homework 7

# homework 7 - 1)If t he corporate tax rate is 35 what is the...

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Picture 1 Picture 2 Picture 3 Picture 4 Picture 5 Picture 6 Picture 7 Picture 8 Picture 9 Picture 10 Picture 21 Picture 22 Picture 23 Picture 24 Picture 25 Picture 26 Picture 33 Picture 36 Picture 37 Picture 38 Picture 39 Picture 40 Picture 41 Picture 50 1 )If the corporate tax rate is 35%, what is the maximum effective tax rate on dividends received by another corporation? 10.5% 30% 20% 11.8% 10.3% 35% 21.9% 0% 21% 2) When a firm has no debt, then such a firm is known as: I) An unlevered firm II) A levered firm III) An all-equity firm I and III only III only II only I only II and III only 3) Given the following data for U&P Company: Debt (D) = \$100 million; Equity (E) = \$300 Million; rD = 6%; rE = 12% and TC = 30%. Calculate the after-tax weighted average cost of capital (WACC): 4) Which of the following observations would provide evidence against the strong form of efficient market theory? I) Mutual fund managers do not on average make superior returns II) In any year approximately 50% of all pension funds outperform the market III) Managers who trade in their own firm's stocks make superior returns III only I only II and III only I and III only II only 5) Analysis of past monthly movements in Wal-Mart's stock price has produced the following estimates: =-0.0066 and =1.85. If the market index subsequently rises by 5% one month and Wal-Mart's stock price rises by 3%, what is the expected change in Wal-Mart's stock price in percent? % If the market index subsequently rises by 5% one month and Wal-Mart's stock price rises by 3%, what is the abnormal change in Wal-Mart's stock price in percent?

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Picture 51 Picture 78 Picture 82 Picture 83 Picture 84 Picture 85 Picture 86 Picture 87 Picture 95 Picture 96 Picture 97 Picture 98 Picture 99 Picture 100 Picture 107 Picture 108 Picture 109 Picture 110 Picture 111 Picture 112 Picture 119 % [Hint: Make sure to give your answer in percent!] 6) A firm in Australia earns a pretax profit of \$A30 per share. It pays a corporate tax of \$A9 per share (30% tax rate) in taxes. The firm pays the remaining cash in dividends to a shareholder in the 40% tax bracket. What is the amount of tax paid by the shareholder under the imputation tax system? \$A 7) If firm U is unlevered and firm L is levered, then which of the following is true: I II and III I only II only III only I and II only 8) Which of the following is a statement of weak form efficiency? I) If markets are efficient in the weak form, then it is impossible to make consistently superior profits by
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