StudyXY
RegisterLog in

FIN331 Financial Management and Capital Structure: Problem Set

Problem set focusing on financial management and capital structure.

Leo Bailey
Contributor
4.3
56
6 months ago
Preview (6 of 19 Pages)
100%
Purchase to unlock

Page 1

FIN331 Financial Management and Capital Structure: Problem Set - Page 1 preview image

Loading page ...

Financial Management and Capital Structure: Problem SetFIN3311.Which one(s) is(are) an external financing and has the flotation cost?a.Retained earningsb.Bondsc.Preferred stockd.a & be.b & c-answerRetained earnings are internal source of fund. Issuing bonds, preferred stocks, and commonstocks are external source of fund, which have the floation cost.2.The costs of financing from different sources are as follows:IEF = 5%, EEF=6%, cost of debt before tax = 5%, tax rate=20%, the size of retainedearnings=$30m. The capital structure is: We=40% and Wd=60%. Determine the WAMCC beforeand after the break point.a.4.4% 4.8%b.4.4% 5.2%c.4.6% 4.8%d.4.6% 5.2%e.4.8%5.2%5%*(1–0.2)*0.6 + 5%*0.4 = 4.4%,5%*(1–0.2)*0.6 + 6%*0.4 =4.8%3.Given D1 = $1.00 and K=10%, what is the value of the stock at 8% growth rate? If the currentprice of the stock is $50, would you buy it?a.$55, Buyb.$54, Buyc.$55, Don’td.$54,Don’te.$50, IndifferentPV=D1/(k-g)=1.00/(0.10-0.08) = $50. Since the price=PV, you are indifferent.4.For a preferred stock with the dividend amount of $2.00 each quarter, what is the PV of it with anannual discount rate of 8%? If the price of the preferred stock is $80, what is the yield (ROI, APR)of this security?a.$60, 8%b.$80, 8%c.$60, 10%d.$80,10%e.$100, 10%V0= D/k = 8/0.08 = $100. ROI = (80+8)/80 = 10%

Page 2

Page 3

Page 4

Page 5

Page 6

Preview Mode

This document has 19 pages. Sign in to access the full document!

Study Now!

XY-Copilot AI
Unlimited Access
Secure Payment
Instant Access
24/7 Support
Document Chat

Document Details

University
Arizona State University
Course
FIN 331
Subject
Finance

Related Documents

View all
Past Exams

Texas Life and Health Insurance Exam 150 Questions

A study-sharing site offering verified Q&A for the Texas Life and Health Insurance Exam. Ideal for candidates preparing for certification with updated 2023 content, covering key laws, policies, and insurance concepts.

Class Notes

Understanding Obligation and Deobligation in Resou

Obligation: legally reserving funds for expenses e.g: travel orders. Deobligation: adjusting obligations downward when actual costs are less, freeing funds for other needs. Ensures efficient effective use of finite resources in government operations.

Solved Assignments

Budgeting for Life After High School

High school budgeting activity featuring a real-life scenario for college student Lisa. Students create a zero-based budget using her income, expenses, and support funds to learn personal finance, savings, and responsible spending.

Solved Assignments

Ch 4 les 1

Zach, a college freshman, uses his new credit card with a 19% APR for emergencies during a work break, facing minimum payments that may lead to costly interest and debt.

Class Notes

Understanding Credit Reports Analyzing John's Fina

This activity uses John Doe's financial story and a sample credit report to help students learn how to read and understand credit reports. Students analyze his credit use, debts, and recent financial inquiries to answer related questions.

Solved Assignments

CEO pay at John Deere and Caterpillar

Compares CEO pay at two companies.

Solved Assignments

Efficiency Test in US Stock Market

An assignment analyzing the efficiency of the U.S. stock market and its financial implications.

Solved Assignments

Financial Research Report

A detailed report analyzing financial trends, risk factors, and economic indicators.

Solved Assignments

Financial Planning and Budget Analysis

A financial study on budgeting techniques and financial planning strategies.

Solved Assignments

WACC Project Verizon Communication Inc

This document provides a comprehensive analysis of the Weighted Average Cost of Capital (WACC) for Verizon, offering insights into financial decision-making and investment strategies.