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- Curtis invests $600,000 in a city of Athens bond that pays 8.25 percent interest. Alternatively, Curtis could have invested the $600,000 in a bond recently issued by Initech, Incorporated that pays 11.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond? Multiple Choice $50,560.00 $15,840.00 $11,880.00 $36,920.00 None of the choices are correct.Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to: A. ‐25.0% B. ‐17.5% C. ‐12.5% D. 12.5%Which of the following is NOT TRUE about security/bond valuation? *a. The valuation concept is only applicable to the most common financial securities, the stocks and bonds.b. There are different methods of analysis in valuing bonds which includes getting it present values of future cash flowsc. Regardless of their differences in attributes, other financial securities have essentially the same valuation concept.d. None of the choices.
- A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years.Compute the value of this stock with a required return of 10 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)This refers to the premium to compensate investors for not having to convert their investments into cash. *a. None of the choicesb. Default Risk Premiumc. Liquidity Risk Premiumd. Maturity Risk Premiume. Special Characteristics PremiumApex is a media company that is considering expanding into streaming services. Apex has a levered beta of 0.80 and a debt to capital ratio (D/(D+E)) of 20%. The unlevered beta for streaming service companies is 1.10 and Apex plans to use its existing debt ratio in funding the business. Apex’s effective tax rate is 30% but the marginal tax rate is 40%. Apex is rated A, and the default spread for A rated firms is 2%. You can assume that the riskfree rate is 3% and the equity risk premium is 6% Estimate the cost of capital you would use in doing a project analysis of the streaming service investment
- Market efficiency primarily concerned with how well the financial market reflects all the available financial information in the prices of the shares of listed companies. * True or False?A multi-factor asset pricing approach (e.g. Arbitrage Pricing Theory) differs from the single-factor CAPM in its recognition of multiple systematic risk factors. True FalseAssuming that the average duration of First National Bank's $100 million assets is five years, while the average duration of its $80 million liabilities is three years, then a 5 percentage point decrease in interest rates will cause the net worth of First National to increase by $ million dollars (put a negative sign if it is a decrease). Question 17 options:
- The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared? Group of answer choices.... $60,000. $20,000. $120,000. $100,000.A new partner contributes accounts receivable to a partnership, which appears in the ledger of his sole proprietorship at $20,500, and there was an allowance for doubtful accounts of $750. If $600 of the accounts receivable are completely worthless, the partnership Accounts Receivable should be debited for $19,900. Question 6 options: True False"Individuals with less collateral will want to take on riskier projects, all other things being equal." Is the above statement true/false/uncertain? Explain your answer.