Details of this Paper





1. Which one of the following statements is correct?;To maximize the value of a firm you need to maximize the firm?s WACC.;A Chapter 7 bankruptcy is a legal process for reorganizing a firm.;Investors can use homemade leverage to offset firm leverage.;To maximize the value of a firm you need to borrow as much as you can.;2. A firm has 100,000 shares of stock outstanding. The firm is considering borrowing $1.3 million at 7.5% interest and using the loan proceeds to repurchase 25,000 shares of stock. What is the value of the firm? Ignore taxes.;$5.20 million;$5.98 million;$6.50 million;$7.25 million;3. A firm has a debt-equity ratio of 1.0. The required return on the firm?s assets is 16.1% and the pre-tax cost of debt is 9.1%. Ignore taxes. What is the firm?s cost of equity?;15.3%;18.2%;23.1%;21.7%;4. A company is an all-equity firm that has projected earnings before interest and taxes (EBIT) of $500,000 forever. The current cost of equity is 15% and the tax rate is 33%. The company is in the process of issuing $1.5 million of bonds at par that carry a 6% annual coupon. What is the unlevered value of the firm (in millions)? (Note: You should use MM capital structure model with corporate taxes, but without personal taxes and bankruptcy costs.);$2.05 million;$2.23 Million;$2.56 Million;$2.85 Million;5. From Question 4, what is the levered value of the firm (in millions)?;$2.05 million;$2.36 million;$2.56 million;$2.73 million


Paper#74674 | Written in 18-Jul-2015

Price : $22