2023 Question Clanton Company is financed 75 percent by equity and 25 percent | Assignments Online

2023 Question Clanton Company is financed 75 percent by equity and 25 percent | Assignments Online

Assignments Online 2023 Business & Finance

Question : Clanton Company is financed 75 percent by equity and 25 percent by debt. If the firm expects to earn $30 million in net income next year and retain 40% of it, how large can the capital budget be before common stock must be sold?

  Student Answer:   $7.5 million

     $12.0 million

      $15.5 million

      $16.0 million

   
 2. Question : J.B. Enterprises purchased a new molding machine for $85,000. The company paid $8,000 for shipping and another $7,000 to get the machine integrated with the company’s existing assets. J.B. must maintain a supply of special lubricating oil just in case the machine breaks down. The company purchased a supply of oil for $4,000. The machine is to be depreciated on a straight-line basis over its expected useful life of 8 years. J.B. is replacing an old machine that was purchased 6 years ago for $50,000. The old machine was being depreciated on a straight-line basis over a ten year expected useful life. The machine was sold for $15,000. J.B.’s marginal tax rate is 40%. What is the amount of the initial outlay?

  Student Answer:   $89,000

      $87,000

     $91,000

     $85,000

 

   
 3. Question : A project for Jevon and Aaron, Inc. results in additional accounts receivable of $400,000, additional inventory of $180,000, and additional accounts payable of $70,000. What is the additional investment in net working capital?

  Student Answer:   $580,000

      $510,000

     $270,000

     $150,000

 4. Question : J.B. Enterprises purchased a new molding machine for $85,000. The company paid $8,000 for shipping and another $7,000 to get the machine integrated with the company’s existing assets. J.B. must maintain a supply of special lubricating oil just in case the machine breaks down. The company purchased a supply of oil for $4,000. The machine is to be depreciated on a straight-line basis over its expected useful life of 8 years. What will depreciation expense be during the first year?

  Student Answer:   $13,000

      $12,500

     $11,625

     $11,500

 5. Question : Five Rivers Casino is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Gamblers flotation expense on the new bonds will be $50 per bond. Gamblers marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?

  Student Answer:    8.76%

     8.12%

     7.49%

     10.25%

 6. Question : Porky Pine Co. is issuing a $1,000 par value bond that pays 8.5% interest annually. Investors are expected to pay $1,100 for the 12-year bond. Porky will pay $50 per bond in flotation costs. What is the after-tax cost of new debt if the firm is in the 35% tax bracket?

  Student Answer:   8.23%

     4.55%

      4.70%

     7.45%

 7. Question : Zellars, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. Zellars, Inc.’s required rate of return for these projects is 10%. The profitability index for Project A is

  Student Answer:    1.27.

     1.22.

     1.17.

     1.12.

 8. Question : The simulation approach provides us with

  Student Answer:   a single value for the risk-adjusted net present value.

     an approximation of the systematic risk level.

      a probability distribution of the project’s net present value or internal rate of return.
      a graphic exposition of the year-by-year sequence of possible outcomes.

 9. Question : Jones Distributing Corp. can sell common stock for $27 per share and its investors require a 17% return. However, the administrative or flotation costs associated with selling the stock amount to $2.70 per share. What is the cost of capital for Jones Distributing if the corporation raises money by selling common stock?

  Student Answer:   27.00%

      18.89%

     18.33%

     17.00%

Assignmentsonline.org help students to solve their assignment in the best possible manner. In the assignment help industry, we are regarded as one of the best helpers for students’ tasks in all subjects. We provide solutions to students from all corners of the world, but the main focus is from students residing in the US, UK, and Australia. Our primary focus is solving student assignments for all subjects and streams.

Place Order NOw

Assignment online is a team of top-class experts whose only goal is to give you the best assignment help service. Follow the link below to order now...

#write essay #research paper