Question 31 A firm has a tax rate of 35%, an unlevered rate of return of 12%, to

Question

Question 31

A firm has a tax rate of 35%, an unlevered rate of return of 12%, total debt of $2,000, and an EBIT of $150.00. What is the unlevered value of the firm?

Select one:

a. $1,532

b. $696

c. $813

d. $1,161

e. $1,346

Question 32

A firm that only accepts projects for which the IRR is greater than the firm's required return will, on average, neither create nor destroy wealth for its shareholders.

Select one:

True

False

Question 33

This morning, Alicia bought a ten-year 7% coupon bond that pays interest semi-annually. She paid $994 for a $1,000 bond. If the market interest rate on this type of bond declines to 6.5% tonight, how much will Alicia receive for her first interest payment?

Select one:

a. $32.31

b. $70.00

c. $69.58

d. $35.00

e. $65.00

Question 34

The Johnson Company just paid an annual dividend of $1.85. How much would you be willing to pay for one share of Johnson Company stock if the dividend remains constant and you require a 9.5% rate of return?

Select one:

a. $18.95

b. $16.00

c. $16.84

d. $19.47

e. $17.78

Question 35

If the rate at which you can invest is positive, the future value of $1 received today equal to $1.

Select one:

True

False

Explanation / Answer

1)

Value of unlevered company = EBIT(1 - TAX) / required rate return of unlevered

Value of unlevered company = 150 ( 1 - 0.35) / 0.12

Value of unlevered company = 97.5 / 0.12

Value of unlevered company = $813

2)

True

3)

Interest payment = 0.07 * 1000 = 70 / 2 = 35

4)

Value of share = dividend / required rate of return

Value of share = 1.85 / 0.095

Value of share = $19.47

5)

false

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.