BUS 401 Week 3 Quiz Version c

In this work of BUS 401 Week 3 Quiz Version c you will find the next information:
1. The simulation approach provides us with (Points : 1)
2. Asian Trading Company paid a dividend yesterday of $5 per share (D0 = $4). The dividend is expected to grow at a constant rate of 8% per year. The price of Asian Trading Company’s stock today is $29 per share. If Asian Trading Company decides to issue new common stock flotation costs will equal $2.50 per share. Asian Trading Company’s marginal tax rate is 35%. Based on the above information the cost of retained earnings is (Points : 1)
3. Clothier Inc. has a target capital structure of 40% debt and 60% common equity and has a 40% marginal tax rate. If Clothier’s yield to maturity on bonds is 7.5% and investors require a 15% return on Clothier’s common stock what is the firm’s weighted average cost of capital? (Points : 1)
4. Nickel Industries is considering the purchase of a new machine that will cost $178000 plus an additional $12000 to ship and install. The new machine will have a 5-year useful life and will be depreciated using the straight-line method. The machine is expected to generate new sales of $85000 per year and is expected to increase operating costs by $10000 annually. Nickel’s income tax rate is 40%. What is the projected incremental cash flow of the machine for year 1? (Points : 1)
5. A company has preferred stock that can be sold for $21 per share. The preferred stock pays an annual dividend of 3.5% based on a par value of $100. Flotation costs associated with the sale of preferred stock equal $1.25 per share. The company’s marginal tax rate is 35%. Therefore the cost of preferred stock is: (Points : 1)
6. Five Rivers Casino is undergoing a major expansion. The expansion will be financed by issuing new 15-year $1000 par 9% annual coupon bonds. The market price of the bonds is $1070 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? (Points : 1)
7. Zellars Inc. is considering two mutually exclusive projects A and B. Project A costs $95000 and is expected to generate $65000 in year one and $75000 in year two. Project B costs $120000 and is expected to generate $64000 in year one $67000 in year two $56000 in year three and $45000 in year four. Zellars Inc.’s required rate of return for these projects is 10%. The net present value for Project B is (Points : 1)
8. A new machine can be purchased for $1200000. It will cost $35000 to ship and $15000 to modify the machine. A $12000 recently completed feasibility study indicated that the firm can employ an existing factory owned by the firm which would have otherwise been sold for $180000. The firm will borrow $750000 to finance the acquisition. Total interest expense for 5-years is expected to approximate $350000. What is the investment cost of the machine for capital budgeting purposes? (Points : 1)
9. Rent-to-Own Equipment Co. is considering a new inventory system that will cost $750000. The system is expected to generate positive cash flows over the next four years in the amounts of $350000 in year one $325000 in year two $150000 in year three and $180000 in year four. Rent-to-Own’s required rate of return is 8%. What is the net present value of this project? (Points : 1)
10. PDF Corp. needs to replace an old lathe with a new more efficient model. The old lathe was purchased for $50000 nine years ago and has a current book value of $5000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100000. It will cost the company $10000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2000. The new machine is also being depreciated on a straight-line basis over ten years. Sales are expected to increase by $8000 per year while operating expenses are expected to decrease by $12000 per year. PDF’s marginal tax rate is 40%. Additional working capital of $3000 is required to maintain the new machine and higher sales level. The new lathe is expected to be sold for $5000 at the end of the project’s ten-year life. What is the project’s terminal cash flow? (Points : 1)