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(solution) Please do this and i will have the other questions done by you


Please do this and i will have the other questions done by you tomorrow if you will be available. please get it right!



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NOTE: 1. ATTEMPT ALL QUESTIONS.

 

2. HIGHLIGHT THE CORRECT ANSWER OUT OF THE FOUR

 

GIVEN CHOICES FOR EACH QUESTION:

 

1

 

a

 

b

 

c

 

d

 

2 In calculating the costs of the individual components of a firm's financing, the

 

corporate tax rate is important to which of the following component cost formulas?

 

Common stock.

 

Debt.

 

Preferred stock

 

None of the given options a

 

b

 

c

 

d Optimal capital structure refers to the particular combination that minimizes

 

the------------while maximizing the------------.

 

Operating cost, sales

 

Taxes, Interest expense

 

Cost of capital, Stock price

 

None of the given options 3

 

a

 

b

 

c

 

d The dividend-payout ratio is equal to:

 

The dividend yield plus the capital gains yield.

 

Dividends per share divided by earnings per share.

 

Dividends per share divided by par value per share.

 

Dividends per share divided by current price per share. 4

 

a

 

b

 

c

 

d Which of the following would be consistent with a more aggressive approach to

 

financing working capital?

 

Financing short-term needs with short-term funds.

 

Financing permanent inventory buildup with long-term debt.

 

Financing seasonal needs with short-term funds.

 

Financing some long-term needs with short-term funds. 5

 

a

 

b

 

c

 

d The opportunity cost of holding cash rises when:

 

Interest rates are high

 

Interest rates are low

 

Central bank issue more bank notes

 

None of the given options 6

 

a

 

b

 

c

 

d Which of the following source of financing involve no transactions costs?

 

Common shares

 

Preferred shares

 

Retained earnings

 

All of the given options 7 a

 

b

 

c

 

d

 

8 a

 

b

 

c

 

d ICT Products Inc. has a division that makes plastic composite bags for the space

 

industry. The division has fixed costs of Rs.45,000 per month, and it expects to sell

 

45,000 bags per month. If the variable cost per bag is Rs.6.00, what price must the

 

division charge in order to break even?

 

Rs.6.00

 

Rs.7.00

 

Rs.8.00

 

Rs.9.00

 

The Free Indeed Company manufactures ladies shoes that are sold through discount

 

houses. The shoes are sold for Rs.20 each pair; the fixed costs are Rs.110,000 for up to

 

30,000 pairs of shoes; variable costs are Rs.13 per pair of shoes. What is the firm?s

 

breakeven point in units sold?

 

30,000 pairs of shoes

 

15,714 pairs of shoes

 

8,462 pairs of shoes

 

5,500 pairs of shoes 9 Suppose you know that your firm is facing relatively poor prospects but needs new

 

capital. If you also know that investors do not have this information, signaling theory

 

would predict that you would: a

 

b

 

c

 

d Issue debt to maintain the returns of equity holders.

 

Issue equity to share the burden of decreased equity returns between old and new

 

shareholders.

 

Both a and b are correct

 

None of the given option is correct 10

 

a

 

b

 

c

 

d The extent to which fixed costs are used in a firm?s operations is called its:

 

Financial leverage.

 

Operating leverage.

 

Financial leverage.

 

Foreign risk exposure.

 


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