Value of Common Equity (M's)
Shares of Common Stock Outstanding
Price per share of Common Stock
Market Value of Common Stock
Total Assets
$2,325.90
145
$34.87
$5,056.15
Memo: Book Value of Equity
$1,607
Cost of Common Equity using CAPM
Risk Free Rate
Beta
33. A levered firm has a target capital structure of 30 percent debt and 70 percent
equity. The aftertax cost of debt is 6.5 percent, the tax rate is 34 percent, and the cost
of equity is 12.3 percent. The firm is considering a project that is equally as
49. The hypothesis that market prices reflect all publicly available information is called
_ form
efficiency.
A. open
B. strong
C. semistrong
D. weak
E. stable
50. If the financial markets are efficient, then investors should expect their investments
in t
27. The Red Hen currently has a debttoequity ratio of .45, its cost of equity is 13.6
percent, and its
beta is 1.49. The pretax cost of debt is 7.8 percent, the tax rate is 35 percent, and the
riskfree rate is 3.1 percent. The firm's target debttoequity r
38. Buster's Ice Cream has 2,500 bonds outstanding that are selling for $1,020 each and
yielding a
pretax 7.2 percent. There 60,000 shares of common stock outstanding with a beta of
1.3 and a market price of $56 a share. The riskfree rate is 4 percent, th
61. In examining the issue of whether the choice of accounting methods affects stock
prices, studies have found that:
A. the decision between LIFO and FIFO for inventory accounting can significantly affect
stock
prices.
B. a firm can affect its stock pric
54. Your best friend works in the finance office of the Delta Corporation. You are aware
that this friend trades Delta stock based on information he overhears in the office. You
know that this information is not known to the general public. Your friend co
21. When computing the weights to be used in a project's WACC equation, you should
use the:
A. proportions of debt and equity that will finance the project.
B. current market values of debt and equity.
C. average market weights of debt and equity that are
14. Firms A and B are identical except for their capital structures. Firm A is an allequity
firm while Firm B is levered. Given this, you can assume that Firm B's equity beta will be
_ Firm A's beta and its debt beta will be:
A. greater than; equal to zer
8. To calculate beta you divide the _ of the stock with the market portfolio by the
_ of the
market portfolio.
A. covariance; variance
B. variance; covariance
C. standard deviation; variance
D. expected return; variance
E. covariance; standard deviation
9
1. The discount rate for a project should equal the:
A. cost of equity of the firm.
B. expected return on a financial asset of comparable risk.
C. discount rate used on the firm's last profitable project.
D. firm's weighted average cost of capital.
E. mar
Ross, Westerfield, Jaffe, and Jordan's Spreadsheet Master
Corporate Finance, 11th edition
by Brad Jordan and Joe Smolira
Version 11.0
Chapter 12
In these spreadsheets, you will learn how to use the following Excel
Multifactor Regression Estimates
The foll
Ross, Westerfield, Jaffe, and Jordan's Spreadsheet Master
Corporate Finance, 11th edition
by Brad Jordan and Joe Smolira
Version 11.0
Chapter 22
In these spreadsheets, you will learn how to use the following Excel
EXP
LN
NORMSDIST
ActiveX Control
The foll
42. Metal Roofs has an equity beta of 1.65, a capital structure with 2 parts of debt for
every 3 parts of equity, and a zero tax rate. What is its asset beta?
A. 1.48
B. .40
C. 1.10
D. 1.06
E. .99
43. Which of these help prevent arbitrage from totally cor