Rose Half, CFA, is analyzing EI Toro Electric Company. She has collected the following data: What is El Toro Electric Company's expected long-run rate of return?
A. 10.5%.Cochran Corporation has a weighted average cost of capital of 11 percent for projects of average risk. Projects of below-average risk have a cost of capital of 9 percent, while projects of above-average risk have a cost of capital equal to 13 percent. Projects A and B are mutually exclusive, whereas all other projects are independent. None of the projects will be repeated. The following table summarizes the cash flows, internal rate of return (IRR), and risk of each of the projects. Year (t)Project A Project B Project C Project D Project E O-200,000-100,000-100,000-100,000-100,000 166,00030,00030,00030,00040,000 266,00030,00030,00030,00025,000 366,00040,00030,00040,00030,000 466,00040,00040,00050,00035,000 IRR12. 1114. 03810.84816. 63611.630 ProjectBelowBelowAverageAboveAbove RiskAverageAverageAverageAverage Which projects will the firm select for investment?
A. Projects: A, DWhich of the following can be found in Standard V?
A. Members shall not participate in any professional conduct involving dishonesty, fraud, deceit, etc.The Global Advertising Company had net income after interest but before taxes of $40,000 this year. The marginal tax rate is 40 percent, and the dividend payout ratio is 30 percent. The company can raise debt at a 12 percent interest rate. The last dividend paid by Global was $0.90. Global's common stock is selling for $8.59 per share, and its expected growth rate in earnings and dividends is 5 percent. If Global issues new common stock, the flotation cost incurred will be 10 percent. Global plans to finance all capital expenditures with 30 percent debt and 70 percent equity. What is the cost of common equity raised by selling new stock?
A. 10.33%In preparing its cash flow statement for the year ended December 31, 1998, Roman Co. collected the following data:
Gain on sale of equipment $6,000 Proceeds from sale of equipment 10,000 Purchase of A.S. Inc. bonds (par value $200,000) 180,000 Amortization of bond discount 2,000 Dividends declared 45,000 Dividends paid 38,000 Proceeds from sale of treasury stock (carrying amount of $65,000) 75,000
In its December 31, 1998 statement of cash flows, what amount should Roman report as net cash provided by financing activities?
A. $20,000A tax levied on imported goods is called a(n)
A. excise tax.Which of the following methods for measuring "stand-alone" risk is characterized by the formulation of a "best case" and "worst case" scenario?
A. Monte Carlo SimulationThe ________ is responsible for differences in the required rates of return among alternative investments.
A. real premiumWhich of the following would have an effect on cash flow from operations?
I. Sale of machinery for $50,000 with a net book value of $35,000.
II. Purchase of supplies on credit.
III. Remittance by customer in payment of goods purchased last accounting period.
IV.
Lease payment on machinery, which is accounted for as a capital lease.
A. I, II and IIIBouchard Company's stock sells for $20 per share, its last dividend was $1.00. Its growth rate is a constant 6 percent, and the company would incur a flotation cost of 20 percent if it sold new common stock. Retained earnings for the coming year are expected to be $1,000,000, and the amount of common equity in the capital structure is 60 percent. If Bouchard has a capital budget of $2,000,000, what component cost of common equity will be built into the WACC for the last dollar of capital the company raises?
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