1) A firm's _____________ is the set of policies it has regarding its sources of financing and the particular proportions in which they will be used

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1) A firm's _____________ is the set of policies it has regarding its sources of financing and the particular proportions in which they will be used.

 

Financial policy

Opportunity cost

Fiscal policy

Flotation cost

 

2-Walmart changes its capital structure from 30% debt and 70% equity to 50% debt and 50% equity. Everything else stays the same. Its weighted average cost of capital will 

Increase

Decrease

Stay the same

More information is needed to answer the question

 

3- Best Chocolate corporation paid is a dividend of $6.00 at the end of the year. Dividends are expected to grow at a constant rate of 6.5% indefinitely. The investor's rate of return for a firm like Best Chocolate characteristics is 16%. Compute the value of the stock.

$53.17

$49.97

$63.16

$59.60

 

4-AT&T Inc. (T) has a preferred stock issue outstanding on which it pays an annual dividend of $1.95. The stock price is currently at $36.91. If the company were to sell a new issue of preferred stock today with the same characteristics as its outstanding issue, it would incur flotation costs of $1.23 per share. What would you estimate the cost of preferred stock financing to be for the firm?

6.57%

5.32%

5.47%

6.31%

 

5-The present market price for preferred stock is $65.50. If the stock pays a dividend of $3.14, what is the expected rate of return?

6.9%

4.79%

8.69%

7.2%

 

6-The value of a bond is affected by which of the following?

The amount and timing of the asset's expected cash flows

The riskiness of cash flows

The investor's required date of return for undertaking the investment

All of the above

 

7-target's bonds mature in 7 years and have a face value of $1,000. The bond makes semi-annual payments  on a coupon interest of 7%. The market requires an interest rate of 8% on these bonds. What is the current market price of the bond? 

$947.18

$894.07

$874.37

$907.54

 

8-Which of the following are characteristics of preferred stock?

It has no fixed maturity date

It has protective provisions which come into effect in the event of non-payment of dividends

Can be converted into a predetermined number of shares of common stock

All the above

 

9-Which of the following is not a characteristic of common stock.

Common stock has a residual claim on assets in the case of liquidation

Common shareholders have the right to residual income before preferred stockholders

Common shareholders have limited liability in case of bankruptcy

None of the above, they are all true.

 

10-What is the relationship between bonds and interest rates?

As interest rates increase, the value of the bond decreases

As interest rates increase, the value of the bond increases

As interest rates decrease, the value of the bond decreases

None of the above