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. Which of these dates occurs last in time (when arranged in

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. Which of these dates occurs last in time (when arranged in the chronological order)?
A) Payment date
B) Ex-dividend date
C) Record date
D) Dividend declaration date
2. Which of the following lists events in the chronological order from earliest to latest?
A) Record date, declaration date, ex-dividend date
B) Declaration date, record date, ex-dividend date
C) Declaration date, ex-dividend date, record date
D) None of the above
3. On January 2, Michigan Mining declared a $25-per-share quarterly dividend payable on March 9th to stockholders of record on February 9. What is the latest date by which you could purchase the stock and still get the recently declared dividend?
A) February 5
B) February 6
C) February 7
D) February 8
4. Dutch auction process is the same as:
A) discriminatory price auction
B) uniform price auction
C) English auction
D) none of the above
5. The par value of the outstanding shares is defined as:
A) Retained earnings
B) Legal capital
C) Book value of equity
D) None of the above
6. The total market value (V) of the securities of a firm with both debt (D) and equity (E) is:
A) V = D - E
B) V = E - D
C) V = D * E
D) V = D + E
7. If a firm is financed with both debt and equity, the firm's equity is known as:
A) unlevered equity
B) levered equity
C) preferred equity
D) none of the above
8. Under what conditions would a policy of maximizing the value of the firm not the same as a policy of maximizing shareholders' wealth?
A) If the issue of debt increases the probability of bankruptcy
B) If the firm issues debt for the first time
C) If the beta of equity is positive
D) If an issue of debt affects the market value of existing debt
9. Modigliani and Miller's Proposition I states that:
A) The market value of any firm is independent of its capital structure
B) The market value of a firm's debt is independent of its capital structure
C) The market value of a firm's common stock is independent of its capital structure
D) None of the above
10. The law of conservation of value implies that:
A) The value of a firm's common stock is unchanged when debt is added to its capital structure
B) The value of any asset is preserved regardless of the nature of the claims against it
C) The value of a firm's debt is unchanged when common stock is added to its capital structure
D) None of the above
11. If a firm permanently borrows $100 million at an interest rate of 8%, what is the present value of the interest tax shield? (Assume that the tax rate is 30%)
A) $8.00 million
B) $5.6 million
C) $30 million
D) $26.67 million
E) None of the above
12. If a firm borrows $50 million for one year at an interest rate of 10%, what is the present value of the interest tax shield? Assume a 30% tax rate. (Approximately.)
A) $1.364 million
B) $1.5 million
C) $1.0 million
D) $4.545 million
E) None of the above
13. In order to find the present value of the tax shields provided by debt, the discount rate used is the:
A) cost of capital
B) cost of equity
C) cost of debt
D) none of the above
14. In order to calculate the tax shields provided by debt, the tax rate used is the:
A) average corporate tax rate
B) marginal corporate tax rate
C) average of shareholders' tax rates
D) average of bondholders' tax rates
15. If a firm permanently borrows $50 million at an interest rate of 10%, what is the present value of the interest tax shield? Assume a 30% tax rate.
A) $50.0 million
B) $25.0 million
C) $15.0 million
D) $1.5 million
16. The after-tax weighted average cost of capital is determined by:
A) Multiplying the weighted average after tax cost of debt by the weighted average cost of equity
B) Adding the weighted average before tax cost of debt to the weighted average cost of equity
C) Adding the weighted average after tax cost of debt to the weighted average cost of equity
D) Dividing the weighted average before tax cost of debt to the weighted average cost of equity
17. In calculating the weighted average cost of capital, the values used for D,E and V are:
A) book values
B) liquidating values
C) market values
D) none of the above
18. Given the following data: Cost of debt = rD = 6%; Cost of equity = rE = 12.1%; Marginal tax rate = 35%; and the firm has 50% debt and 50% equity. Calculate the after-tax weighted average coat of capital (WACC):
A) 8%
B) 7.1%
C) 9.05%
D) None of the given values
19. A firm has a total market value of $10 million and debt has a market value of $4 million. What is the after-tax weighted average cost of capital if the before - tax cost of debt is 10%, the cost of equity is 15% and the tax rate is 35%?
A) 13%
B) 11.6%
C) 8.75%
D) None of the given answers
20. When weighted average cost of capital (WACC) is used to value a levered firm, the interest tax shield is:
A) ignored.
B) considered by deducting the interest payment from the cash flows.
C) automatically considered because the after-tax cost of debt is used in the WACC formula.
D) none of the above
Submitted: 6 years ago.
Category: Homework
Expert:  Manal Elkhoshkhany replied 6 years ago.
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