QUESTION:
6
[QUESTION BANK ID:
269628]
CORRECT
As a member of UA Corporation’s financial staff, you must estimate the Year 1 cash flow for a proposed
project with the following data. What is the Year 1 cash flow?
TYPE:
MULTIPLE CHOICE
Sales revenues, each year
$42,500
Depreciation
$10,000
Other operating costs
$17,000
Interest expense
$4,000
Tax rate
35.0%

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A
$16,351

B
$17,212
C
$18,118
D
$19,071
E
$20,075
QUESTION:
7
[QUESTION BANK ID:
269611]
CORRECT
Assume that Kish Inc. hired you as a consultant to help estimate its cost of common equity. You have
obtained the following data: D
0
= $0.90; P
0
= $27.50; and g = 7.00% (constant). Based on the DCF
approach, what is the cost of common equity assuming no flotation costs?
TYPE:
MULTIPLE CHOICE

QUESTION:
8
[QUESTION BANK ID:
269634]
TYPE:
MULTIPLE CHOICE

CORRECT
Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend
policy and also maintains its target capital structure, what will its payout ratio be?
EBIT
$2,000,000
Capital budget
$850,000
Interest rate
10%
% Debt
40%
Debt outstanding
$5,000,000
% Equity
60%
Shares outstanding
$5,000,000
Tax rate
40%
B
C
D
E