98%(41)40 out of 41 people found this document helpful
This preview shows page 2 - 6 out of 11 pages.
QUESTION:2[QUESTION BANK ID:269616]TYPE:MULTIPLE CHOICECORRECTDaves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information.(1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. (2) The company’s tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock’s beta is 1.20. (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses the CAPM to estimate
the cost of common stock, and it does not expect to issue any new shares (so no flotation costs). What isits WACC? << HIDE ANSWERSA7.16%B7.54%C7.93%D8.35%E8.79%QUESTION:3[QUESTION BANK ID:269486]TYPE:MULTIPLE CHOICECORRECTWhat is the amount of the annual interest tax shield for a firm with $3 million in debt that pays 12% interest if the firm is in the 35% tax bracket? << HIDE ANSWERS
QUESTION:4[QUESTION BANK ID:269624]TYPE:MULTIPLE CHOICECORRECTJazz World Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. WACC:14.00%Year01234Cashflows-$1,200$400$425$450$475<< HIDE ANSWERS