1. Adams Corporation can raise up to $1700 million for investment from a mixture

Question

1. Adams Corporation can raise up to $1700 million for investment from a mixture of debt, preferred stock and retained equity. Above $1700 million, the firm must issue new common stock. Assuming that debt costs and preferred stock costs remain unchanged, the marginal cost of capital for amounts up to $1700 million will be ____ the marginal cost of capital for amounts over $1700 million. (Points : 3)        less than
       equal to
       greater than
       cannot be determined from the information given

       $3,900
       $900
       $5,700
       $4,200

Question 2. 2. What is the formula for cash conversion cycle? (Points : 3)        Inventory conversion period + Receivables conversion period

       Operating cycle - Payables deferral period
       Inventory conversion period + Receivables conversion period + Payables deferral period
       None of the above

Explanation / Answer

calculation of annual net cash flows

=operating cash flows after tax+tax savings on depreciation

= $ 4,500*(1-tax rate )+ deprecation*taxrate

=$ 4500*0.6+3000*0.4

= $ 3900

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