A firm currently has no debt and its equity has a

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#6. A firm currently has no debt and its equity has a beta of 1.0. The risk-free rate is 4% and the market risk premium is 6%. The corporate tax rate is 40%. What is this firm’s r wacc ? (a) 6% (b) 8% (c) 10% (d) 12% (e) none of the above
#7. Spartan Corp. has a very small board of directors composed of only 3 people. The firm is conducting its annual election to choose these 3 individuals to serve on the board. Spartan has cumulative voting. There are 1,000,000 shares outstanding and you own 400,000 of these shares. You really want your marketing professor appointed to Spartan's board. Can you guarantee that she will be elected?
#8. In financing their spending needs in any given year, which of the following is typically the largest/most important source of funds for U.S. corporations?
#9. In the Marriott case, when Marriott attempts to calculate a discount rate for a new hotel we recommended that they use:
#10. Modigliani and Miller’s Proposition 1 in a world with no taxes or financial distress costs states that _________. (a) the total value of a firm’s bonds is independent of capital structure (b) the total value of the sum of all of a firm’s stock and bonds is independent of capital structure (c) a firm’s r wacc is increases when the debt-equity ratio increases
#11. In the Marriott case, we argued that the risk-free interest rate that should enter into any calculation of a cost of capital should correspond to a Treasury bond _______________ that is ___________ the project that is being discounted (i.e., the project for which you are calculating an NPV).
#12. According to the Modigliani and Miller theory with corporate taxes but no personal taxes or financial distress costs which of the following is true?
#13. Cavalier Corp. and Hokie Corp. are identical in all respects except capital structure. Cavalier's bonds have a market value of $400 million and Cavalier's stock has a market value of $600 million. Hokie's bonds have a market value of $200 million and Hokie's stock has a market value of $700 million. Is this data consistent with the Modigliani and Miller theory in a world with no taxes or financial distress costs?

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