chap12 - You are considering a recapitalization plan that...

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Sheet1 Page 1 You are considering a recapitalization plan that would convert Bavarian Brew (BB) from an all equity capital structure to one in c What is the breakeven level of EBIT where EPS are the same for stockholders under the current and the proposed capital stru c a. $810,000 b. $1,250,000 c. $945,000 d. $1,350,000 status: not answered () correct: a your answer: -------------------------------------------------------------------------------- 2 The legal proceeding for liquidating or reorganizing a firm operating in default is called: a. a tender offer. b. bankruptcy. c. a proxy fight. d. a takeover. status: not answered () correct: b your answer: -------------------------------------------------------------------------------- 3 The complete termination of the firm as a going concern is called a: a. merger. b. reorganization. c. divestiture. d. liquidation. status: not answered () correct: d your answer: -------------------------------------------------------------------------------- 4 The unlevered cost of capital for Bavarian Brew is 15% and its cost of equity is 19.05%. Assuming a debt equity ratio of .45 w a. 6%
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Sheet1 Page 2 b. 5% c. 7% d. 8% status: not answered () correct: a your answer: -------------------------------------------------------------------------------- 5 You are considering a recapitalization plan that would convert Bavarian Brew (BB) from an all equity capital structure to one At which level of EBIT will BB shareholders earn a zero EPS under the proposed capital structure? a. $0 b. $150,000 c. $215,000 d. $324,000 status: not answered () correct: d your answer: -------------------------------------------------------------------------------- 6 The proposition that the value of a firm is independent of its capital structure is called: a. proposition I. b. proposition II. c. the capital asset pricing model. d. the law of one price. status: not answered () correct: a your answer: -------------------------------------------------------------------------------- 7 Bavarian Brew has an EBIT of $1,500,000. There is $5 million of debt outstanding with a required rate of return of 8%. The r e What is the present value of Bavarian Brew's interest tax shield? a. $5,000,000
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Sheet1 Page 3 b. $1,750,000 c. $2,500,000 d. $3,250,000 status: not answered () correct: b your answer: -------------------------------------------------------------------------------- 8 You are considering a recapitalization plan that would convert Bavarian Brew (BB) from an all equity capital structure to one What is the required return of the firm's stock before the restructuring according to M and M Proposition I? a. 9%
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This note was uploaded on 08/26/2011 for the course ECON 515 taught by Professor John during the Spring '11 term at American University of Kuwait.

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chap12 - You are considering a recapitalization plan that...

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