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Question;1. Genaro needs to capture a return of;40 percent for his one-year investment in a property. He believes that he can;sell the property at the end of the year for $150,000 and that the property;will provide him with rental income of $25,000. What is the maximum amount that;Genaro should be willing to pay for the property?;$150,000;$112,500;$125,000;$137,500;2. The process of identifying the bundle of projects that creates the greatest;total value and allocating the available capital to the projects is known as;Budgeting;Rationing;capital rationing;risk analysis;3. You are considering a project that has an initial cost of $1,200,000. If you;take the project, it will produce net cash flows of $300,000 per year for the;next six years. If the appropriate discount rate for the project is 10 percent;what is the profitability index of the project?;1.09;2.09;2.18;0.09;4. What might cause a firm to face capital rationing?;If a firm rejects some capital;investments that are expected to generate positive NPV?s;If investors require returns for their;capital that are too high;If a firm has several projects that are expected;to generate negative IRR?s;If a firm has more than one project with;a positive NPV;5. The WACC for a firm is 19.75 percent. You know that the firm is financed;with $75 million of equity and $25 million of debt. The cost of debt capital is;7 percent. What is the cost of equity for the firm?;19.75%;24.00%;32.50%;58.00%;6. Bellamee, Inc., has semiannual bonds;outstanding with five years to maturity and are priced at $920.87. If the bonds;have a coupon rate of 7 percent, then what is the YTM for the bonds?;9.0%;9.2%;4.5%;7.0%;7. Beckham Corporation has semiannual;bonds outstanding with 13 years to maturity and are currently priced at;$746.16. If the bonds have a coupon rate of 8.5 percent, then what is the;after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that;your calculation is made as on Wall Street.;12.890%;12.500%;6.250%;8.125%;8. RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If;the risk-free rate of return is 10 percent and the expected return on the;market is 18 percent, then what is the firm's beta if the firm's marginal tax;rate is 35 percent?;1.28;1.0;1.60;4.10;9. Which type of project do financial;managers typically use the highest cost of capital when evaluating?;Efficiency projects;Extension projects;Market expansion projects;New product projects


Paper#47447 | Written in 18-Jul-2015

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