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Question;Which of the following could explain why a business might choose to operate as a partnership rather than as a corporation?AnswerPartnerships generally find it easier to raise large amounts of capital.Partnerships are exposed to unlimited liability.Less of a partnership?s income is generally subject to federal taxes.None of these are a valid reason why a business would choose to be structured as a partnership.Sue currently has $10,000. To the nearest dollar, how much would she have after 1 year if she invested the money at 12% with monthly compounding?You were hired as a consultant to Tarlo Company, whose target capital structure is 60% debt and 40% common equity. The after-tax cost of debt is 5.0% and the cost of retained earnings is 12.0%. The firm will not be issuing any new stock. What is its WACC?If the Treasury yield curve is downward sloping, how should the yield to maturity on a 1-year corporate bond compare to that on a 15-year corporate?AnswerThe yield on a 15-year bond would have to be higher than that on a 1-year.The yield on a 15-year bond would be less than that on a 1-year.It is impossible to tell without knowing the coupon rates of the bonds.The yields on the two securities should be equal for the same corporation.Considered alone, which of the following would decrease a company?s current ratio?AnswerAn increase in net fixed assets.A decrease in accrued liabilities.A decrease in inventories.An increase in long-term, notes payable.How much would $1,000 due (i.e, paid) in 10 years be worth today if the (annualized) discount rate were 8.5%?Dutton Inc.'s stock has a 40% of producing a 15% return, a 25% chance of producing a 10% return, and a 15% chance of producing a -20% return. What is the firm's expected rate of return?If its yield to maturity increased by 1%, which of the following bonds would have the largest percentage decrease in value?AnswerA 30-year bond with an 5% coupon.A 1-year bond with an 5% coupon.A 10-year bond with an 5% coupon.A 30-year zero coupon bond


Paper#51162 | Written in 18-Jul-2015

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