Question 46 The primary goal of financial management is to maximize compensation

Question

Question 46

The primary goal of financial management is to maximize compensation.

Select one:

True

False

Question 47

A firm's stock has a required return of 10%. The stock's dividend yield is 4%. What is the dividend the firm is expected to pay over a one year period if the current stock price is $80?

Select one:

a. $2.40

b. $2.00

c. $3.60

d. $2.80

e. $3.20

Question 48

ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 7%. The firm's tax rate is 40%. The CCA rate is 20% (Class 8).What is the present value of the depreciation tax shield?

Select one:

a. $336,959

b. $377,177

c. 301,242

d. $343,885

e. $351,193

Question 49

Al's Audio has a cost of debt of 7 percent, a cost of equity of 12 percent, and a cost of preferred stock of 9 percent. The weight for debt is 0.16, the weight for preferred shares is 0.34, and the weight for common stock is 0.5. The company's tax rate is 34 percent. What is the weighted average cost of capital for Al's Audio Shop?

Select one:

a. 9.45 percent

b. 9.68 percent

c. 9.15 percent

d. 9.80 percent

e. 6.54 percent

Question 50

Ernst's Electrical has a bond issue outstanding with ten years to maturity. These bonds have a $1,000 face value, a 5 percent coupon, and pay interest annually. The bonds are currently quoted at 90 percent of face value. What is Ernst's pre-tax cost of debt?

Select one:

a. 6.38 percent

b. 6.47 percent

c. 5.33 percent

d. 5.53 percent

e. 5.40 percent

Explanation / Answer

46. The primary goal of financial management is maximising profit and shareholder value. So the statement is FALSE.

47. (c) Value of stock in 1 year = $ 80 + 10%*80/100= $ 88

Expected Dividend in one year= Diviend yield*Expected stock price= 4*88/100 = $ 3.57 or $ 3.60 option (c) is correct

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