is due to the change in dividends, not due to the change in dividend policy.Dividend policy can still be irrelevant without a contradiction.7.The stock price dropped because of an expected drop in future dividends. Since the stock price is thepresent value of all future dividend payments, if the expected future dividend payments decrease, then the stock price will decline.8. The plan will probably have little effect on shareholder wealth. The shareholders can reinvest ontheir own, and the shareholders must pay the taxes on the dividends either way. However, the shareholders who take the option may benefit at the expense of the ones who don’t (because of the discount). Also as a result of the plan, the firm will be able to raise equity by paying a 10% flotation cost (the discount), which may be a smaller discount than the market flotation costs of a new issue for some companies.9.If these firms just went public, they probably did so because they were growing and needed theadditional capital. Growth firms typically pay very small cash dividends, if they pay a dividend at all.This is because they have numerous projects available, and they reinvest the earnings in the firm instead of paying cash dividends.B-2 SOLUTIONS10.It would not be irrational to find low-dividend, high-growth stocks. The trust should be indifferentbetween receiving dividends or capital gains since it does not pay taxes on either one (ignoring possible restrictions on invasion of principal, etc.). It would be irrational, however, to hold municipal bonds. Since the trust does not pay taxes on the interest income it receives, it does not need the tax break associated with the municipal bonds. Therefore, it should prefer to hold higher yield, taxable bonds.11.The stock price drop on the ex-dividend date should be lower. With taxes, stock prices should dropby the amount of the dividend, less the taxes investors must pay on the dividends. A lower tax rate lowers the investors’ tax liability.12.With a high tax on dividends and a low tax on capital gains, investors, in general, will prefer capitalgains. If the dividend tax rate declines, the attractiveness of dividends increases.13.Knowing that share price can be expressed as the present value of expected future dividends doesnot make dividend policy relevant. Under the growing perpetuity model, if overall corporate cash flows are unchanged, then a change in dividend policy only changes the timing of the dividends.The PV of those dividends is the same. This is true because, given that future earnings are held constant, dividend policy simply represents a transfer between current and future stockholders.In a more realistic context and assuming a finite holding period, the value of the shares should represent the future stock price as well as the dividends. Any cash flow not paid as a dividend will be reflected in the future stock price. As such the PV of the flows will not change with shifts in dividend policy; dividend policy is still irrelevant.14.T he bird-in-the-hand argument is based upon the erroneous assumption that increased dividendsmake a firm less risky. If capital spending and investment spending are unchanged, the firm’s overall cash flows are not affected by the dividend policy.15.This argument is theoretically correct. In the real world, with transaction costs of security trading,home-made dividends can be more expensive than dividends directly paid out by the firms. However, the existence of financial intermediaries, such as mutual funds, reduces the transaction costs for individuals greatly. Thus, as a whole, the desire for current income shouldn’t be a major factor favoring high-current-dividend policy.16. a.Cap’s past behavior suggests a preference for capital gains, while Widow Jones exhibits apreference for current income.b. Cap could show the Widow how to construct homemade dividends through the sale of stock.Of course, Cap will also have to convince her that she lives in an MM world. Remember thathomemade dividends can only be constructed under the MM assumptions.c.Widow Jones may still not invest in Neotech because of the transaction costs involved inconstructing homemade dividends. Also, the Widow may desire the uncertainty resolutionwhich comes with high dividend stocks.17.To minimize her tax burden, your aunt should divest herself of high dividend yield stocks and investin low dividend yield stock. Or, if possible, she should keep her high dividend stocks, borrow an equivalent amount of money and invest that money in a tax-deferred account.CHAPTER 16 B-3 18. The capital investment needs of small, growing companies are very high. Therefore, payment ofdividends could curtail their investment opportunities. Their other option is to issue stock to pay the dividend, thereby incurring issuance costs. In either case, the companies and thus their investors are better off with a zero dividend policy during the firms’ rapid growth phases. This fact makes these firms attractive only to low dividend clienteles.This example demonstrates that dividend policy is relevant when there are issuance costs. Indeed, it may be relevant whenever the assumptions behind the MM model are not met.19. Unless there is an unsatisfied high dividend clientele, a firm cannot improve its share price byswitching policies. If the market is in equilibrium, the number of people who desire high dividend payout stocks should exactly equal the number of such stocks available. The supplies and demands of each clientele will be exactly met in equilibrium. If the market is not in equilibrium, the supply of high dividend payout stocks may be less than the demand. Only in such a situation could a firm benefit from a policy shift.20. This finding implies that firms use initial dividends to “signal” their potential growth and positiveNPV prospects to the stock market. The initiation of regular cash dividends also serves to convince the market that their high current earnings are not temporary.Solutions to Questions and ProblemsNOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints, when these intermediate steps are included in this solutions manual, rounding may appear to have occurred. However, the final answer for each problem is found without rounding during any step in the problem.Basic1.The aftertax dividend is the pretax dividend times one minus the tax rate, so:Aftertax dividend = $6.00(1 – .20) = $4.80The stock price should drop by the aftertax dividend amount, or:Ex-dividend price = $80 – 4.80 = $75.202. a.The shares outstanding increases by 10 percent, so:New shares outstanding = 10,000(1.10) = 11,000New shares issued = 1,000Since the par value of the new shares is £1, the capital surplus per share is £24. The total capital surplus is therefore:B-4 SOLUTIONSCapital surplus on new shares = 1,000(£24) = £24,000Common stock (£1 par value) £ 11,000Capital surplus 204,000Retained earnings 561,500£776,500b.The shares outstanding increases by 25 percent, so:New shares outstanding = 10,000(1.25) = 12,500New shares issued = 2,500Since the par value of the new shares is £1, the capital surplus per share is £24. The total capital surplus is therefore:Capital surplus on new shares = 2,500(£24) = £60,000Common stock (£1 par value) £ 12,500Capital surplus 240,000Retained earnings 524,000£776,5003. a.To find the new shares outstanding, we multiply the current shares outstanding times the ratioof new shares to old shares, so:New shares outstanding = 10,000(3/1) = 30,000The equity accounts are unchanged except that the par value of the stock is changed by the ratio of new shares to old shares, so the new par value is:New par value = £1(1/3) = £.3333 per share.b.To find the new shares outstanding, we multiply the current shares outstanding times the ratioof new shares to old shares, so:New shares outstanding = 10,000(1/5) = 2,000.The equity accounts are unchanged except that the par value of the stock is changed by the ratio of new shares to old shares, so the new par value is:New par value = £1(5/1) = £5.00 per share.CHAPTER 16 B-5 4.To find the new stock price, we multiply the current stock price by the ratio of old shares to newshares, so:a.€65(2/5) = €26.00b.€65(1/1.18) = €55.08c.€65(1/1.40) = €46.43d.€65(7/4) = €113.75e.To find the new shares outstanding, we multiply the current shares outstanding times the ratioof new shares to old shares, so:a: 150,000(5/2) = 375,000b: 150,000(1.18) = 177,000c: 150,000(1.40) = 210,000d: 150,000(4/7) = 85,7145.The stock price is the total market value of equity divided by the shares outstanding, so:P0 = Au$175,000 equity/5,000 shares = Au$35.00 per shareIgnoring tax effects, the stock price will drop by the amount of the dividend, so:P X = Au$35.00 – 1.50 = Au$33.50The total dividends paid will be:Au$1.50 per share(5,000 shares) = Au$7,500The equity and cash accounts will both decline by Au$7,500.6.Repurchasing the shares will reduce shareholders’ equity by Au$4,025. The shares repurchased willbe the total purchase amount divided by the stock price, so:Shares bought = Au$4,025/Au$35.00 = 115And the new shares outstanding will be:New shares outstanding = 5,000 – 115 = 4,885B-6 SOLUTIONSAfter repurchase, the new stock price is:Share price = Au$170,975/4,885 shares = Au$35.00The repurchase is effectively the same as the cash dividend because you either hold a share worth Au$35.00, or a share worth Au$33.50 and Au$1.50 in cash. Therefore, you participate in the repurchase according to the dividend payout percentage; you are unaffected.7. The stock price is the total market value of equity divided by the shares outstanding, so:P0 = ₦360,000 equity/15,000 shares = ₦24 per shareThe shares outstanding will increase by 25 percent, so:New shares outstanding = 15,000(1.25) = 18,750The new stock price is the market value of equity divided by the new shares outstanding, so:P X = ₦360,000/18,750 shares = ₦19.208.With a stock dividend, the shares outstanding will increase by one plus the dividend amount, so:New shares outstanding = 350,000(1.12) = 392,000The capital surplus is the capital paid in excess of par value, which is €1, so:Capital surplus for new shares = 42,000(€19) = €798,000The new capital surplus will be the old capital surplus plus the additional capital surplus for the new shares, so:Capital surplus = €1,650,000 + 798,000 = €2,448,000The new equity portion of the balance sheet will look like this:Common stock (€1 par value) € 392,000Capital surplus 2,448,000Retained earnings 2,160,000€5,000,0009.The only equity account that will be affected is the par value of the stock. The par value will changeby the ratio of old shares to new shares, so:New par value = €1(1/5) = €0.20 per share.CHAPTER 16 B-7The total dividends paid this year will be the dividend amount times the number of shares outstanding. The company had 350,000 shares outstanding before the split. We must remember to adjust the shares outstanding for the stock split, so:Total dividends paid this year = €0.70(350,000 shares)(5/1 split) = €1,225,000The dividends increased by 10 percent, so the total dividends paid last year were:Last year’s dividends = €1,225,000/1.10 = €1,113,636.36And to find the dividends per share, we simply divide this amount by the shares outstanding last year. Doing so, we get:Dividends per share last year = €1,113,636.36/350,000 shares = €3.1810.The equity portion of capital outlays is the retained earnings. Subtracting dividends from net income,we get:Equity portion of capital outlays = $1,200 – 600 = $600Since the debt-equity ratio is .80, we can find the new borrowings for the company by multiplying the equity investment by the debt-equity ratio, so:New borrowings = .80($600) = $480And the total capital outlay will be the sum of the new equity and the new debt, which is:Total capital outlays = $600 + 480 =$1,080.11. a.The payout ratio is the dividend per share divided by the earnings per share, so:Payout ratio = ₩0.80/₩7Payout ratio = .1143 or 11.43%b.Under a residual dividend policy, the additions to retained earnings, which is the equity portionof the planned capital outlays, is the retained earnings per share times the number of shares outstanding, so:Equity portion of capital outlays = 7M shares (₩7 – .80) = ₩43.4MThis means the total investment outlay will be:Total investment outlay = ₩43.4M + 18MTotal investment outlay = ₩61.4MThe debt-equity ratio is the new borrowing divided by the new equity, so:D/E ratio = ₩18M/₩43.4M = .4147B-8 SOLUTIONSCHAPTER 16 B-9 12. a.Since the company has a debt-equity ratio of 3, they can raise ₡3 in debt for every ₡1 of equity.The maximum capital outlay with no outside equity financing is:Maximum capital outlay = ₡180,000 + 3(₡180,000) = ₡720,000.b.If planned capital spending is ₡800,000, then no dividend will be paid and new equity will beissued since this exceeds the amount calculated in a.c.No, they do not maintain a constant dividend payout because, with the strict residual policy,the dividend will depend on the investment opportunities and earnings. As these two things vary, the dividend payout will also vary.13. a.We can find the new borrowings for the company by multiplying the equity investment by thedebt-equity ratio, so we get:New debt = 2(₪56M) = ₪112MAdding the new retained earnings, we get:Maximum investment with no outside equity financing = ₪56M + 2(₪56M) = ₪168Mb. A debt-equity ratio of 2 implies capital structure is 2/3 debt and 1/3 equity. The equity portionof the planned new investment will be:Equity portion of investment funds = 1/3(₪72M) = ₪24MThis is the addition to retained earnings, so the total available for dividend payments is:Residual = ₪56M – 24M = ₪32MThis makes the dividend per share:Dividend per share = ₪32M/12M shares = ₪2.67c.The borrowing will be:Borrowing = ₪72M – 24M = ₪48MAlternatively, we could calculate the new borrowing as the weight of debt in the capital structure times the planned capital outlays, so:Borrowing = 2/3(₪72M) = ₪48MThe addition to retained earnings is ₪24M, which we calculated in part b.B-10 SOLUTIONSd.If the company plans no capital outlays, no new borrowing will take place. The dividend pershare will be:Dividend per share = ₪56M/12M shares = ₪4.6714. a.If the dividend is declared, the price of the stock will drop on the ex-dividend date by the valueof the dividend, ¥5. It will then trade for ¥95.b.If it is not declared, the price will remain at ¥100.c.Nakumura’s outflows for inves tments are ¥5,000,000. These outflows occur immediately. Oneyear from now, the firm will realize ¥1,000,000 in net income and it will pay ¥500,000 in dividends, but the need for financing is immediate. Nakumura must finance ¥2,000,000 through the sale of shares worth ¥100. It must sell ¥5,000,000 / ¥100 = 50,000 shares.d.The MM model is not realistic since it does not account for taxes, brokerage fees, uncertaintyover future cash flows, investors’ preferences, signaling effects, and agency costs.Intermediate15.The price of the stock today is the PV of the dividends, so:P0 = Rs.0.70/1.15 + Rs.40/1.152 = Rs.30.85To find the equal two year dividends with the same present value as the price of the stock, we set up the following equation and solve for the dividend (Note: The dividend is a two year annuity, so we could solve with the annuity factor as well):Rs.30.85 = D/1.15 + D/1.152D = Rs.18.98We now know the cash flow per share we want each of the next two years. We can find the price of stock in one year, which will be:P1 = Rs.40/1.15 = Rs.34.78Since you own 1,000 shares, in one year you want:Cash flow in Year one = 1,000(Rs.18.98) = Rs.18,979.07B ut you’ll only get:Dividends received in one year = 1,000(Rs.0.70) = Rs.700.00CHAPTER 16 B-11 Thus, in one year you will need to sell additional shares in order to increase your cash flow. The number of shares to sell in year one is:Shares to sell at time one = (Rs.18,979.07 – 700)/Rs.34.78 = 525.52 sharesAt Year 2, you cash flow will be the dividend payment times the number of shares you still own, so the Year 2 cash flow is:Year 2 cash flow = Rs.40(1,000 – 525.52) = Rs.18,979.0716.If you only want Rs.200 in Year 1, you will buy:(Rs.700 – 200)/Rs.34.78 = 14.38 sharesat Year 1. Your dividend payment in Year 2 will be:Year 2 dividend = (1,000 + 14.38)(Rs.40) = Rs.40,575Note that the present value of each cash flow stream is the same. Below we show this by finding the present values as:PV = Rs.200/1.15 + Rs.40,575/1.152 = Rs.30,854.44PV = 1,000(Rs.0.70)/1.15 + 1,000(Rs.40)/1.152 = Rs.30,854.4417. a.If the company makes a dividend payment, we can calculate the wealth of a shareholder as:Dividend per share = 元5,000/200 shares = 元25.00The stock price after the dividend payment will be:P X = 元40 – 25 = 元15 per shareThe shareholder will have a stock worth 元15 and a 元25 dividend for a total wealth of 元40.If the company makes a repurchase, the company will repurchase:Shares repurchased = 元5,000/元40 = 125 sharesIf the shareholder lets their shares be repurchased, they will have 元40 in cash. If the shareholder keeps their shares, they’re still worth 元40.b.If the company pays dividends, the current EPS is 元0.95, and the P/E ratio is:P/E = 元15/元0.95 = 15.79B-12 SOLUTIONSCHAPTER 16 B-13 If the company repurchases stock, the number of shares will decrease. The total net income is the EPS times the current number of shares outstanding. Dividing net income by the new number of shares outstanding, we find the EPS under the repurchase is:EPS = 元0.95(200)/(200 125) = 元2.53The stock price will remain at 元40 per share, so the P/E ratio is:P/E = 元40/元2.53 = 15.79c. A share repurchase would seem to be the preferred course of action. Only those shareholderswho wish to sell will do so, giving the shareholder a tax timing option that he or she doesn’t get with a dividend payment.18. a.Since the firm has a 100 percent payout policy, the entire net income, ฿32,000 will be paid as adividend. The current value of the firm is the discounted value one year from now, plus the current income, which is:Value = ฿32,000 + ฿1,545,600/1.12Value = ฿1,412,000b.The current stock price is the value of the firm, divided by the shares outstanding, which is:Stock price = ฿1,412,000/10,000Stock price = ฿141.20Since the company has a 100 percent payout policy, the current dividend per share will be the company’s net income, divided by the shares outstanding, or:Current dividend = ฿32,000/10,000Current dividend = ฿3.20The stock price will fall by the value of the dividend to:Ex-dividend stock price = ฿141.20 – 3.20Ex-dividend stock price = ฿138.00c. i.According to MM, it cannot be true that the low dividend is depressing the price. Sincedividend policy is irrelevant, the level of the dividend should not matter. Any funds notdistributed as dividends add to the value of the firm, hence the stock price. Thesedirectors merely want to change the timing of the dividends (more now, less in the future).As the calculations below indicate, the value of the firm is unchanged by their proposal.Therefore, share price will be unchanged.B-14 SOLUTIONSTo show this, consider what would happen if the dividend was increased to ฿4.25. Sinceonly the existing shareholders will get the dividend, the required baht amount to pay thedividends is:Total dividends = ฿4.25(10,000)Total dividends = ฿42,500To fund this dividend payment, the company must raise:Bahts raised = Required funds – Net incomeBahts raised = ฿42,500 – 32,000Bahts raised = ฿10,500This money can only be raised with the sale of new equity to maintain the all-equityfinancing. Since those new shareholders must also earn 12 percent, their share of the firmone year from now is:New shareholder value in one year = ฿10,500(1.12)New shareholder value in one year = ฿11,760This means that the old shareholders' interest falls to:Old shareholder value in one year = ฿1,545,600 – 11,760Old shareholder value in one year = ฿1,533,840Under this scenario, the current value of the firm is:Value = ฿42,500 + ฿1,533,840/1.12Value = ฿1,412,000Since the firm value is the same as in part a, the change in dividend policy had no effect.ii.The new shareholders are not entitled to receive the current dividend. They will receive only the value of the equity one year hence. The present value of those flows is:Present value = ฿1,533,840/1.12Present value = ฿1,369,500And the current share price will be:Current share price = ฿1,369,500/10,000Current share price = ฿136.95So, the number of new shares the company must sell will be:Shares sold = ฿10,500/฿136.95Shares sold = 76.67 sharesCHAPTER 16 B-15 19. a.The current price is the current cash flow of the company plus the present value of theexpected cash flows, divided by the number of shares outstanding. So, the current stock price is: Stock price = ($1,200,000 + 15,000,000) / 1,000,000Stock price = $16.20b.To achieve a zero dividend payout policy, he can invest the dividends back into the company’sstock. The dividends per share will be:Dividends per share = [($1,200,000)(.50)]/1,000,000Dividends per share = $0.60And the stockholder in question will receive:Dividends paid to shareholder = $0.60(1,000)Dividends paid to shareholder = $600The new stock price after the dividends are paid will be:Ex-dividend stock price = $16.20 – 0.60Ex-dividend stock price = $15.60So, the number of shares the investor will buy is:Number of shares to buy = $600 / $15.60Number of shares to buy = 38.4620. ing the formula from the text proposed by Lintner:Div1 = Div0 + s(t EPS1– Div0)Div1 = €1.25 + .3[(.4)(€4.50) –€1.25]Div1 = €1.415b.Now we use an adjustment rate of 0.60, so the dividend next year will be:Div1 = Div0 + s(t EPS1– Div0)Div1 = €1.25 + .7[(.4)(€4.50) –€1.25]Div1= €1.635c.The lower adjustment factor in part a is more conservative. The lower adjustment factor willalways result in a lower future dividend.B-16 SOLUTIONSChallenge21.Assuming no capital gains tax, the aftertax return for the Gordon Company is the capital gainsgrowth rate, plus the dividend yield times one minus the tax rate. Using the constant growth dividend model, we get:Aftertax return = g + D(1 – t) = .15Solving for g, we get:.15 = g + .06(1 – .35)g = .1110The equivalent pretax return for Gecko Company, which pays no dividend, is:Pretax return = g + D = .1110 + .06 = 17.10%22. Using the equation for the decline in the stock price ex-dividend for each of the tax ratepolicies, we get:(P0– P X)/D = (1 – T P)/(1 – T G)a.P0– P X = D(1 – 0)/(1 – 0)P0– P X = Db.P0– P X = D(1 – .15)/(1 – 0)P0– P X = .85Dc.P0– P X = D(1 – .15)/(1 – .25)P0– P X = 1.1333Dd.With this tax policy, we simply need to multiply the personal tax rate times one minus thedividend exemption percentage, so:P0– P X = D[1 – (.35)(.30)]/(1 – .35)P0– P X = 1.3769De.Since different investors have widely varying tax rates on ordinary income and capital gains,dividend payments have different after-tax implications for different investors. This differential taxation among investors is one aspect of what we have called the clientele effect.CHAPTER 16 B-17 23.Since the ¥2,000,000 cash is after corporate tax, the full amount will be invested. So, the value ofeach alternative is:Alternative 1:The firm invests in T-bills or in preferred stock, and then pays out as special dividend in 3 years If the firm invests in T-Bills:If the firm invests in T-bills, the aftertax yield of the T-bills will be:Aftertax corporate yield = .07(1 – .35)Aftertax corporate yield = .0455 or 4.55%So, the future value of the corporate investment in T-bills will be:FV of investment in T-bills = ¥2,000,000(1 + .0455)3FV of investment in T-bills = ¥2,285,609.89Since the future value will be paid to shareholders as a dividend, the aftertax cash flow will be:Aftertax cash flow to shareholders = ¥2,285,609.89(1 – .15)Aftertax cash flow to shareholders = ¥1,942,768.41If the firm invests in preferred stock:If the firm invests in preferred stock, the assumption would be that the dividends received will be reinvested in the same preferred stock. The preferred stock will pay a dividend of:Preferred dividend = .11(¥2,000,000)Preferred dividend = ¥220,000Since 70 percent of the dividends are excluded from tax:Taxable preferred dividends = (1 – .70)(¥220,000)Taxable preferred dividends = ¥66,000And the taxes the company must pay on the preferred dividends will be:Taxes on preferred dividends = .35(¥66,000)Taxes on preferred dividends = ¥23,100So, the aftertax dividend for the corporation will be:Aftertax corporate dividend = ¥220,000 – 23,100Aftertax corporate dividend = ¥196,900B-18 SOLUTIONSThis means the aftertax corporate dividend yield is:Aftertax corporate dividend yield = ¥196,900 / ¥2,000,000Aftertax corporate dividend yield = .09845 or 9.845%The future value of the company’s investment in preferred stock will be:FV of investment in preferred stock = ¥2,000,000(1 + .09845)3FV of investment in preferred stock = ¥2,650,762.85Since the future value will be paid to shareholders as a dividend, the aftertax cash flow will be: Aftertax cash flow to shareholders = ¥2,650,762.85(1 – .15)Aftertax cash flow to shareholders = ¥2,253,148.42Alternative 2:The firm pays out dividend now, and individuals invest on their own. The aftertax cash received by shareholders now will be:Aftertax cash received today = ¥2,000,000(1 – .15)Aftertax cash received today = ¥1,700,000The individuals invest in Treasury bills:If the shareholders invest the current aftertax dividends in Treasury bills, the aftertax individual yield will be:Aftertax individual yield on T-bills = .07(1 – .31)Aftertax individual yield on T-bills = .0483 or 4.83%So, the future value of the individual investment in Treasury bills will be:FV of investment in T-bills = ¥1,700,000(1 + .0483)3FV of investment in T-bills = ¥1,958,419.29The individuals invest in preferred stock:If the individual invests in preferred stock, the assumption would be that the dividends received will be reinvested in the same preferred stock. The preferred stock will pay a dividend of:Preferred dividend = .11(¥1,700,000)Preferred dividend = ¥187,000。
罗斯公司理财题库全集
Chapter 09How to Value Stocks Multiple Choice Questions1. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model.A. zero growthB. dividend growthC. capital pricingD. earnings capitalizationE. differential growth2. Next year's annual dividend divided by the current stock price is called the:A. yield to maturity.B. total yield.C. dividend yield.D. capital gains yield.E. earnings yield.3. The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield.A. currentB. totalC. dividendD. capital gainsE. earnings4. A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock.A. dual classB. cumulativeC. deferredD. preferredE. common5. Payments made by a corporation to its shareholders, in the form of either cash, stock or payments in kind, are called:A. retained earnings.B. net income.C. dividends.D. redistributions.E. infused equity.6. The constant dividend growth model is:A. generally used in practice because most stocks have a constant growth rate.B. generally used in practice because the historical growth rate of most stocks is constant.C. generally not used in practice because most stocks grow at a non constant rate.D. generally not used in practice because the constant growth rate is usually higher than the required rate of return.E. based on the assumption Dow 30 represents a good estimate of the market index.7. The constant dividend growth model:I. assumes that dividends increase at a constant rate forever.II. can be used to compute a stock price at any point of time.III. states that the market price of a stock is only affected by the amount of the dividend. IV. considers capital gains but ignores the dividend yield.A. I onlyB. II onlyC. III and IV onlyD. I and II onlyE. I, II, and III only8. The underlying assumption of the dividend growth model is that a stock is worth:A. the same amount to every investor regardless of their desired rate of return.B. the present value of the future income which the stock generates.C. an amount computed as the next annual dividend divided by the market rate of return.D. the same amount as any other stock that pays the same current dividend and has the same required rate of return.E. an amount computed as the next annual dividend divided by the required rate of return.9. Assume that you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the:A. market values of all stocks to increase, all else constant.B. market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate.C. market values of all stocks to decrease, all else constant.D. stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.E. dividend growth rates to increase to offset this change.10. Latcher's Inc. is a relatively new firm that is still in a period of rapid development. The company plans on retaining all of its earnings for the next six years. Seven years from now, the company projects paying an annual dividend of $.25 a share and then increasing that amount by 3% annually thereafter. To value this stock as of today, you would most likely determine the value of the stock _____ years from today before determining today's value.A. 4B. 5C. 6D. 7E. 811. The Robert Phillips Co. currently pays no dividend. The company is anticipating dividends of $0, $0, $0, $.10, $.20, and $.30 over the next 6 years, respectively. After that, the company anticipates increasing the dividend by 4% annually. The first step in computing the value of this stock today, is to compute the value of the stock when it reaches constant growth in year:A. 3B. 4C. 5D. 6E. 712. Differential growth refers to a firm that increases its dividend by:A. three or more percent per year.B. a rate which is most likely not sustainable over an extended period of time.C. a constant rate of two or more percent per year.D. $.10 or more per year.E. an amount in excess of $.10 a year.13. The total rate of return earned on a stock is comprised of which two of the following?I. current yieldII. yield to maturityIII. dividend yieldIV. capital gains yieldA. I and II onlyB. I and IV onlyC. II and III onlyD. II and IV onlyE. III and IV only14. Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a share. The stock pays a $1 a year dividend. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return.A. remain constantB. decrease by 5%C. increase by 5%D. increase by 10%E. increase by 15%15. The Scott Co. has a general dividend policy whereby it pays a constant annual dividend of $1 per share of common stock. The firm has 1,000 shares of stock outstanding. The company:A. must always show a current liability of $1,000 for dividends payable.B. is obligated to continue paying $1 per share per year.C. will be declared in default and can face bankruptcy if it does not pay $1 per year to each shareholder on a timely basis.D. has a liability which must be paid at a later date should the company miss paying an annual dividend payment.E. must still declare each dividend before it becomes an actual company liability.16. The value of common stock today depends on:A. the expected future holding period and the discount rate.B. the expected future dividends and the capital gains.C. the expected future dividends, capital gains and the discount rate.D. the expected future holding period and capital gains.E. None of the above.17. The closing price of a stock is quoted at 22.87, with a P/E of 26 and a net change of 1.42. Based on this information, which one of the following statements is correct?A. The closing price on the previous day was $1.42 higher than today's closing price.B. A dealer will buy the stock at $22.87 and sell it at $26 a share.C. The stock increased in value between yesterday's close and today's close by $.0142.D. The earnings per share are equal to 1/26th of $22.87.E. The earnings per share have increased by $1.42 this year.18. A stock listing contains the following information: P/E 17.5, closing price 33.10, dividend .80, YTD% chg 3.4, and net chg - .50. Which of the following statements are correct given this information?I. The stock price has increased by 3.4% during the current year.II. The closing price on the previous trading day was $32.60.III. The earnings per share are approximately $1.89.IV. The current yield is 17.5%.A. I and II onlyB. I and III onlyC. II and III onlyD. III and IV onlyE. I, III, and IV only19. The discount rate in equity valuation is composed entirely of:A. the dividends paid and the capital gains yield.B. the dividend yield and the growth rate.C. the dividends paid and the growth rate.D. the capital gains earned and the growth rate.E. the capital gains earned and the dividends paid.20. The net present value of a growth opportunity, NPVGO, can be defined as:A. the initial investment necessary for a new project.B. the net present value per share of an investment in a new project.C. a continual reinvestment of earnings when r < g.D. a single period investment when r > g.E. None of the above.21. Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.16 a share. Secondly, the company announced that all future dividends will increase by 4% annually. What is the maximum amount you should pay to purchase a share of Angelina's stock if your goal is to earn a 10% rate of return?A. $21.60B. $22.46C. $27.44D. $34.62E. $36.0022. How much are you willing to pay for one share of stock if the company just paid an $.80 annual dividend, the dividends increase by 4% annually and you require an 8% rate of return?A. $19.23B. $20.00C. $20.40D. $20.80E. $21.6323. Lee Hong Imports paid a $1.00 per share annual dividend last week. Dividends are expected to increase by 5% annually. What is one share of this stock worth to you today if the appropriate discount rate is 14%?A. $7.14B. $7.50C. $11.11D. $11.67E. $12.2524. Majestic Homes' stock traditionally provides an 8% rate of return. The company just paid a $2 a year dividend which is expected to increase by 5% per year. If you are planning on buying 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 9% at the time of your purchase?A. $48.60B. $52.50C. $55.13D. $57.89E. $70.0025. Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $2.00 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a 12% return on your equity investments?A. $10.00B. $13.33C. $16.67D. $18.88E. $20.0026. Martin's Yachts has paid annual dividends of $1.40, $1.75, and $2.00 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given the lack of future growth, you will only buy this stock if you can earn at least a 15% rate of return. What is the maximum amount you are willing to pay to buy one share today?A. $10.00B. $13.33C. $16.67D. $18.88E. $20.0027. The common stock of Eddie's Engines, Inc. sells for $25.71 a share. The stock is expected to pay $1.80 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock?A. 7%B. 9%C. 11%D. 13%E. 15%28. The current yield on Alpha's common stock is 4.8%. The company just paid a $2.10 dividend. The rumor is that the dividend will be $2.205 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on Alpha's stock?A. 10.04%B. 16.07%C. 21.88%D. 43.75%E. 45.94%29. Martha's Vineyard recently paid a $3.60 annual dividend on its common stock. This dividend increases at an average rate of 3.5% per year. The stock is currently selling for $62.10 a share. What is the market rate of return?A. 2.5%B. 3.5%C. 5.5%D. 6.0%E. 9.5%30. Bet'R Bilt Bikes just announced that its annual dividend for this coming year will be $2.42 a share and that all future dividends are expected to increase by 2.5% annually. What is the market rate of return if this stock is currently selling for $22 a share?A. 9.5%B. 11.0%C. 12.5%D. 13.5%E. 15.0%31. Shares of common stock of the Samson Co. offer an expected total return of 12%. The dividend is increasing at a constant 8% per year. The dividend yield must be:A. -4%.B. 4%.C. 8%.D. 12%.E. 20%.32. The common stock of Grady Co. had an 11.25% rate of return last year. The dividend amount was $.70 a share which equated to a dividend yield of 1.5%. What was the rate of price appreciation on the stock?A. 1.50%B. 8.00%C. 9.75%D. 11.25%E. 12.75%33. Weisbro and Sons' common stock sells for $21 a share and pays an annual dividend that increases by 5% annually. The market rate of return on this stock is 9%. What is the amount of the last dividend paid by Weisbro and Sons?A. $.77B. $.80C. $.84D. $.87E. $.8834. The common stock of Energizer's pays an annual dividend that is expected to increase by 10% annually. The stock commands a market rate of return of 12% and sells for $60.50 a share. What is the expected amount of the next dividend to be paid on Energizer's common stock?A. $.90B. $1.00C. $1.10D. $1.21E. $1.3335. The Reading Co. has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 3% annually. The last dividend it paid was $0.90 a share. What will the company's dividend be in six years?A. $0.90B. $0.93C. $1.04D. $1.07E. $1.1136. A stock pays a constant annual dividend and sells for $31.11 a share. If the dividend yield of this stock is 9%, what is the dividend amount?A. $1.40B. $1.80C. $2.20D. $2.40E. $2.8037. You have decided that you would like to own some shares of GH Corp. but need an expected 12% rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.50 annual dividend per share?A. $26.04B. $29.17C. $32.67D. $34.29E. $36.5938. Turnips and Parsley common stock sells for $39.86 a share at a market rate of return of 9.5%. The company just paid its annual dividend of $1.20. What is the rate of growth of its dividend?A. 5.2%B. 5.5%C. 5.9%D. 6.0%E. 6.3%39. B&K Enterprises will pay an annual dividend of $2.08 a share on its common stock next year. Last week, the company paid a dividend of $2.00 a share. The company adheres to a constant rate of growth dividend policy. What will one share of B&K common stock be worth ten years from now if the applicable discount rate is 8%?A. $71.16B. $74.01C. $76.97D. $80.05E. $83.2540. Wilbert's Clothing Stores just paid a $1.20 annual dividend. The company has a policy whereby the dividend increases by 2.5% annually. You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another three years. If you desire a 10% rate of return, how much should you expect to pay for 100 shares when you can afford to buy this stock? Ignore trading costs.A. $1,640B. $1,681C. $1,723D. $1,766E. $1,81041. The Merriweather Co. just announced that it will pay a dividend next year of $1.60 and is establishing a policy whereby the dividend will increase by 3.5% annually thereafter. How much will one share be worth five years from now if the required rate of return is 12%?A. $21.60B. $22.36C. $23.14D. $23.95E. $24.7942. The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20% a year for the next four years and then decreasing the growth rate to 5% per year. The company just paid its annual dividend in the amount of $1.00 per share. What is the current value of one share if the required rate of return is 9.25%?A. $35.63B. $38.19C. $41.05D. $43.19E. $45.8143. The Extreme Reaches Corp. last paid a $1.50 per share annual dividend. The company is planning on paying $3.00, $5.00, $7.50, and $10.00 a share over the next four years, respectively. After that the dividend will be a constant $2.50 per share per year. What is the market price of this stock if the market rate of return is 15%?A. $17.04B. $22.39C. $26.57D. $29.08E. $33.7144. Can't Hold Me Back, Inc. is preparing to pay its first dividends. It is going to pay $1.00, $2.50, and $5.00 a share over the next three years, respectively. After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 7% rate of return?A. $7.20B. $14.48C. $18.88D. $21.78E. $25.0645. NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $.25 a share. The following dividends will be $.40, $.60, and $.75 a share annually for the following three years, respectively. After that, dividends are projected to increase by 3.5% per year. How much are you willing to pay to buy one share of this stock if your desired rate of return is 12%?A. $1.45B. $5.80C. $7.25D. $9.06E. $10.5846. Now or Later, Inc. recently paid $1.10 as an annual dividend. Future dividends are projected at $1.14, $1.18, $1.22, and $1.25 over the next four years, respectively. After that, the dividend is expected to increase by 2% annually. What is one share of this stock worth to you if you require an 8% rate of return on similar investments?A. $15.62B. $19.57C. $21.21D. $23.33E. $25.9847. The Red Bud Co. just paid a dividend of $1.20 a share. The company announced today that it will continue to pay this constant dividend for the next 3 years after which time it will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 7%?A. $2.94B. $3.15C. $3.23D. $3.44E. $3.6048. Bill Bailey and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $.30 a share for two years commencing two years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. Given a required return of 14%, what is the value of this stock?A. $4.82B. $5.25C. $5.39D. $5.46E. $5.5849. The Lighthouse Co. is in a downsizing mode. The company paid a $2.50 annual dividend last year. The company has announced plans to lower the dividend by $.50 a year. Once the dividend amount becomes zero, the company will cease all dividends permanently. The required rate of return is 16%. What is one share of this stock worth?A. $3.76B. $4.08C. $4.87D. $5.13E. $5.3950. Mother and Daughter Enterprises is a relatively new firm that appears to be on the road to great success. The company paid its first annual dividend yesterday in the amount of $.28 a share. The company plans to double each annual dividend payment for the next three years. After that time, it is planning on paying a constant $1.50 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 11.5%?A. $9.41B. $11.40C. $11.46D. $11.93E. $12.4351. BC ‘n D just paid its annual dividend of $.60 a share. The projected dividends for the next five years are $.30, $.50, $.75, $1.00, and $1.20, respectively. After that time, the dividends will be held constant at $1.40. What is this stock worth today at a 6% discount rate?A. $20.48B. $20.60C. $21.02D. $21.28E. $21.4352. Beaksley, Inc. is a very cyclical type of business which is reflected in its dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was paid last year. Five years from now, the company is repurchasing all of the outstanding shares at a price of $50 a share. At an 8% rate of return, what is this stock worth today?A. $34.03B. $37.21C. $43.78D. $48.09E. $53.1853. Last week, Railway Cabooses paid its annual dividend of $1.20 per share. The company has been reducing the dividends by 10% each year. How much are you willing to pay to purchase stock in this company if your required rate of return is 14%?A. $4.50B. $7.71C. $10.80D. $15.60E. $27.0054. Nu-Tek, Inc. is expecting a period of intense growth and has decided to retain more of its earnings to help finance that growth. As a result it is going to reduce its annual dividend by 10% a year for the next three years. After that, it will maintain a constant dividend of $.70 a share. Last month, the company paid $1.80 per share. What is the value of this stock if the required rate of return is 13%?A. $6.79B. $7.22C. $8.22D. $8.87E. $9.0155. The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. After that, it will maintain a constant dividend of $1 a share. Two weeks ago, the company paid a dividend of $1.40 per share. What is this stock worth if you require a 9% rate of return?A. $10.86B. $11.11C. $11.64D. $12.98E. $14.2356. Which of the following amounts is closest to what should be paid for Overland common stock? Overland has just paid a dividend of $2.25. These dividends are expected to grow at a rate of 5% in the foreseeable future. The required rate of return is 11%.A. $20.45B. $21.48C. $37.50D. $39.38E. $47.7057. What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a dividend of $1.36 per year? The next dividend will be paid in exactly 1 year. The required rate of return is 12.5%.A. $9.52B. $10.88C. $12.24D. $17.00E. None of the above58. Mortgage Instruments Inc. is expected to pay dividends of $1.03 next year. The company just paid a dividend of $1. This growth rate is expected to continue. How much should be paid for Mortgage Instruments stock just after the dividend if the appropriate discount rate is 5%.A. $20.00B. $21.50C. $34.75D. $50.00E. $51.5059. The Felix Corp. projects to pay a dividend of $.75 next year and then have it grow at 12% for the following 3 years before growing at 8% indefinitely thereafter. The equity has a required return of 10% in the market. The price of the stock should be ____.A. $9.38B. $17.05C. $41.67D. $59.80E. $62.3860. If a company paid a dividend of $0.40 last month and it is expected to grow at 7% for the next 6 years and then grow at 4% thereafter, the dividend expected in year 8 is ___.A. $0.63B. $0.65C. $0.68D. $0.69E. $0.7461. The Lory Company had net earnings of $127,000 this past year. Dividends of $38,100 were paid. The company's equity was $1,587,500. If Lory has 100,000 shares outstanding with a current market price of $11.625 per share, and the growth rate is 5.6%, what is the required rate of return?A. 4.2%B. 6%C. 9%D. 14%E. None of the above62. Doctors-On-Call, a newly formed medical group, just paid a dividend of $.50. The company's dividend is expected to grow at a 20% rate for the next 5 years and at a 3% rate thereafter. What is the value of the stock if the appropriate discount rate is 12%?A. $8.08B. $11.17C. $14.22D. $17.32E. $30.9063. A stock you are interested in paid a dividend of $1 last week. The anticipated growth rate in dividends and earnings is 20% for the next year and 10% the year after that before settling down to a constant 5% growth rate. The discount rate is 12%. Calculate the expected price of the stock.A. $17.20B. $17.90C. $18.20D. $19.40E. $19.7564. A stock you are interested in paid a dividend of $1 last month. The anticipated growth rate in dividends and earnings is 25% for the next 2 years before settling down to a constant 5% growth rate. The discount rate is 12%. Calculate the expected price of the stock.A. $15.38B. $20.50C. $21.04D. $22.27E. $26.1465. Which of the following values is closest to the amount that should be paid for a stock that will pay a dividend of $10 in one year and $11 in two years? The stock will be sold in 2 years for an estimated price of $120. The appropriate discount rate is 9%.A. $114.60B. $119.43C. $124.20D. $129.50E. $138.75Essay Questions66. What are the components of the required rate of return on a share of stock? Briefly explain each component.67. Explain whether it is easier to find the required return on a publicly traded stock or a publicly traded bond, and explain why.68. A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms. How is this possible? Does this violate our basic principle of stock valuation? Explain.Chapter 09 How to Value Stocks Answer KeyMultiple Choice Questions1. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model.A. zero growthB. dividend growthC. capital pricingD. earnings capitalizationE. differential growthDifficulty level: EasyTopic: DIVIDEND GROWTH MODELType: DEFINITIONS2. Next year's annual dividend divided by the current stock price is called the:A. yield to maturity.B. total yield.C. dividend yield.D. capital gains yield.E. earnings yield.Difficulty level: EasyTopic: DIVIDEND YIELDType: DEFINITIONS3. The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____ yield.A. currentB. totalC. dividendD. capital gainsE. earningsDifficulty level: EasyTopic: CAPITAL GAINS YIELDType: DEFINITIONS4. A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called _____ stock.A. dual classB. cumulativeC. deferredD. preferredE. commonDifficulty level: EasyTopic: COMMON STOCKType: DEFINITIONS5. Payments made by a corporation to its shareholders, in the form of either cash, stock or payments in kind, are called:A. retained earnings.B. net income.C. dividends.D. redistributions.E. infused equity.Difficulty level: EasyTopic: DIVIDENDSType: DEFINITIONS6. The constant dividend growth model is:A. generally used in practice because most stocks have a constant growth rate.B. generally used in practice because the historical growth rate of most stocks is constant.C. generally not used in practice because most stocks grow at a non constant rate.D. generally not used in practice because the constant growth rate is usually higher than the required rate of return.E. based on the assumption Dow 30 represents a good estimate of the market index.Difficulty level: MediumTopic: CONSTANT DIVIDEND GROWTH MODELType: CONCEPTS7. The constant dividend growth model:I. assumes that dividends increase at a constant rate forever.II. can be used to compute a stock price at any point of time.III. states that the market price of a stock is only affected by the amount of the dividend. IV. considers capital gains but ignores the dividend yield.A. I onlyB. II onlyC. III and IV onlyD. I and II onlyE. I, II, and III onlyDifficulty level: MediumTopic: CONSTANT DIVIDEND GROWTH MODELType: CONCEPTS8. The underlying assumption of the dividend growth model is that a stock is worth:A. the same amount to every investor regardless of their desired rate of return.B. the present value of the future income which the stock generates.C. an amount computed as the next annual dividend divided by the market rate of return.D. the same amount as any other stock that pays the same current dividend and has the same required rate of return.E. an amount computed as the next annual dividend divided by the required rate of return. Difficulty level: MediumTopic: DIVIDEND GROWTH MODELType: CONCEPTS。
(完整版)公司理财-罗斯课后习题答案
(完整版)公司理财-罗斯课后习题答案-CAL-FENGHAI-(2020YEAR-YICAI)_JINGBIAN第一章1.在所有权形式的公司中,股东是公司的所有者。
股东选举公司的董事会,董事会任命该公司的管理层。
企业的所有权和控制权分离的组织形式是导致的代理关系存在的主要原因。
管理者可能追求自身或别人的利益最大化,而不是股东的利益最大化。
在这种环境下,他们可能因为目标不一致而存在代理问题。
2.非营利公司经常追求社会或政治任务等各种目标。
非营利公司财务管理的目标是获取并有效使用资金以最大限度地实现组织的社会使命。
3.这句话是不正确的。
管理者实施财务管理的目标就是最大化现有股票的每股价值，当前的股票价值反映了短期和长期的风险、时间以及未来现金流量。
4.有两种结论。
一种极端,在市场经济中所有的东西都被定价。
因此所有目标都有一个最优水平，包括避免不道德或非法的行为，股票价值最大化。
另一种极端,我们可以认为这是非经济现象,最好的处理方式是通过政治手段。
一个经典的思考问题给出了这种争论的答案:公司估计提高某种产品安全性的成本是30美元万。
然而,该公司认为提高产品的安全性只会节省20美元万。
请问公司应该怎么做呢?”5.财务管理的目标都是相同的,但实现目标的最好方式可能是不同的,因为不同的国家有不同的社会、政治环境和经济制度。
6.管理层的目标是最大化股东现有股票的每股价值。
如果管理层认为能提高公司利润，使股价超过35美元,那么他们应该展开对恶意收购的斗争。
如果管理层认为该投标人或其它未知的投标人将支付超过每股35美元的价格收购公司,那么他们也应该展开斗争。
然而,如果管理层不能增加企业的价值,并且没有其他更高的投标价格,那么管理层不是在为股东的最大化权益行事。
现在的管理层经常在公司面临这些恶意收购的情况时迷失自己的方向。
7.其他国家的代理问题并不严重,主要取决于其他国家的私人投资者占比重较小。
较少的私人投资者能减少不同的企业目标。
罗斯公司理财题库cha16
Chapter 16Capital Structure: Basic Concepts Multiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:A. homemade leverage.B. dividend recapture.C. the weighted average cost of capital.D. private debt placement.E. personal offset.2. The proposition that the value of the firm is independent of its capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.3. The proposition that the cost of equity is a positive linear function of capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.4. The tax savings of the firm derived from the deductibility of interest expense is called the:A. interest tax shield.B. depreciable basis.C. financing umbrella.D. current yield.E. tax-loss carry forward savings.5. The unlevered cost of capital is:A. the cost of capital for a firm with no equity in its capital structure.B. the cost of capital for a firm with no debt in its capital structure.C. the interest tax shield times pretax net income.D. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.E. equal to the profit margin for a firm with some debt in its capital structure.6. The cost of capital for a firm, rWACC, in a zero tax environment is:A. equal to the expected earnings divided by market value of the unlevered firm.B. equal to the rate of return for that business risk class.C. equal to the overall rate of return required on the levered firm.D. is constant regardless of the amount of leverage.E. All of the above.7. The difference between a market value balance sheet and a book value balance sheet is that a market value balance sheet:A. places assets on the right hand side.B. places liabilities on the left hand side.C. does not equate the right hand with the left hand side.D. lists items in terms of market values, not historical costs.E. uses the market rate of return.8. The firm's capital structure refers to:A. the way a firm invests its assets.B. the amount of capital in the firm.C. the amount of dividends a firm pays.D. the mix of debt and equity used to finance the firm's assets.E. how much cash the firm holds.9. A general rule for managers to follow is to set the firm's capital structure such that:A. the firm's value is minimized.B. the firm's value is maximized.C. the firm's bondholders are made well off.D. the firms suppliers of raw materials are satisfied.E. the firms dividend payout is maximized.10. A levered firm is a company that has:A. Accounts Payable as the only liability on the balance sheet.B. some debt in the capital structure.C. all equity in the capital structure.D. All of the above.E. None of the above.11. A manager should attempt to maximize the value of the firm by:A. changing the capital structure if and only if the value of the firm increases.B. changing the capital structure if and only if the value of the firm increases to the benefit of inside management.C. changing the capital structure if and only if the value of the firm increases only to the benefits of the debtholders.D. changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.E. changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.12. The effect of financial leverage depends on the operating earnings of the company. Which of the following is not true?A. Below the indifference or break-even point in EBIT the non-levered structure is superior.B. Financial leverage increases the slope of the EPS line.C. Above the indifference or break-even point the increase in EPS for all equity structures is less than debt-equity structures.D. Above the indifference or break-even point the increase in EPS for all equity structures is greater than debt-equity structures.E. The rate of return on operating assets is unaffected by leverage.13. The Modigliani-Miller Proposition I without taxes states:A. a firm cannot change the total value of its outstanding securities by changing its capital structure proportions.B. when new projects are added to the firm the firm value is the sum of the old value plus the new.C. managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value.D. the determination of value must consider the timing and risk of the cash flows.E. None of the above.14. MM Proposition I without taxes is used to illustrate:A. the value of an unlevered firm equals that of a levered firm.B. that one capital structure is as good as another.C. leverage does not affect the value of the firm.D. capital structure changes have no effect on stockholders' welfare.E. All of the above.15. A key assumption of MM's Proposition I without taxes is:A. that financial leverage increases risk.B. that individuals can borrow on their own account at rates less than the firm.C. that individuals must be able to borrow on their own account at rates equal to the firm.D. managers are acting to maximize the value of the firm.E. All of the above.16. In an EPS-EBI graphical relationship, the slope of the debt ray is steeper than the equity ray. The debt ray has a lower intercept because:A. more shares are outstanding for the same level of EBI.B. the break-even point is higher with debt.C. a fixed interest charge must be paid even at low earnings.D. the amount of interest per share has only a positive effect on the intercept.E. the higher the interest rate the greater the slope.17. In an EPS-EBI graphical relationship, the debt ray and equity ray cross. At this point the equity and debt are:A. equivalent with respect to EPS but above and below this point equity is always superior.B. at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPS below this point.C. equal but away from breakeven equity is better as fewer shares are outstanding.D. at breakeven and MM Proposition II states that debt is the better choice.E. at breakeven and debt is the better choice below breakeven because small payments can be made.18. When comparing levered vs. unlevered capital structures, leverage works to increase EPS for high levels of EBIT because:A. interest payments on the debt vary with EBIT levels.B. interest payments on the debt stay fixed, leaving less income to be distributed over less shares.C. interest payments on the debt stay fixed, leaving more income to be distributed over less shares.D. interest payments on the debt stay fixed, leaving less income to be distributed over more shares.E. interest payments on the debt stay fixed, leaving more income to be distributed over more shares.19. Financial leverage impacts the performance of the firm by:A. maintaining the same level of volatility of the firm's EBIT.B. decreasing the volatility of the firm's EBIT.C. decreasing the volatility of the firm's net income.D. increasing the volatility of the firm's net income.E. None of the above.20. The increase in risk to equityholders when financial leverage is introduced is evidenced by:A. higher EPS as EBIT increases.B. a higher variability of EPS with debt than all equity.C. increased use of homemade leverage.D. equivalence value between levered and unlevered firms in the presence of taxes.E. None of the above.21. The reason that MM Proposition I does not hold in the presence of corporate taxation is because:A. levered firms pay less taxes compared with identical unlevered firms.B. bondholders require higher rates of return compared with stockholders.C. earnings per share are no longer relevant with taxes.D. dividends are no longer relevant with taxes.E. All of the above.22. MM Proposition I with corporate taxes states that:A. capital structure can affect firm value.B. by raising the debt-to-equity ratio, the firm can lower its taxes and thereby increase its total value.C. firm value is maximized at an all debt capital structure.D. All of the above.E. None of the above.23. The change in firm value in the presence of corporate taxes only is:A. positive as equityholders face a lower effective tax rate.B. positive as equityholders gain the tax shield on the debt interest.C. negative because of the increased risk of default and fewer shares outstanding.D. negative because of a reduction of equity outstanding.E. None of the above.24. A firm should select the capital structure which:A. produces the highest cost of capital.B. maximizes the value of the firm.C. minimizes taxes.D. is fully unlevered.E. has no debt.25. In a world of no corporate taxes if the use of leverage does not change the value of the levered firm relative to the unlevered firm is known as:A. MM Proposition III that the cost of stock is less than the cost of debt.B. MM Proposition I that leverage is invariant to market value.C. MM Proposition II that the cost of equity is always constant.D. MM Proposition I that the market value of the firm is invariant to the capital structure.E. MM Proposition III that there is no risk associated with leverage in a no tax world.26. Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:A. borrow some money and purchase additional shares of Bryco stock.B. maintain his current position as the debt of the firm did not affect his personal leverage position.C. sell some shares of Bryco stock and hold the proceeds in cash.D. sell some shares of Bryco stock and loan it out such that he creates a personal debt-equity ratio equal to that of the firm.E. create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the firm.27. The capital structure chosen by a firm doesn't really matter because of:A. taxes.B. the interest tax shield.C. the relationship between dividends and earnings per share.D. the effects of leverage on the cost of equity.E. homemade leverage.28. MM Proposition I with no tax supports the argument that:A. business risk determines the return on assets.B. the cost of equity rises as leverage rises.C. it is completely irrelevant how a firm arranges its finances.D. a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.E. financial risk is determined by the debt-equity ratio.29. The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.30. The concept of homemade leverage is most associated with:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.31. Which of the following statements are correct in relation to MM Proposition II with no taxes?I. The required return on assets is equal to the weighted average cost of capital.II. Financial risk is determined by the debt-equity ratio.III. Financial risk determines the return on assets.IV. The cost of equity declines when the amount of leverage used by a firm rises.A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only32. MM Proposition I with taxes supports the theory that:A. there is a positive linear relationship between the amount of debt in a levered firm and its value.B. the value of a firm is inversely related to the amount of leverage used by the firm.C. the value of an unlevered firm is equal to the value of a levered firm plus the value of the interest tax shield.D. a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.E. a firm's weighted average cost of capital increases as the debt-equity ratio of the firm rises.33. MM Proposition I with taxes is based on the concept that:A. the optimal capital structure is the one that is totally financed with equity.B. the capital structure of the firm does not matter because investors can use homemade leverage.C. the firm is better off with debt based on the weighted average cost of capital.D. the value of the firm increases as total debt increases because of the interest tax shield.E. the cost of equity increases as the debt-equity ratio of a firm increases.34. MM Proposition II with taxes:A. has the same general implications as MM Proposition II without taxes.B. reveals how the interest tax shield relates to the value of a firm.C. supports the argument that business risk is determined by the capital structure employed by a firm.D. supports the argument that the cost of equity decreases as the debt-equity ratio increases.E. reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.35. MM Proposition II is the proposition that:A. supports the argument that the capital structure of a firm is irrelevant to the value of the firm.B. the cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.C. a firm's cost of equity capital is a positive linear function of the firm's capital structure.D. the cost of equity is equivalent to the required return on the total assets of a firm.E. supports the argument that the size of the pie does not depend on how the pie is sliced.36. The interest tax shield has no value for a firm when:I. the tax rate is equal to zero.II. the debt-equity ratio is exactly equal to 1.III. the firm is unlevered.IV. a firm elects 100% equity as its capital structure.A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, and IV only37. The interest tax shield is a key reason why:A. the required rate of return on assets rises when debt is added to the capital structure.B. the value of an unlevered firm is equal to the value of a levered firm.C. the net cost of debt to a firm is generally less than the cost of equity.D. the cost of debt is equal to the cost of equity for a levered firm.E. firms prefer equity financing over debt financing.38. Which of the following will tend to diminish the benefit of the interest tax shield given a progressive tax rate structure?I. a reduction in tax ratesII. a large tax loss carryforwardIII. a large depreciation tax deductionIV. a sizeable increase in taxable incomeA. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV39. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?A. $20.0 millionB. $20.8 millionC. $21.0 millionD. $21.2 millionE. $21.3 million40. Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares. What is the total value of this firm if you ignore taxes?A. $15.5 millionB. $15.6 millionC. $16.0 millionD. $16.8 millionE. $17.2 million41. You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firm today if you ignore taxes?A. $4.8 millionB. $5.1 millionC. $5.4 millionD. $5.7 millionE. $6.0 million42. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes?A. 11.25%B. 12.21%C. 16.67%D. 19.88%E. 21.38%43. Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The required return on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition II with no taxes?A. .60B. .64C. .72D. .75E. .8044. The Backwoods Lumber Co. has a debt-equity ratio of .80. The firm's required return on assets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on MM Proposition II with no taxes?A. 6.76%B. 7.00%C. 7.25%D. 7.40%E. 7.50%45. The Winter Wear Company has expected earnings before interest and taxes of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A. $9,900B. $10,852C. $11,748D. $12,054E. $12,70046. Gail's Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% and the tax rate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?A. $2.4 millionB. $2.7 millionC. $3.3 millionD. $3.7 millionE. $3.9 million47. The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A. $48,600B. $50,000C. $52,680D. $56,667E. $60,60048. Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?A. $567,600B. $781,818C. $860,000D. $946,000E. $1,152,40049. An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of $150,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is the value of the levered firm?A. $696,429B. $907,679C. $941,429D. $1,184,929E. $1,396,42950. The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rate of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?A. .44B. .49C. .51D. .56E. .6251. Hey Guys!, Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm's cost of equity?A. 13.25%B. 13.89%C. 13.92%D. 14.14%E. 14.25%52. Anderson's Furniture Outlet has an unlevered cost of capital of 10%, a tax rate of 34%, and expected earnings before interest and taxes of $1,600. The company has $3,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?A. 8.67%B. 9.34%C. 9.72%D. 9.99%E. 10.46%53. Walter's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of debt?A. 7.92%B. 8.10%C. 8.16%D. 8.84%E. 9.00%54. Rosita's has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. The debt-equity ratio is .60 and the tax rate is .34. What is Rosita's unlevered cost of capital?A. 8.83%B. 12.30%C. 13.97%D. 14.08%E. 14.60%55. Your firm has a pre-tax cost of debt of 7% and an unlevered cost of capital of 13%. Your tax rate is 35% and your cost of equity is 15.26%. What is your debt-equity ratio?A. .43B. .49C. .51D. .54E. .5856. Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is the cost of equity if the tax rate is 34%?A. 7.52%B. 8.78%C. 15.98%D. 16.83%E. 17.30%57. Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, pay interest semiannually, and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?A. $6,125B. $6,309C. $9,500D. $17,500E. $18,02558. Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 34%?A. $58,500B. $60,100C. $60,750D. $61,200E. $62,25059. Juanita's Steak House has $12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. The tax rate is 34%. What is the present value of the tax shield?A. $2,823B. $2,887C. $4,080D. $4,500E. $4,63360. A firm has debt of $5,000, equity of $16,000, a leveraged value of $8,900, a cost of debt of 8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost of capital?A. 7.29%B. 7.94%C. 8.87%D. 10.40%E. 11.05%61. A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 60% debt. The interest rate on the debt would be 8%. Assuming there are no taxes or other imperfections, its cost of equity capital with the new capital structure would be _____.A. 9%B. 10%C. 13%D. 14%E. None of the above.62. A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections?A. 10.0%B. 13.5%C. 14.4%D. 18.0%E. None of the above.63. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0?A. 8%B. 10%C. 12%D. 14%E. 16%64. A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?A. 10%B. 15%C. 18%D. 21%E. None of the above.65. If a firm is unlevered and has a cost of equity capital of 12%, what would its cost of equity be if its debt-equity ratio became 2? The expected cost of debt is 8%.A. 14.0%B. 14.67%C. 16.0%D. 20.0%E. None of the above.66. A firm has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would its cost of equity capital with the new capital structure be?A. 10.3%B. 11.0%C. 11.2%D. 13.9%E. None of the above.67. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would its cost of equity be if the debt-to-equity ratio were 0?A. 11.11%B. 12.57%C. 13.33%D. 16.00%E. None of the above.68. A firm has a debt-to-equity ratio of .5. Its cost of equity is 22%, and its cost of debt is 16%. If the corporate tax rate is .40, what would its cost of equity be if the debt-to-equity ratio were 0?A. 14.00%B. 20.61%C. 21.07%D. 22.00%E. None of the above.69. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 14%. Its cost of debt is 10%. What is its cost of equity if the corporate tax rate is 50%?A. 14.0%B. 16.0%C. 17.5%D. 21.0%E. None of the above.70. What is the cost of equity for a firm if the corporate tax rate is 40%? The firm has adebt-to-equity ratio of 1.5. If it had no debt, its cost of equity would be 16%. Its current cost of debt is 10%.A. 17.4%B. 18.4%C. 19.6%D. 21.4%E. None of the above.71. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?A. 7.73%B. 10.00%C. 10.75%D. 12.50%E. None of the above.72. Batter's Home has 3,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 30%?A. $52,000B. $60,000C. $62,500D. $68,000E. $72,00073. Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield?A. $2,800B. $3,000C. $3,400D. $3,800E. $7.00074. A firm has debt of $7,000, equity of $12,000, a leveraged value of $8,900, a cost of debt of 7%, a cost of equity of 14%, and a tax rate of 30%. What is the firm's weighted average cost of capital?A. 8.45%B. 9.90%C. 10.65%D. 12.50%E. 14.00%Essay Questions75. Based on MM with taxes and without taxes, how much time should a financial manager spend analyzing the capital structure of his firm? What if the analysis is based on the static theory?76. Explain homemade leverage and why it matters.77. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, isn't the goal of the firm to maximize share value and minimize shareholder costs?Consider two firms, U and L, both with $50,000 in assets. Firm U is unlevered, and firm L has $20,000 of debt that pays 8% interest. Firm U has 1,000 shares outstanding, while firm L has 600 shares outstanding. Mike owns 20% of firm L and believes that leverage works in his favor. Steve tells Mike that this is an illusion, and that with the possibility of borrowing on his own account at 8% interest, he can replicate Mike's payout from firm L.78. Given a level of operating income of $2,500, show the specific strategy that Mike has in mind.79. After seeing Steve's analysis, Mike tells Steve that while his analysis looks good on paper, Steve will never be able to borrow at 8%, but would have to pay a more realistic rate of 12%. If Mike is right, what will Steve's payout be?80. Suppose the tax authorities allow firms to deduct their interest expense from operating income. Both firm U and firm L are in the 34% tax bracket. Show what happens to the market value of both firms if the debt held by firm L is permanent. Assume MM with taxes.。
罗斯公司理财练习题(打印版)
罗斯公司理财练习题（打印版）# 罗斯公司理财练习题## 一、选择题1. 以下哪项不是公司理财的主要目标？A. 利润最大化B. 股东财富最大化C. 企业价值最大化D. 社会责任最大化2. 罗斯公司计划进行一项投资，预计初始投资为50万元，未来5年的现金流分别为10万元、15万元、20万元、25万元和30万元。
假设贴现率为10%，该投资的净现值（NPV）是多少？A. 10万元B. 15万元C. 20万元D. 25万元## 二、计算题1. 罗斯公司正在考虑一项新项目，该项目需要初始投资100万元。
预计该项目在未来3年内每年可以产生40万元的现金流。
假设公司的加权平均资本成本（WACC）为8%，请计算该项目的净现值（NPV）。
2. 罗斯公司计划发行一批债券，面值为1000元，票面利率为5%，期限为5年，每年支付一次利息。
如果市场利率为6%，该债券的理论价格是多少？## 三、简答题1. 简述公司理财中的代理问题，并举例说明如何通过公司治理机制来解决这一问题。
2. 描述资本结构决策对公司价值的影响，并解释为什么在不同情况下，公司可能会选择不同的资本结构。
## 四、案例分析题罗斯公司是一家生产型企业，目前面临资金短缺的问题。
公司管理层提出了两种融资方案：方案一是发行股票，方案二是发行债券。
请分析这两种方案对公司财务状况和股东财富的影响，并给出你的建议。
## 五、论述题论述公司进行跨国投资时需要考虑的主要财务因素，并分析这些因素如何影响公司的全球战略。
以上练习题涵盖了公司理财的多个重要领域，包括目标设定、投资决策、融资决策和跨国投资等。
通过这些练习，可以帮助学生更好地理解和掌握公司理财的基本原理和方法。
希望同学们认真完成这些练习题，提高自己的理财能力。
公司理财罗斯课后习题答案
第一章1.在所有权形式的公司中,股东是公司的所有者。
股东选举公司的董事会,董事会任命该公司的管理层。
企业的所有权和控制权分离的组织形式是导致的代理关系存在的主要原因。
管理者可能追求自身或别人的利益最大化,而不是股东的利益最大化。
在这种环境下,他们可能因为目标不一致而存在代理问题。
2.非营利公司经常追求社会或政治任务等各种目标。
非营利公司财务管理的目标是获取并有效使用资金以最大限度地实现组织的社会使命。
3.这句话是不正确的。
管理者实施财务管理的目标就是最大化现有股票的每股价值，当前的股票价值反映了短期和长期的风险、时间以及未来现金流量。
4.有两种结论。
一种极端,在市场经济中所有的东西都被定价。
因此所有目标都有一个最优水平，包括避免不道德或非法的行为，股票价值最大化。
另一种极端,我们可以认为这是非经济现象,最好的处理方式是通过政治手段。
一个经典的思考问题给出了这种争论的答案:公司估计提高某种产品安全性的成本是30美元万。
然而,该公司认为提高产品的安全性只会节省20美元万。
请问公司应该怎么做呢?”5.财务管理的目标都是相同的,但实现目标的最好方式可能是不同的,因为不同的国家有不同的社会、政治环境和经济制度。
6.管理层的目标是最大化股东现有股票的每股价值。
如果管理层认为能提高公司利润，使股价超过35美元,那么他们应该展开对恶意收购的斗争。
如果管理层认为该投标人或其它未知的投标人将支付超过每股35美元的价格收购公司,那么他们也应该展开斗争。
然而,如果管理层不能增加企业的价值,并且没有其他更高的投标价格,那么管理层不是在为股东的最大化权益行事。
现在的管理层经常在公司面临这些恶意收购的情况时迷失自己的方向。
7.其他国家的代理问题并不严重,主要取决于其他国家的私人投资者占比重较小。
较少的私人投资者能减少不同的企业目标。
高比重的机构所有权导致高学历的股东和管理层讨论决策风险项目。
此外,机构投资者比私人投资者可以根据自己的资源和经验更好地对管理层实施有效的监督机制。
罗斯公司理财题库全集
Chapter 26Short-Term Finance and Planning Multiple Choice Questions1. The length of time between the acquisition of inventory and the collection of cash from receivables is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.2. The length of time between the acquisition of inventory and its sale is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.3. The length of time between the sale of inventory and the collection of cash from receivables is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.4. The length of time between the acquisition of inventory by a firm and the payment by the firm for that inventory is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.5. The length of time between the payment for inventory and the collection of cash from receivables is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.6. Costs of the firm that rise with increased levels of investment in its current assets are called _____ costs.A. carryingB. shortageC. orderD. safetyE. trading7. Costs of the firm that fall with increased levels of investment in its current assets are called _____ costs.A. carryingB. shortageC. debtD. equityE. payables8. The forecast of cash receipts and disbursements for the next planning period is called a:A. pro forma income statement.B. statement of cash flows.C. cash budget.D. receivables analysis.E. credit analysis.9. A prearranged, short-term bank loan made on a formal or informal basis, and typically reviewed for renewal annually, is called a:A. letter of credit.B. cleanup loan.C. compensating balance.D. line of credit.E. roll-over.10. A prearranged credit agreement with a bank typically open for two or more years is called a:A. letter of credit.B. cleanup loan.C. compensating balance.D. line of credit.E. revolving credit arrangement.11. A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a:A. compensating balance.B. cleanup loan.C. letter of credit.D. line of credit.E. roll-over.12. A _____ issued by a bank is a promise by that bank to make a loan if certain conditions are met.A. compensating balanceB. cleanup loanC. letter of creditD. line creditE. revolver13. A short-term loan where the lender holds the borrower's receivables as security is called:A. a compensating balance.B. assigned receivables financing.C. a letter of credit.D. factored receivables financing.E. a bond.14. A type of short-term loan where the borrower sells its receivables to the lender up-front, but at a discount to face value, is called:A. a compensating balance.B. assigned receivables financing.C. a letter of credit.D. factored receivables financing.E. a bond.15. A short-term loan secured by the borrower's inventory, either directly or via an intermediary, is called a(n):A. debenture.B. line of credit.C. banker's acceptance.D. compensating balance.E. inventory loan.16. Net working capital is defined as:A. the current assets in a business.B. the difference between current assets and current liabilities.C. the present value of short-term cash flows.D. the difference between all assets and liabilities.E. None of the above.17. Which one of the following is a source of cash?A. an increase in accounts receivableB. an increase in fixed assetsC. a decrease in long-term debtD. the payment of a cash dividendE. an increase in accounts payable18. Which of the following are uses of cash?I. marketable securities are soldII. the amount of inventory on hand is increasedIII. the firm takes out a long-term bank loanIV. payments are paid on accounts payableA. I and III onlyB. II and IV onlyC. I and IV onlyD. II and III onlyE. II, III and IV only19. Which one of the following will increase net working capital? Assume that the current ratio is greater than 1.0.A. using cash to pay an accounts payableB. uing cash to pay a long-term debtC. selling inventory at costD. collecting an accounts receivableE. using a long-term loan to buy inventory20. Which one of the following will decrease the net working capital of a firm? Assume that the current ratio is greater than 1.0.A. Selling inventory at a profitB. Collecting an accounts receivableC. Paying a payment on a long-term debtD. Selling a fixed asset for book valueE. Paying an accounts payable21. Which one of the following will decrease the operating cycle?A. Paying accounts payable fasterB. Discontinuing the discount given for early payment of an accounts receivableC. Decreasing the inventory turnover rateD. Collecting accounts receivable fasterE. Increasing the accounts payable turnover rate22. Which one of the following will decrease the operating cycle?A. Decreasing the days sales in inventoryB. Decreasing the days in accounts payableC. Decreasing the cash cycle by increasing the accounts payable periodD. Decreasing the accounts receivable turnover rateE. Decreasing the speed at which inventory is sold23. The short-term financial policy that a firm adopts will be reflected in:A. the size of the firm's investment in current assets.B. the financing of current assets.C. the financing of fixed assets.D. Both A and B.E. Both A and C.24. Which one of the following will not affect the operating cycle?A. decreasing the payables turnover from 7 times to 6 timesB. increasing the days sales in receivablesC. decreasing the inventory turnover rateD. increasing the average receivables balanceE. decreasing the credit repayment times for the firm's customers25. Which one of the following will increase the cash cycle?A. Improving the cash discounts given to customers who pay their accounts earlyB. Having a larger percentage of customers paying with cash instead of creditC. Buying less raw materials to have on handD. Paying your suppliers earlier to receive the discount they offerE. Ordering raw materials inventory only when you need it26. An increase in which one of the following will decrease the cash cycle, all else equal?A. Payables turnoverB. Days sales in inventoryC. Operating cycleD. Inventory turnover rateE. Accounts receivable period27. ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The firm is now changing its policy and only producing a product when it receives an actual order from a customer. All else equal, this change will:A. increase the operating cycle.B. lengthen the accounts receivable period.C. shorten the accounts payable period.D. decrease the cash cycle.E. decrease the inventory turnover rate.28. Which one of the following statements concerning the cash cycle is correct?A. The cash cycle is equal to the operating cycle minus the inventory period.B. A negative cash cycle is actually preferable to a positive cash cycle.C. Granting credit to slower paying customers tends to decrease the cash cycle.D. The cash cycle plus the accounts receivable period is equal to the operating cycle.E. The most desirable cash cycle is the one that equals zero days.29. Which one of the following statements is correct concerning the cash cycle?A. The longer the cash cycle, the more likely a firm will need external financing.B. Increasing the accounts payable period increases the cash cycle.C. A positive cash cycle is preferable to a negative cash cycle.D. The cash cycle can exceed the operating cycle if the payables period is equal to zero.E. Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.30. Which of the following actions will tend to decrease the inventory period?I. discontinuing all slow-selling merchandiseII. selling obsolete inventory below cost just to get rid of itIII. buying raw materials only as they are needed in the manufacturing processIV. producing goods on demand versus for inventoryA. I and III onlyB. II and IV onlyC. II, III and IV onlyD. I, II and III onlyE. I, II, III and IV31. Which of the following actions will tend to decrease the accounts receivable period?I. loosening the standards for granting credit to customersII. increasing the discount for early payment by credit customersIII. increasing the finance charges applied to all customer balances outstanding over thirty days IV. granting discounts for cash salesA. I and III onlyB. II and IV onlyC. I, II and IV onlyD. II, III and IV onlyE. I, II, III and IV32. An increase in which one of the following is most apt to be an indicator of an accounts receivable policy that is too restrictive?A. bad debtsB. accounts receivable turnover rateC. accounts receivable periodD. credit salesE. operating cycle33. If you delay paying your suppliers by an additional ten days, then:A. your payables turnover rate will increase.B. you will require less bank financing of your operations.C. the cash cycle will increase by ten days.D. your operating cycle will lengthen by ten days.E. your stock-out costs will rise.34. Which one of the following will increase the accounts payable period, all else constant?A. an increase in the cost of goods sold account valueB. an increase in the ending accounts payable balanceC. an increase in the cash cycleD. a decrease in the operating cycleE. a decrease in the average accounts payable balance35. Which one of the following managers is most likely in charge of establishing the accounts receivable policy?A. Purchasing managerB. Credit managerC. ControllerD. Production managerE. Payables manager36. The manager responsible for the accounting information concerning cash flows is the:A. controller.B. payables manager.C. credit manager.D. purchasing manager.E. production manager.37. Flexible short-term financial policies tend to:A. maintain low accounts receivable balances.B. support few investments in marketable securities.C. minimize the investment in inventory.D. maintain large cash balances.E. tightly restrict credit sales.38. A restrictive short-term financial policy tends to:A. reduce future sales more so than a flexible policy.B. grant credit to more customers.C. incur more carrying costs than a flexible policy does.D. encourage credit sales over cash sales.E. reduce order costs as compared to a more flexible policy.39. Which of the following are associated with a restrictive short-term financial policy?I. large investments in marketable securitiesII. liberal credit terms for customersIII. minimal cash balancesIV. minimal credit salesA. I and III onlyB. II and IV onlyC. III and IV onlyD. III and IV onlyE. I, II and III only40. A restrictive short-term financial policy, as compared to a more flexible policy, tends to:I. cause a firm to lose sales due to a lack of inventory on hand.II. increase the sales of a firm due to the firm's credit availability and terms.III. increase the probability that a firm will face a cash-out situation.IV. increase the ability of a firm to charge premium prices.A. I and III onlyB. II and IV onlyC. I and IV onlyD. II and III onlyE. I and II only41. A flexible short-term financial policy:A. is associated with firms where the carrying costs are considered to be less than the shortage costs.B. applies mostly to firms where the shortage costs tend to be less than the carrying costs.C. applies only to firms that strictly limit their credit sales.D. tends to decrease the amount of current assets held by a firm.E. is designed to utilize short-term external financing to fund all of the seasonal increases in current assets.42. A flexible short-term financial policy:A. increases the likelihood that a firm will face financial distress.B. incurs an opportunity cost due to the rate of return that applies to short-term assets.C. advocates a smaller investment in net working capital than a restrictive policy does.D. increases the probability that a firm will earn high returns on all of its assets.E. utilizes short-term financing to fund all of the firm's assets.43. If your accounts receivable period is 30 days, you will collect payment for your _____ sales during the second quarter of a calendar year.A. January and FebruaryB. January, February and MarchC. February and MarchD. February, March and AprilE. March, April and May44. Your firm collects 30% of sales in the month of sale, 55% of sales in the month following the month of sale and 13% of sales in the second month following the month of sale. Given this, you will collect _____ sales during the month of June.A. 30% of MayB. 55% of JuneC. 13% of MayD. 55% of MayE. 13% of March45. A manufacturing firm has a 90 day collection period. The firm produces seasonal merchandise and thus has the least sales during the first quarter of a year and the highest level of sales during the third quarter of a year. The firm maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters. The firm is most apt to face a cash-out situation in:A. the first quarter.B. the second quarter.C. the third quarter.D. the fourth quarter.E. any quarter, equally.46. The appropriate amount of short-term borrowing is determined by:A. cash reserves.B. maturity hedging.C. relative interest rates.D. All of the above.E. None of the above.47. Which two of the following four conditions are most apt to cause a quarterly cash shortfall for a firm which is financially sound?I. a relatively constant level of salesII. periodic expenditures for major equipment purchasesIII. a steady dependence on a constant level of external financingIV. highly seasonal salesA. I and III onlyB. II and IV onlyC. III and IV onlyD. I, II and III onlyE. II, III and IV only48. Which of the following statements are correct concerning the cash balance of a firm?I. Most firms plan on maintaining a minimum cash balance at all times.II. The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum cash balance retained by the firm.III. The cumulative cash surplus at the end of March is used as the beginning cash balance for April when you are compiling a projected monthly cash balance report.IV. A negative cumulative cash surplus indicates a borrowing need by the firm.A. I and III onlyB. II and IV onlyC. I and IV onlyD. II and III onlyE. I and II only49. A cumulative cash deficit indicates that a firm:A. has at least a short-term need for external funding.B. is facing long-term financial distress.C. will go out of business within the year.D. is capable of funding all of its needs internally.E. is using its cash wisely.50. The most common means of financing a temporary cash deficit is a:A. long-term secured bank loan.B. short-term secured bank loan.C. short-term issue of corporate bonds.D. long-term unsecured bank loan.E. short-term unsecured bank loan.51. The primary difference between a line of credit and a revolving credit arrangement is the:A. type of collateral used to secure the loan.B. length of the time period covered by the loan agreement.C. fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured.D. fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured.E. line of credit is a long-term financing agreement while the revolving credit arrangement is a short-term financing agreement.52. A compensating balance:I. is required when a firm acquires bank financing other than a line of credit.II. increases the cost of short-term bank financing.III. represents an opportunity cost to the lending institution.IV. is often used as a means of paying for banking services received.A. I and III onlyB. II and IV onlyC. II and III onlyD. I and IV onlyE. I, II and IV only53. With a flexible policy with regard to short term financing, over a year a firm will have:A. some short-term borrowing.B. some funds to invest in marketable equity securities.C. full coverage of permanent current assets.D. Both A and B are correct.E. A, B and C are correct.54. Which one of the following statements is correct?A. A farmer generally uses a type of financing that employs trust receipts to provide financing during the growing season.B. A third-party inventory manager is generally involved with the lender and the borrower in a floor plan arrangement.C. A drug store is more apt to have a financing arrangement involving trust receipts than one involving a blanket lien.D. Floor plan arrangements are most applicable to large, easily identifiable types of inventory.E. A direct loan from a bank is generally less expensive than a loan involving commercial paper.55. Which of the following are benefits of compiling a short-term financial plan?I. knowing ahead of time when your firm will probably require external financingII. being able to estimate how long of a time period your firm might need a loanIII. being able to determine when your firm can best afford to spend funds on a capital expenditureIV. knowing when your firm should have excess funds that can be investedA. I and III onlyB. I, II and IV onlyC. II, III and IV onlyD. I, II and III onlyE. I, II, III and IV56. If the average accounts receivable that a firm holds decreases without any decrease in credit sales, the operating cycle will:A. stay the same because of no sales change.B. stay the same because cash collections are sooner, and it will affect the cash cycle only.C. decrease because days' sales outstanding decreases.D. stay the same because accounts receivable are not in the operating cycle.E. have an unknown effect.57. Which of the following is not included in current assets?A. Accounts receivableB. Accrued wagesC. CashD. InventoriesE. All of the above are included in current assets58. Which of the following is not included in current liabilities?A. Accounts payableB. Prepaid insuranceC. Accrued expenses payableD. Taxes payableE. Notes payable59. Assets presented on the balance sheet are in order of accounting liquidity. Accounting liquidity refers to:A. how much inventory a brewer keeps.B. a firm's ability to sell its product.C. the risk of receiving payment on their accounts.D. ability and time it takes to convert assets to cash.E. None of the above.60. Sources of cash do not include:A. increases in borrowing from banks.B. increases in cash flow.C. decreases in accounts payable.D. increases in notes payable.E. increases in taxes payable.61. A use of cash can be determined by:A. a decrease in a liability.B. an increase in an asset.C. an increase in retained earnings.D. Both B and C.E. Both A and B.62. The cash cycle is defined as the time between:A. the arrival of inventory in stock and when the cash is collected from receivables.B. selling the product and posting the accounts receivable.C. selling the product and collecting the accounts receivable.D. cash disbursements and cash collection.E. the sale of inventory and cash collection.63. Cash cycle equals:A. inventory period plus accounts receivable period.B. change in net working capital period.C. operating cycle plus accounts payable period.D. operating cycle plus inventory period.E. None of the above.64. Which of the following increases cash?A. a decrease in long term debt.B. an increase in equity.C. an increase in current liabilities.D. B and C.E. A, B, and C.65. Which of the following changes cash?A. a decrease in fixed assets.B. a decrease in current liabilities.C. an increase in current liabilities.D. A and C.E. All of the above.66. Which of the following decreases cash?A. an increase in current assets other than cash.B. a decrease in fixed assets.C. an increase in current liabilities.D. A and C.E. None of the above.67. Which of the following decreases cash?A. a decrease in current assets other than cash.B. a decrease in fixed assets.C. an increase in current liabilities.D. A and C.E. None of the above.68. Which of the following increases cash?A. a decrease in current assets other than cash.B. an increase in fixed assets.C. an increase in current liabilities.D. A and C.E. None of the above.69. Stoney Brooke, Inc. has sales of $890,000 and cost of goods sold of $640,000. The firm hada beginning inventory of $36,000 and an ending inventory of $46,000. What is the length of the inventory period?A. 15.24 daysB. 15.61 daysC. 21.19 daysD. 21.71 daysE. 23.38 days70. Your firm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the inventory turnover rate?A. 11.23 timesB. 12.56 timesC. 18.60 timesD. 19.63 timesE. 29.06 times71. A firm has sales of $720,000. The cost of goods sold is equal to 70% of sales. The firm has an average inventory of $6,500. How many days on average does it take the firm to sell its inventory?A. 3.30 daysB. 4.71 daysC. 67.29 daysD. 77.54 daysE. 110.77 days72. Bilt Rite, Inc. has sales of $610,000. The cost of goods sold is equal to 70% of sales. The beginning accounts receivable balance is $21,000 and the ending accounts receivable balance is $25,000. How long on average does it take the firm to collect its receivables?A. 13.76 daysB. 14.09 daysC. 21.07 daysD. 25.98 daysE. 26.52 days73. Weson, Inc. has sales of $462,000, costs of goods sold of $308,000 and average accounts receivable of $48,900. How long does it take its credit customers to pay for their purchases?A. 36.09 daysB. 38.63 daysC. 41.23 daysD. 44.20 daysE. 57.95 days74. LoDo, Inc. has sales of $642,000 and average accounts payable of $36,400. The cost of goods sold is equivalent to 65% of sales. How long does it take LoDo to pay its suppliers?A. 11.46 daysB. 13.45 daysC. 20.69 daysD. 26.18 daysE. 31.85 days75. True Blue Stores had a beginning accounts payable balance of $56,900 and an ending accounts payable balance of $62,800. Sales for the period were $670,000 and costs of goods sold were $418,000. What is the payables turnover rate?A. 6.98 timesB. 7.35 timesC. 8.13 timesD. 11.19 timesE. 11.78 times76. A firm has an inventory turnover rate of 16, a receivables turnover rate of 21 and a payables turnover rate of 11. How long is the operating cycle?A. 37.00 daysB. 40.19 daysC. 42.87 daysD. 63.08 daysE. 73.37 days77. Your firm currently has an operating cycle of 64 days. You are analyzing some operational changes which are expected to decrease the accounts receivable period by 3 days and decrease the inventory period by 2 days. The accounts payable turnover rate is expected to increase from 7 to 9 times per year. If all of these changes are adopted, what will your firm's new operating cycle be?A. 47 daysB. 51 daysC. 54 daysD. 57 daysE. 59 days78. Dallas and More (D&M) sells its inventory in 82 days on average. Its average customer charges his purchase on a credit card whereby payment is received in ten days. On the other hand, D&M takes 56 days on average to pay for its purchases. Given this information, what is the length of D&M's operating cycle?A. 26 daysB. 36 daysC. 66 daysD. 92 daysE. 128 days79. Jaxson and Sons has an inventory period of 33 days, an accounts payable period of 41 days and an accounts receivable period of 27 days. Management is considering offering a 5% discount if its credit customers pay for their purchases within 10 days. If the new discount is offered the accounts receivable period is expected to decline by 13 days. If the new discount is offered, the operating cycle will decrease from _____ days to _____ days.A. 19; 6B. 60; 47C. 87; 74D. 101; 88E. 101; 9180. Wislon, Inc. has an inventory turnover rate of 15, an accounts payable period of 54 days and an accounts receivable period of 37 days. What is the length of the cash cycle?A. -7.33 daysB. -2.00 daysC. 2.00 daysD. 6.50 daysE. 7.33 days81. Drefus, Inc. has an inventory turnover of 15 and an accounts receivable turnover of 9. The accounts payable period is 51 days. What is the length of the cash cycle?A. 13.89 daysB. 14.07 daysC. 14.23 daysD. 18.79 daysE. 23.00 days82. A firm currently has a 36 day cash cycle. Assume that the firm changes its operations such that it decreases its receivables period by 4 days, increases its inventory period by 1 day and decreases its payables period by 2 days. What will the length of the cash cycle be after these changes?A. 31 daysB. 33 daysC. 35 daysD. 37 daysE. 38 days83. A firm currently has a 43 day cash cycle. Assume that the firm changes its operations such that it increases its receivables period by 2 days, decreases its inventory period by 1 day and increases its payables period by 3 days. What will the length of the cash cycle be after these changes?A. 38 daysB. 39 daysC. 41 daysD. 43 daysE. 45 days84. Martinque and Son have a 60 day collection period. Sales for the next calendar year are estimated at $1,200, $1,100, $2,300 and $1,800, respectively, by quarter starting with the first quarter of the year. Given this information, which one of the following statements is correct? Assume that a year has 360 days.A. The firm will collect $1,133 in Quarter 2.B. The accounts receivable balance at the beginning of Quarter 4 will be $767.C. The firm will collect $367 from Quarter 2 sales in Quarter 3.D. The firm will have an accounts receivable balance of $1,200 at the end of the year.E. The firm will collect a total of $1,967 in Quarter 4.85. ABC, Inc. has a beginning receivables balance on January 1st of $430. Sales for January through April are $240, $250, $330 and $350, respectively. The accounts receivable period is 60 days. How much did the firm collect in the month of March? Assume that a year has 360 days.A. $240B. $250C. $330D. $350E. $43086. Smith and Johnson have expected sales of $380, $340, $430 and $480 for the months of January through April, respectively. The accounts receivable period is 15 days. How much did the firm collect in the month of March? Assume that a year has 360 days.A. $340B. $360C. $385D. $430E. $45587. Dokos, Inc. has a beginning receivables balance on January 1st of $560. Sales for January through April are $620, $680, $570 and $550, respectively. The accounts receivable period is 30 days. How much did the firm collect in the month of March? Assume that a year has 360 days.A. $550B. $570C. $620D. $625E. $68088. Baker Industries has a 45 day accounts receivable period. The estimated quarterly sales for this year, starting with the first quarter, are $1,200, $1,400, $1,900 and $3,200, respectively. How much does the firm expect to collect in the third quarter? Assume that a year has 360 days.A. $1,300B. $1,400C. $1,650D. $1,900E. $2,550。
罗斯公司理财题库cha16
Chapter 16Capital Structure: Basic Concepts Multiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:A. homemade leverage.B. dividend recapture.C. the weighted average cost of capital.D. private debt placement.E. personal offset.2. The proposition that the value of the firm is independent of its capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.3. The proposition that the cost of equity is a positive linear function of capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.4. The tax savings of the firm derived from the deductibility of interest expense is called the:A. interest tax shield.B. depreciable basis.C. financing umbrella.D. current yield.E. tax-loss carry forward savings.5. The unlevered cost of capital is:A. the cost of capital for a firm with no equity in its capital structure.B. the cost of capital for a firm with no debt in its capital structure.C. the interest tax shield times pretax net income.D. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.E. equal to the profit margin for a firm with some debt in its capital structure.6. The cost of capital for a firm, rWACC, in a zero tax environment is:A. equal to the expected earnings divided by market value of the unlevered firm.B. equal to the rate of return for that business risk class.C. equal to the overall rate of return required on the levered firm.D. is constant regardless of the amount of leverage.E. All of the above.7. The difference between a market value balance sheet and a book value balance sheet is that a market value balance sheet:A. places assets on the right hand side.B. places liabilities on the left hand side.C. does not equate the right hand with the left hand side.D. lists items in terms of market values, not historical costs.E. uses the market rate of return.8. The firm's capital structure refers to:A. the way a firm invests its assets.B. the amount of capital in the firm.C. the amount of dividends a firm pays.D. the mix of debt and equity used to finance the firm's assets.E. how much cash the firm holds.9. A general rule for managers to follow is to set the firm's capital structure such that:A. the firm's value is minimized.B. the firm's value is maximized.C. the firm's bondholders are made well off.D. the firms suppliers of raw materials are satisfied.E. the firms dividend payout is maximized.10. A levered firm is a company that has:A. Accounts Payable as the only liability on the balance sheet.B. some debt in the capital structure.C. all equity in the capital structure.D. All of the above.E. None of the above.11. A manager should attempt to maximize the value of the firm by:A. changing the capital structure if and only if the value of the firm increases.B. changing the capital structure if and only if the value of the firm increases to the benefit of inside management.C. changing the capital structure if and only if the value of the firm increases only to the benefits of the debtholders.D. changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.E. changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.12. The effect of financial leverage depends on the operating earnings of the company. Which of the following is not true?A. Below the indifference or break-even point in EBIT the non-levered structure is superior.B. Financial leverage increases the slope of the EPS line.C. Above the indifference or break-even point the increase in EPS for all equity structures is less than debt-equity structures.D. Above the indifference or break-even point the increase in EPS for all equity structures is greater than debt-equity structures.E. The rate of return on operating assets is unaffected by leverage.13. The Modigliani-Miller Proposition I without taxes states:A. a firm cannot change the total value of its outstanding securities by changing its capital structure proportions.B. when new projects are added to the firm the firm value is the sum of the old value plus the new.C. managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value.D. the determination of value must consider the timing and risk of the cash flows.E. None of the above.14. MM Proposition I without taxes is used to illustrate:A. the value of an unlevered firm equals that of a levered firm.B. that one capital structure is as good as another.C. leverage does not affect the value of the firm.D. capital structure changes have no effect on stockholders' welfare.E. All of the above.15. A key assumption of MM's Proposition I without taxes is:A. that financial leverage increases risk.B. that individuals can borrow on their own account at rates less than the firm.C. that individuals must be able to borrow on their own account at rates equal to the firm.D. managers are acting to maximize the value of the firm.E. All of the above.16. In an EPS-EBI graphical relationship, the slope of the debt ray is steeper than the equity ray. The debt ray has a lower intercept because:A. more shares are outstanding for the same level of EBI.B. the break-even point is higher with debt.C. a fixed interest charge must be paid even at low earnings.D. the amount of interest per share has only a positive effect on the intercept.E. the higher the interest rate the greater the slope.17. In an EPS-EBI graphical relationship, the debt ray and equity ray cross. At this point the equity and debt are:A. equivalent with respect to EPS but above and below this point equity is always superior.B. at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPS below this point.C. equal but away from breakeven equity is better as fewer shares are outstanding.D. at breakeven and MM Proposition II states that debt is the better choice.E. at breakeven and debt is the better choice below breakeven because small payments can be made.18. When comparing levered vs. unlevered capital structures, leverage works to increase EPS for high levels of EBIT because:A. interest payments on the debt vary with EBIT levels.B. interest payments on the debt stay fixed, leaving less income to be distributed over less shares.C. interest payments on the debt stay fixed, leaving more income to be distributed over less shares.D. interest payments on the debt stay fixed, leaving less income to be distributed over more shares.E. interest payments on the debt stay fixed, leaving more income to be distributed over more shares.19. Financial leverage impacts the performance of the firm by:A. maintaining the same level of volatility of the firm's EBIT.B. decreasing the volatility of the firm's EBIT.C. decreasing the volatility of the firm's net income.D. increasing the volatility of the firm's net income.E. None of the above.20. The increase in risk to equityholders when financial leverage is introduced is evidenced by:A. higher EPS as EBIT increases.B. a higher variability of EPS with debt than all equity.C. increased use of homemade leverage.D. equivalence value between levered and unlevered firms in the presence of taxes.E. None of the above.21. The reason that MM Proposition I does not hold in the presence of corporate taxation is because:A. levered firms pay less taxes compared with identical unlevered firms.B. bondholders require higher rates of return compared with stockholders.C. earnings per share are no longer relevant with taxes.D. dividends are no longer relevant with taxes.E. All of the above.22. MM Proposition I with corporate taxes states that:A. capital structure can affect firm value.B. by raising the debt-to-equity ratio, the firm can lower its taxes and thereby increase its total value.C. firm value is maximized at an all debt capital structure.D. All of the above.E. None of the above.23. The change in firm value in the presence of corporate taxes only is:A. positive as equityholders face a lower effective tax rate.B. positive as equityholders gain the tax shield on the debt interest.C. negative because of the increased risk of default and fewer shares outstanding.D. negative because of a reduction of equity outstanding.E. None of the above.24. A firm should select the capital structure which:A. produces the highest cost of capital.B. maximizes the value of the firm.C. minimizes taxes.D. is fully unlevered.E. has no debt.25. In a world of no corporate taxes if the use of leverage does not change the value of the levered firm relative to the unlevered firm is known as:A. MM Proposition III that the cost of stock is less than the cost of debt.B. MM Proposition I that leverage is invariant to market value.C. MM Proposition II that the cost of equity is always constant.D. MM Proposition I that the market value of the firm is invariant to the capital structure.E. MM Proposition III that there is no risk associated with leverage in a no tax world.26. Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:A. borrow some money and purchase additional shares of Bryco stock.B. maintain his current position as the debt of the firm did not affect his personal leverage position.C. sell some shares of Bryco stock and hold the proceeds in cash.D. sell some shares of Bryco stock and loan it out such that he creates a personal debt-equity ratio equal to that of the firm.E. create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the firm.27. The capital structure chosen by a firm doesn't really matter because of:A. taxes.B. the interest tax shield.C. the relationship between dividends and earnings per share.D. the effects of leverage on the cost of equity.E. homemade leverage.28. MM Proposition I with no tax supports the argument that:A. business risk determines the return on assets.B. the cost of equity rises as leverage rises.C. it is completely irrelevant how a firm arranges its finances.D. a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.E. financial risk is determined by the debt-equity ratio.29. The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.30. The concept of homemade leverage is most associated with:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.31. Which of the following statements are correct in relation to MM Proposition II with no taxes?I. The required return on assets is equal to the weighted average cost of capital. II. Financial risk is determined by the debt-equity ratio.III. Financial risk determines the return on assets.IV. The cost of equity declines when the amount of leverage used by a firm rises.A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only32. MM Proposition I with taxes supports the theory that:A. there is a positive linear relationship between the amount of debt in a levered firm and its value.B. the value of a firm is inversely related to the amount of leverage used by the firm.C. the value of an unlevered firm is equal to the value of a levered firm plus the value of the interest tax shield.D. a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.E. a firm's weighted average cost of capital increases as the debt-equity ratio of the firm rises.33. MM Proposition I with taxes is based on the concept that:A. the optimal capital structure is the one that is totally financed with equity.B. the capital structure of the firm does not matter because investors can use homemade leverage.C. the firm is better off with debt based on the weighted average cost of capital.D. the value of the firm increases as total debt increases because of the interest tax shield.E. the cost of equity increases as the debt-equity ratio of a firm increases.34. MM Proposition II with taxes:A. has the same general implications as MM Proposition II without taxes.B. reveals how the interest tax shield relates to the value of a firm.C. supports the argument that business risk is determined by the capital structure employed by a firm.D. supports the argument that the cost of equity decreases as the debt-equity ratio increases.E. reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.35. MM Proposition II is the proposition that:A. supports the argument that the capital structure of a firm is irrelevant to the value of the firm.B. the cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.C. a firm's cost of equity capital is a positive linear function of the firm's capital structure.D. the cost of equity is equivalent to the required return on the total assets of a firm.E. supports the argument that the size of the pie does not depend on how the pie is sliced.36. The interest tax shield has no value for a firm when:I. the tax rate is equal to zero.II. the debt-equity ratio is exactly equal to 1.III. the firm is unlevered.IV. a firm elects 100% equity as its capital structure.A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, and IV only37. The interest tax shield is a key reason why:A. the required rate of return on assets rises when debt is added to the capital structure.B. the value of an unlevered firm is equal to the value of a levered firm.C. the net cost of debt to a firm is generally less than the cost of equity.D. the cost of debt is equal to the cost of equity for a levered firm.E. firms prefer equity financing over debt financing.38. Which of the following will tend to diminish the benefit of the interest tax shield given a progressive tax rate structure?I. a reduction in tax ratesII. a large tax loss carryforwardIII. a large depreciation tax deductionIV. a sizeable increase in taxable incomeA. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV39. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?A. $20.0 millionB. $20.8 millionC. $21.0 millionD. $21.2 millionE. $21.3 million40. Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares. What is the total value of this firm if you ignore taxes?A. $15.5 millionB. $15.6 millionC. $16.0 millionD. $16.8 millionE. $17.2 million41. You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firm today if you ignore taxes?A. $4.8 millionB. $5.1 millionC. $5.4 millionD. $5.7 millionE. $6.0 million42. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes?A. 11.25%B. 12.21%C. 16.67%D. 19.88%E. 21.38%43. Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The required return on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition II with no taxes?A. .60B. .64C. .72D. .75E. .8044. The Backwoods Lumber Co. has a debt-equity ratio of .80. The firm's required return on assets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on MM Proposition II with no taxes?A. 6.76%B. 7.00%C. 7.25%D. 7.40%E. 7.50%45. The Winter Wear Company has expected earnings before interest and taxes of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A. $9,900B. $10,852C. $11,748D. $12,054E. $12,70046. Gail's Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% and the tax rate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?A. $2.4 millionB. $2.7 millionC. $3.3 millionD. $3.7 millionE. $3.9 million47. The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A. $48,600B. $50,000C. $52,680D. $56,667E. $60,60048. Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?A. $567,600B. $781,818C. $860,000D. $946,000E. $1,152,40049. An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of $150,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is the value of the levered firm?A. $696,429B. $907,679C. $941,429D. $1,184,929E. $1,396,42950. The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rate of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?A. .44B. .49C. .51D. .56E. .6251. Hey Guys!, Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm's cost of equity?A. 13.25%B. 13.89%C. 13.92%D. 14.14%E. 14.25%52. Anderson's Furniture Outlet has an unlevered cost of capital of 10%, a tax rate of 34%, and expected earnings before interest and taxes of $1,600. The company has $3,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?A. 8.67%B. 9.34%C. 9.72%D. 9.99%E. 10.46%53. Walter's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of debt?A. 7.92%B. 8.10%C. 8.16%D. 8.84%E. 9.00%54. Rosita's has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. The debt-equity ratio is .60 and the tax rate is .34. What is Rosita's unlevered cost of capital?A. 8.83%B. 12.30%C. 13.97%D. 14.08%E. 14.60%55. Your firm has a pre-tax cost of debt of 7% and an unlevered cost of capital of 13%. Your tax rate is 35% and your cost of equity is 15.26%. What is your debt-equity ratio?A. .43B. .49C. .51D. .54E. .5856. Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is the cost of equity if the tax rate is 34%?A. 7.52%B. 8.78%C. 15.98%D. 16.83%E. 17.30%57. Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, pay interest semiannually, and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?A. $6,125B. $6,309C. $9,500D. $17,500E. $18,02558. Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 34%?A. $58,500B. $60,100C. $60,750D. $61,200E. $62,25059. Juanita's Steak House has $12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. The tax rate is 34%. What is the present value of the tax shield?A. $2,823B. $2,887C. $4,080D. $4,500E. $4,63360. A firm has debt of $5,000, equity of $16,000, a leveraged value of $8,900,a cost of debt of 8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost of capital?A. 7.29%B. 7.94%C. 8.87%D. 10.40%E. 11.05%61. A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 60% debt. The interest rate on the debt would be 8%. Assuming there are no taxes or other imperfections, its cost of equity capital with the new capital structure would be _____.A. 9%B. 10%C. 13%D. 14%E. None of the above.62. A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections?A. 10.0%B. 13.5%C. 14.4%D. 18.0%E. None of the above.63. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0?A. 8%B. 10%C. 12%D. 14%E. 16%64. A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?A. 10%B. 15%C. 18%D. 21%E. None of the above.65. If a firm is unlevered and has a cost of equity capital of 12%, what would its cost of equity be if its debt-equity ratio became 2? The expected cost of debt is 8%.A. 14.0%B. 14.67%C. 16.0%D. 20.0%E. None of the above.66. A firm has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would its cost of equity capital with the new capital structure be?A. 10.3%B. 11.0%C. 11.2%D. 13.9%E. None of the above.67. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would its cost of equity be if the debt-to-equity ratio were 0?A. 11.11%B. 12.57%C. 13.33%D. 16.00%E. None of the above.68. A firm has a debt-to-equity ratio of .5. Its cost of equity is 22%, and its cost of debt is 16%. If the corporate tax rate is .40, what would its cost of equity be if the debt-to-equity ratio were 0?A. 14.00%B. 20.61%C. 21.07%D. 22.00%E. None of the above.69. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 14%. Its cost of debt is 10%. What is its cost of equity if the corporate tax rate is 50%?A. 14.0%B. 16.0%C. 17.5%D. 21.0%E. None of the above.70. What is the cost of equity for a firm if the corporate tax rate is 40%? The firm has a debt-to-equity ratio of 1.5. If it had no debt, its cost of equity would be 16%. Its current cost of debt is 10%.A. 17.4%B. 18.4%C. 19.6%D. 21.4%E. None of the above.71. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?A. 7.73%B. 10.00%C. 10.75%D. 12.50%E. None of the above.72. Batter's Home has 3,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 30%?A. $52,000B. $60,000C. $62,500D. $68,000E. $72,00073. Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield?A. $2,800B. $3,000C. $3,400D. $3,800E. $7.00074. A firm has debt of $7,000, equity of $12,000, a leveraged value of $8,900,a cost of debt of 7%, a cost of equity of 14%, and a tax rate of 30%. What is the firm's weighted average cost of capital?A. 8.45%B. 9.90%C. 10.65%D. 12.50%E. 14.00%Essay Questions75. Based on MM with taxes and without taxes, how much time should a financial manager spend analyzing the capital structure of his firm? What if the analysis is based on the static theory?76. Explain homemade leverage and why it matters.77. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, isn't the goal of the firm to maximize share value and minimize shareholder costs?Consider two firms, U and L, both with $50,000 in assets. Firm U is unlevered, and firm L has $20,000 of debt that pays 8% interest. Firm U has 1,000 shares outstanding, while firm L has 600 shares outstanding. Mike owns 20% of firm L and believes that leverage works in his favor. Steve tells Mike that this is an illusion, and that with the possibility of borrowing on his own account at 8% interest, he can replicate Mike's payout from firm L.78. Given a level of operating income of $2,500, show the specific strategy that Mike has in mind.79. After seeing Steve's analysis, Mike tells Steve that while his analysis looks good on paper, Steve will never be able to borrow at 8%, but would have to pay a more realistic rate of 12%. If Mike is right, what will Steve's payout be?80. Suppose the tax authorities allow firms to deduct their interest expense from operating income. Both firm U and firm L are in the 34% tax bracket. Show what happens to the market value of both firms if the debt held by firm L is permanent. Assume MM with taxes.。
罗斯《公司理财》名校考研(含复试)真题详解
罗斯《公司理财》名校考研（含复试）真题详解第1章公司理财导论一、单选题按资金的偿还期限分，金融市场可分为（）。
（浙江工商大学2011金融硕士）A．一级市场和二级市场B．同业拆借市场和长期债券市场C．货币市场和资本市场D．股票市场和债券市场【答案】C【解析】根据偿还期限不同，可将金融市场划分为货币市场和资本市场。
货币市场是指短期的债券市场，要在一年内偿还；资本市场是指长期债券和权益证券市场，其中长期债券的期限为一年以上。
二、概念题1证券市场（东北财大2007研）答：证券市场是有价证券发行与交易的网络和体系。
证券市场是金融市场的组成部分。
证券市场分为发行市场和交易市场。
证券市场的根本功能和作用在于按照市场方式调配社会资金，促进企业经营的合理化与提高效率，它对经济具有自发调节作用，发展证券市场可以增加政府对经济的调控力度，证券市场在产业结构调整中发挥着重要的作用。
现代证券市场具有筹资技术多样化、证券投资大众化和法人化、证券市场电脑化和现代化、国际化和自由化的特点。
2证券交易所（东北财大2007研）答：证券交易所是依据国家有关法律，经政府主管机关批准设立的证券集中竞价交易的有形场所。
各类有价证券（包括普通股、优先股、公司债券和政府债券等）凡符合规定都能在证券交易所，由证券经纪商进场买卖。
它为证券投资者提供了一个稳定的、公开交易的高效率市场。
证券交易所本身并不参与证券买卖，只不过提供交易场所和服务，同时也兼有管理证券交易的职能。
证券交易所就组织形式来说，主要有会员制和公司制两种。
三、简答题1简述公司理财的目标以及影响公司财务目标实现的因素。
（江西财大2004研）答：财务管理目标是指企业理财活动所希望实现的结果，是评价企业理财活动是否合理的基本标准。
财务管理目标制约着财务运行的基本特征和发展方向，是财务运行的一种驱动力。
不同的财务管理目标，会产生不同的财务管理运行机制，科学地设置财务管理目标，对优化理财行为，实现财务管理的良性循环，具有重要的意义。
罗斯《公司理财》期末试题和模拟题
《公司理财》复习资料一、单项选择题1、下列各项中，不能协调所有者与债权人之间矛盾的方式是（A）A.市场对公司强行接收或吞并B.债权人通过合同实施限制性借款C.债权人停止借款D.债权人收回借款2、在下列各项中，能够反映上市公司价值最大化目标实现程度的是（C）A.总资产报酬率B.净资产收益率C.每股市价D.每股利润3、作为财务管理目标，既能够考虑资金的时间价值和投资风险，又能避免企业的短期行为的是（B）A. 利润最大化B. 企业价值最大化C. 每股利润最大化D. 资本利润率最大化4、将利率分为基准利率和套算利率的依据是（A）A．利率的变动关系B．资金的供求关系C．利率形成机制D．利率的构成5、按照证券交易的方式和次数，将金融市场分为（D）A．现货市场和期货市场B．第一市场和第二市场C．短期金融市场和长期金融市场D．发行市场和交易市场6、在没有通货膨胀的情况下，纯利率是指（D）A．投资期望收益率B．银行贷款基准利率C．社会实际平均收益率D．没有风险的均衡点利率7、某企业2003年主营业务收入净额为36000万元，流动资产平均余额为4000万元，固定资产平均余额为8000万元。
假定没有其他资产，则该企业2003年的总资产周转率（A）次A．3.0B．3.4C．2.9D．3.28、在杜邦财务分析体系中，综合性最强的财务比率是（A）A．权益报酬率B．总资产净利率C．总资产周转率D．营业净利率9、下列各项中，不会影响流动比率的业务是（A）A．用现金购买短期债券B．用现金购买固定资产C．用存货进行对外长期投资D．从银行取得长期借款10、下列各项中，可能导致企业资产负债率变化的经济业务是（C）A．收回应收账款B．用现金购买债券C．接受所有者投资转入的固定资产D．以固定资产对外投资（按账面价值作价）11、某企业税前经营利润100万元，利息费用10万元，平均所得税率为30%，则该企业的净利润为（A）A．63万元B．80万元C．20万元D．97万元12、下列指标属于企业长期偿债能力衡量指标的是（C）A．固定资产周转率B．速动比率C．已获利息倍数D．总资产周转率13、企业大量增加速动资产可能导致的结果是（B）A．减少资金的机会成本B．增加资金的机会成本C．增加财务风险D．提高流动资产的收益率14、若流动比率大于1，下列说法正确的是（A）A．营运资本大于0B．短期偿债能力绝对有保证C．现金比率大于1D．速动比率大于115、某企业于年初存入银行10000元，假定年利息率为12%，每年复利两次。
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Chapter 16Capital Structure: Basic Concepts Multiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:A. homemade leverage.B. dividend recapture.C. the weighted average cost of capital.D. private debt placement.E. personal offset.2. The proposition that the value of the firm is independent of its capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.3. The proposition that the cost of equity is a positive linear function of capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.4. The tax savings of the firm derived from the deductibility of interest expense is called the:A. interest tax shield.B. depreciable basis.C. financing umbrella.D. current yield.E. tax-loss carry forward savings.5. The unlevered cost of capital is:A. the cost of capital for a firm with no equity in its capital structure.B. the cost of capital for a firm with no debt in its capital structure.C. the interest tax shield times pretax net income.D. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.E. equal to the profit margin for a firm with some debt in its capital structure.6. The cost of capital for a firm, rWACC, in a zero tax environment is:A. equal to the expected earnings divided by market value of the unlevered firm.B. equal to the rate of return for that business risk class.C. equal to the overall rate of return required on the levered firm.D. is constant regardless of the amount of leverage.E. All of the above.7. The difference between a market value balance sheet and a book value balance sheet is that a market value balance sheet:A. places assets on the right hand side.B. places liabilities on the left hand side.C. does not equate the right hand with the left hand side.D. lists items in terms of market values, not historical costs.E. uses the market rate of return.8. The firm's capital structure refers to:A. the way a firm invests its assets.B. the amount of capital in the firm.C. the amount of dividends a firm pays.D. the mix of debt and equity used to finance the firm's assets.E. how much cash the firm holds.9. A general rule for managers to follow is to set the firm's capital structure such that:A. the firm's value is minimized.B. the firm's value is maximized.C. the firm's bondholders are made well off.D. the firms suppliers of raw materials are satisfied.E. the firms dividend payout is maximized.10. A levered firm is a company that has:A. Accounts Payable as the only liability on the balance sheet.B. some debt in the capital structure.C. all equity in the capital structure.D. All of the above.E. None of the above.11. A manager should attempt to maximize the value of the firm by:A. changing the capital structure if and only if the value of the firm increases.B. changing the capital structure if and only if the value of the firm increases to the benefit of inside management.C. changing the capital structure if and only if the value of the firm increases only to the benefits of the debtholders.D. changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.E. changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.12. The effect of financial leverage depends on the operating earnings of the company. Which of the following is not true?A. Below the indifference or break-even point in EBIT the non-levered structure is superior.B. Financial leverage increases the slope of the EPS line.C. Above the indifference or break-even point the increase in EPS for all equity structures is less than debt-equity structures.D. Above the indifference or break-even point the increase in EPS for all equity structures is greater than debt-equity structures.E. The rate of return on operating assets is unaffected by leverage.13. The Modigliani-Miller Proposition I without taxes states:A. a firm cannot change the total value of its outstanding securities by changing its capital structure proportions.B. when new projects are added to the firm the firm value is the sum of the old value plus the new.C. managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value.D. the determination of value must consider the timing and risk of the cash flows.E. None of the above.14. MM Proposition I without taxes is used to illustrate:A. the value of an unlevered firm equals that of a levered firm.B. that one capital structure is as good as another.C. leverage does not affect the value of the firm.D. capital structure changes have no effect on stockholders' welfare.E. All of the above.15. A key assumption of MM's Proposition I without taxes is:A. that financial leverage increases risk.B. that individuals can borrow on their own account at rates less than the firm.C. that individuals must be able to borrow on their own account at rates equal to the firm.D. managers are acting to maximize the value of the firm.E. All of the above.16. In an EPS-EBI graphical relationship, the slope of the debt ray is steeper than the equity ray. The debt ray has a lower intercept because:A. more shares are outstanding for the same level of EBI.B. the break-even point is higher with debt.C. a fixed interest charge must be paid even at low earnings.D. the amount of interest per share has only a positive effect on the intercept.E. the higher the interest rate the greater the slope.17. In an EPS-EBI graphical relationship, the debt ray and equity ray cross. At this point the equity and debt are:A. equivalent with respect to EPS but above and below this point equity is always superior.B. at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPS below this point.C. equal but away from breakeven equity is better as fewer shares are outstanding.D. at breakeven and MM Proposition II states that debt is the better choice.E. at breakeven and debt is the better choice below breakeven because small payments can be made.18. When comparing levered vs. unlevered capital structures, leverage works to increase EPS for high levels of EBIT because:A. interest payments on the debt vary with EBIT levels.B. interest payments on the debt stay fixed, leaving less income to be distributed over less shares.C. interest payments on the debt stay fixed, leaving more income to be distributed over less shares.D. interest payments on the debt stay fixed, leaving less income to be distributed over more shares.E. interest payments on the debt stay fixed, leaving more income to be distributed over more shares.19. Financial leverage impacts the performance of the firm by:A. maintaining the same level of volatility of the firm's EBIT.B. decreasing the volatility of the firm's EBIT.C. decreasing the volatility of the firm's net income.D. increasing the volatility of the firm's net income.E. None of the above.20. The increase in risk to equityholders when financial leverage is introduced is evidenced by:A. higher EPS as EBIT increases.B. a higher variability of EPS with debt than all equity.C. increased use of homemade leverage.D. equivalence value between levered and unlevered firms in the presence of taxes.E. None of the above.21. The reason that MM Proposition I does not hold in the presence of corporate taxation is because:A. levered firms pay less taxes compared with identical unlevered firms.B. bondholders require higher rates of return compared with stockholders.C. earnings per share are no longer relevant with taxes.D. dividends are no longer relevant with taxes.E. All of the above.22. MM Proposition I with corporate taxes states that:A. capital structure can affect firm value.B. by raising the debt-to-equity ratio, the firm can lower its taxes and thereby increase its total value.C. firm value is maximized at an all debt capital structure.D. All of the above.E. None of the above.23. The change in firm value in the presence of corporate taxes only is:A. positive as equityholders face a lower effective tax rate.B. positive as equityholders gain the tax shield on the debt interest.C. negative because of the increased risk of default and fewer shares outstanding.D. negative because of a reduction of equity outstanding.E. None of the above.24. A firm should select the capital structure which:A. produces the highest cost of capital.B. maximizes the value of the firm.C. minimizes taxes.D. is fully unlevered.E. has no debt.25. In a world of no corporate taxes if the use of leverage does not change the value of the levered firm relative to the unlevered firm is known as:A. MM Proposition III that the cost of stock is less than the cost of debt.B. MM Proposition I that leverage is invariant to market value.C. MM Proposition II that the cost of equity is always constant.D. MM Proposition I that the market value of the firm is invariant to the capital structure.E. MM Proposition III that there is no risk associated with leverage in a no tax world.26. Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:A. borrow some money and purchase additional shares of Bryco stock.B. maintain his current position as the debt of the firm did not affect his personal leverage position.C. sell some shares of Bryco stock and hold the proceeds in cash.D. sell some shares of Bryco stock and loan it out such that he creates a personal debt-equity ratio equal to that of the firm.E. create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the firm.27. The capital structure chosen by a firm doesn't really matter because of:A. taxes.B. the interest tax shield.C. the relationship between dividends and earnings per share.D. the effects of leverage on the cost of equity.E. homemade leverage.28. MM Proposition I with no tax supports the argument that:A. business risk determines the return on assets.B. the cost of equity rises as leverage rises.C. it is completely irrelevant how a firm arranges its finances.D. a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.E. financial risk is determined by the debt-equity ratio.29. The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.30. The concept of homemade leverage is most associated with:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.31. Which of the following statements are correct in relation to MM Proposition II with no taxes?I. The required return on assets is equal to the weighted average cost of capital.II. Financial risk is determined by the debt-equity ratio.III. Financial risk determines the return on assets.IV. The cost of equity declines when the amount of leverage used by a firm rises.A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only32. MM Proposition I with taxes supports the theory that:A. there is a positive linear relationship between the amount of debt in a levered firm and its value.B. the value of a firm is inversely related to the amount of leverage used by the firm.C. the value of an unlevered firm is equal to the value of a levered firm plus the value of the interest tax shield.D. a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.E. a firm's weighted average cost of capital increases as the debt-equity ratio of the firm rises.33. MM Proposition I with taxes is based on the concept that:A. the optimal capital structure is the one that is totally financed with equity.B. the capital structure of the firm does not matter because investors can use homemade leverage.C. the firm is better off with debt based on the weighted average cost of capital.D. the value of the firm increases as total debt increases because of the interest tax shield.E. the cost of equity increases as the debt-equity ratio of a firm increases.34. MM Proposition II with taxes:A. has the same general implications as MM Proposition II without taxes.B. reveals how the interest tax shield relates to the value of a firm.C. supports the argument that business risk is determined by the capital structure employed by a firm.D. supports the argument that the cost of equity decreases as the debt-equity ratio increases.E. reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.35. MM Proposition II is the proposition that:A. supports the argument that the capital structure of a firm is irrelevant to the value of the firm.B. the cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.C. a firm's cost of equity capital is a positive linear function of the firm's capital structure.D. the cost of equity is equivalent to the required return on the total assets of a firm.E. supports the argument that the size of the pie does not depend on how the pie is sliced.36. The interest tax shield has no value for a firm when:I. the tax rate is equal to zero.II. the debt-equity ratio is exactly equal to 1.III. the firm is unlevered.IV. a firm elects 100% equity as its capital structure.A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, and IV only37. The interest tax shield is a key reason why:A. the required rate of return on assets rises when debt is added to the capital structure.B. the value of an unlevered firm is equal to the value of a levered firm.C. the net cost of debt to a firm is generally less than the cost of equity.D. the cost of debt is equal to the cost of equity for a levered firm.E. firms prefer equity financing over debt financing.38. Which of the following will tend to diminish the benefit of the interest tax shield given a progressive tax rate structure?I. a reduction in tax ratesII. a large tax loss carryforwardIII. a large depreciation tax deductionIV. a sizeable increase in taxable incomeA. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV39. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?A. $20.0 millionB. $20.8 millionC. $21.0 millionD. $21.2 millionE. $21.3 million40. Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares. What is the total value of this firm if you ignore taxes?A. $15.5 millionB. $15.6 millionC. $16.0 millionD. $16.8 millionE. $17.2 million41. You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firm today if you ignore taxes?A. $4.8 millionB. $5.1 millionC. $5.4 millionD. $5.7 millionE. $6.0 million42. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes?A. 11.25%B. 12.21%C. 16.67%D. 19.88%E. 21.38%43. Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The required return on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition II with no taxes?A. .60B. .64C. .72D. .75E. .8044. The Backwoods Lumber Co. has a debt-equity ratio of .80. The firm's required return on assets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on MM Proposition II with no taxes?A. 6.76%B. 7.00%C. 7.25%D. 7.40%E. 7.50%45. The Winter Wear Company has expected earnings before interest and taxes of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A. $9,900B. $10,852C. $11,748D. $12,054E. $12,70046. Gail's Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% and the tax rate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?A. $2.4 millionB. $2.7 millionC. $3.3 millionD. $3.7 millionE. $3.9 million47. The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A. $48,600B. $50,000C. $52,680D. $56,667E. $60,60048. Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?A. $567,600B. $781,818C. $860,000D. $946,000E. $1,152,40049. An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of $150,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is the value of the levered firm?A. $696,429B. $907,679C. $941,429D. $1,184,929E. $1,396,42950. The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rate of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?A. .44B. .49C. .51D. .56E. .6251. Hey Guys!, Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm's cost of equity?A. 13.25%B. 13.89%C. 13.92%D. 14.14%E. 14.25%52. Anderson's Furniture Outlet has an unlevered cost of capital of 10%, a tax rate of 34%, and expected earnings before interest and taxes of $1,600. The company has $3,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?A. 8.67%B. 9.34%C. 9.72%D. 9.99%E. 10.46%53. Walter's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of debt?A. 7.92%B. 8.10%C. 8.16%D. 8.84%E. 9.00%54. Rosita's has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. The debt-equity ratio is .60 and the tax rate is .34. What is Rosita's unlevered cost of capital?A. 8.83%B. 12.30%C. 13.97%D. 14.08%E. 14.60%55. Your firm has a pre-tax cost of debt of 7% and an unlevered cost of capital of 13%. Your tax rate is 35% and your cost of equity is 15.26%. What is your debt-equity ratio?A. .43B. .49C. .51D. .54E. .5856. Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is the cost of equity if the tax rate is 34%?A. 7.52%B. 8.78%C. 15.98%D. 16.83%E. 17.30%57. Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, pay interest semiannually, and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?A. $6,125B. $6,309C. $9,500D. $17,500E. $18,02558. Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 34%?A. $58,500B. $60,100C. $60,750D. $61,200E. $62,25059. Juanita's Steak House has $12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. The tax rate is 34%. What is the present value of the tax shield?A. $2,823B. $2,887C. $4,080D. $4,500E. $4,63360. A firm has debt of $5,000, equity of $16,000, a leveraged value of $8,900, a cost of debt of 8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost of capital?A. 7.29%B. 7.94%C. 8.87%D. 10.40%E. 11.05%61. A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 60% debt. The interest rate on the debt would be 8%. Assuming there are no taxes or other imperfections, its cost of equity capital with the new capitalstructure would be _________ .A. 9%B. 10%C. 13%D. 14%E. None of the above.62. A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections?A. 10.0%B. 13.5%C. 14.4%D. 18.0%E. None of the above.63. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0?A. 8%B. 10%C. 12%D. 14%E. 16%64. A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?A. 10%B. 15%C. 18%D. 21%E. None of the above.65. If a firm is unlevered and has a cost of equity capital of 12%, what would its cost of equity be if its debt-equity ratio became 2? The expected cost of debt is 8%.A. 14.0%B. 14.67%C. 16.0%D. 20.0%E. None of the above.66. A firm has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would its cost of equity capital with the new capital structure be?A. 10.3%B. 11.0%C. 11.2%D. 13.9%E. None of the above.67. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would its cost of equity be if the debt-to-equity ratio were 0?A. 11.11%B. 12.57%C. 13.33%D. 16.00%E. None of the above.68. A firm has a debt-to-equity ratio of .5. Its cost of equity is 22%, and its cost of debt is 16%. If the corporate tax rate is .40, what would its cost of equity be if the debt-to-equity ratio were 0?A. 14.00%B. 20.61%C. 21.07%D. 22.00%E. None of the above.69. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 14%. Its cost of debt is 10%. What is its cost of equity if the corporate tax rate is 50%?A. 14.0%B. 16.0%C. 17.5%D. 21.0%E. None of the above.70. What is the cost of equity for a firm if the corporate tax rate is 40%? The firm has a debt-to-equity ratio of 1.5. If it had no debt, its cost of equity would be 16%. Its current cost of debt is 10%.A. 17.4%B. 18.4%C. 19.6%D. 21.4%E. None of the above.71. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?A. 7.73%B. 10.00%C. 10.75%D. 12.50%E. None of the above.72. Batter's Home has 3,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 30%?A. $52,000B. $60,000C. $62,500D. $68,000E. $72,00073. Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield?A. $2,800B. $3,000C. $3,400D. $3,800E. $7.00074. A firm has debt of $7,000, equity of $12,000, a leveraged value of $8,900, a cost of debt of 7%, a cost of equity of 14%, and a tax rate of 30%. What is the firm's weighted average cost of capital?A. 8.45%B. 9.90%C. 10.65%D. 12.50%E. 14.00%Essay Questions75. Based on MM with taxes and without taxes, how much time should a financial manager spend analyzing the capital structure of his firm? What if the analysis is based on the static theory?76. Explain homemade leverage and why it matters.77. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, isn't the goal of the firm to maximize share value and minimize shareholder costs? Consider two firms, U and L, both with $50,000 in assets. Firm U is unlevered, and firm L has $20,000 of debt that pays 8% interest. Firm U has 1,000 shares outstanding, while firm L has 600 shares outstanding. Mike owns 20% of firm L and believes that leverage works in his favor. Steve tells Mike that this is an illusion, and that with the possibility of borrowing on his own account at8% interest, he can replicate Mike's payout from firm L.78. Given a level of operating income of $2,500, show the specific strategy that Mike has in mind.79. After seeing Steve's analysis, Mike tells Steve that while his analysis looks good on paper, Steve will never be able to borrow at 8%, but would have to pay a more realistic rate of 12%. If Mike is right, what will Steve's payout be?80. Suppose the tax authorities allow firms to deduct their interest expense from operating income. Both firm U and firm L are in the 34% tax bracket. Show what happens to the market value of both firms if the debt held by firm L is permanent. Assume MM with taxes.。