11 - Name Chapter 11--Risk-Adjusted Expected Rates of...

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Unformatted text preview: Name Chapter 11--Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach Description Instructions Modify Add Question Here Question 1 Multiple Choice 0 points Modify Remove Question Which of the following is not a problem with using a dividend-based valuation formula Answer dividends are arbitrarily established dividends represent a transfer of wealth to shareholders some firms do not pay a regular periodic dividend it is a challenge to forecast the final liquidating dividend Add Question Here Question 2 Multiple Choice 0 points Modify Remove Question Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions): Assuming that riskless rate is 4.2% and the market premium is 6.2% calculate Zolar 's cost of equity capital: Total Assets $6,840 Interest-Bearing Debt $3,562 Average Pre-tax borrowing cost 11.5% Common Equity: Book Value $2,560 Market Value $12,850 Income Tax Rate 35% Market Equity Beta 1.24 Answer 10.4% 7.69% 11.89% 2.0% Correct Feedback cost of equity capital = .042 + 1.24(.062) Incorrect Feedback cost of equity capital = .042 + 1.24(.062) Add Question Here Question 3 Multiple Choice 0 points Modify Remove Question Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions): Determine the weight on debt capital that should be used to calculate Zolar 's weighted-average cost of capital: Total Assets $6,840 Interest-Bearing Debt $3,562 Average Pre-tax borrowing cost 11.5% Common Equity: Book Value $2,560 Market Value $12,850 Income Tax Rate 35% Market Equity Beta 1.24 Answer 21.7% 78.3% 50% 58.2% Correct Feedback Debt 3,562 21.7% Market Value of Equity 12,850 78.3% Total 16,412 100% Incorrect Feedback Debt 3,562 21.7% Market Value of Equity 12,850 78.3% Total 16,412 100% Add Question Here Question 4 Multiple Choice 0 points Modify Remove Question Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions): Determine the weight on equity capital that should be used to calculate Zolar 's weighted-average cost of capital: Total Assets $6,840 Interest-Bearing Debt $3,562 Average Pre-tax borrowing cost 11.5% Common Equity: Book Value $2,560 Market Value $12,850 Income Tax Rate 35% Market Equity Beta 1.24 Answer 21.7% 78.3% 41.8% 50% Correct Feedback Debt 3,562 21.7% Market Value of Equity 12,850 78.3% Total 16,412 100% Incorrect Feedback Debt 3,562 21.7% Market Value of Equity 12,850 78.3% Total 16,412 100% Add Question Here Question 5 Multiple Choice 0 points Modify Remove Question Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions): Using the above information, calculate Zolar 's weighted-average cost of capital: Total Assets $6,840 Interest-Bearing Debt $3,562 Average Pre-tax borrowing cost 11.5% Common Equity: Book Value $2,560 Market Value $12,850 Income Tax Rate 35% Market Equity Beta 1.24 1....
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This note was uploaded on 03/06/2012 for the course ACCT 6344 taught by Professor Mark during the Fall '11 term at University of Texas at Austin.

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11 - Name Chapter 11--Risk-Adjusted Expected Rates of...

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