Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)

1
Which one of the following adds value to a project for a levered firm?
A)banker's services in the issuance of financial securities
B)financial distress costs
C)subsidized debt provided by a state or local governmental agency
D)legal fees incurred in the issuance of stock
E)loss of tax-exempt debt financing
2
Which one of the following lenders can offer tax-exempt financing?
A)private individuals
B)corporations
C)federal government
D)local government
E)financial institutions
3
Moody Industrial Supply is considering a perpetual project that will produce annual cash revenues of $382,000. The annual cash costs are $313,000 and the initial investment is $350,000. The firm is an all-equity firm with a tax rate of 35 percent and an unlevered cost of capital of 12.5 percent. What is the net present value of this project to Moody Industrial Supply?
A)$8,800
B)$44,850
C)$67,150
D)$347,200
E)$358,800
4
Dexter & Daughter are considering a perpetual project which will produce annual cash inflows from sales of $126,000 and annual cash costs of $87,500. The initial cost of the project is $134,000. The firm has a 34 percent tax rate and an unlevered cost of capital of 15 percent. The firm has a policy of financing 45 percent of the initial cost of each new project with debt. What is the adjusted present value of this project?
A)$35,400
B)$42,400
C)$55,902
D)$87,700
E)$169,400
5
Taylor's is considering a project which has an initial cost of $189,000, indefinite annual cash sales of $265,000, and indefinite annual cash costs of $218,000. The unlevered cost of capital is 15 percent and the tax rate is 35 percent. What is the present value of the project's indefinite cash flows?
A)$14,666.67
B)$30,550.00
C)$47,000.00
D)$189,000.00
E)$203,666.67
6
Sandler's is considering a project which has an initial cost of $441,000, indefinite annual cash sales of $525,000, and indefinite annual cash costs of $420,000. The unlevered cost of capital is 13 percent and the tax rate is 34 percent. What is the adjusted present value of the project if the firm acquires $200,000 of debt to help finance the project?
A)$92,076.92
B)$137,408.14
C)$160,076.92
D)$187,408.14
E)$194,406.18
7
A project has an initial cost of $482,000 of which 40 percent will be financed with debt. The interest rate on the debt is 9 percent. The cash flow from the project to the equityholders if the firm were unlevered would be $94,000. What is the cash flow to the equityholders given that the firm is leveraged and has a tax rate of 35 percent?
A)$82,721.20
B)$94,000.00
C)$105,278.80
D)$116,008.12
E)$122,197.00
8
An unlevered firm is considering a new project that has an initial cost of $412,000. The expected cash flow to the firm's owners from this project is $74,500 given the unlevered firm's tax rate of 35 percent. Company management is considering the use of $250,000 in debt at an interest rate of 8.5 percent to finance this project. Should the managers decide to use the debt, what will the cash flow be to the equityholders?
A)$57,407.60
B)$60,687.50
C)$72,250.00
D)$84,125.50
E)$88,312.50
9
Galstone Industries has a return on unlevered equity of 18 percent, a cost of debt of 8 percent, a tax rate of 34 percent, and a debt-equity ratio of .55. What is the levered return on equity?
A)79 percent
B)82 percent
C)87 percent
D)03 percent
E)21.63 percent
10
Jupiter and Mars, Inc. has a total value of $368,000 of which $73,600 is the value of debt. The debt has a cost of 10 percent. The firm has an unlevered cost of capital of 18.5 percent and a tax rate of 35 percent. What is the levered cost of equity?
A)72 percent
B)87 percent
C)61 percent
D)19.88 percent
E)67 percent





To learn more about the book this website supports, please visit its Information Center.
(c)2009 Tata McGraw-Hill
Any use is subject to the Terms of Use and Privacy Policy.
Tata McGraw-Hill is one of the many fine businesses ofThe McGraw-Hill Companies.


Ross (SIE)Online Learning Center

Home > Chapter 17 > Multiple Choice Quiz