Casey’s Flower Shop has a cost of debt of 8 percent, a cost of equity

Subject: Business    / Finance
Question
QUESTION 4

Casey’s Flower Shop has a cost of debt of 8 percent, a cost of equity of 12 percent, and a cost of preferred stock of 9 percent. The market capitalization of the common stock is $1,500,000. Preferred stock has a total market value of $200,000. The bond issue has a market value of $700,000. The company’s tax rate is 34 percent. What is the firm’s weighted average cost of capital?

11.77%

11.00%

8.27%

9.79%

10.46%

QUESTION 11

Last year Domino’s Pizza had sales of $500,000 and a net income of $25,000, and its year-end assets were $250,000. The firm’s total-debt-to-total-asset ratio was 45.0%. Based on the DuPont equation, what was the ROE?

14.51%

18.18%

13.82%

15.23%

16.00%

American Enterprises has the following income statement. How much after-tax operating income does the firm have?

Sales $2,250
Costs 1,400
Depreciation 250
EBIT $ 600
Interest expense 70
EBT $ 530
Taxes (40%) 212
Net income $ 318

$325

$360

$342

$397

$378

6. You are given the following information: Risk free rate is 3.75%, Maturity risk premium is 1%, Default risk premium is 2%. What is the expected interest rate for a U.S. Treasury bill?

2.5%

3.75%

3.0%

5.5%

None of the above

7. Pluto Inc. recently issued bonds that mature in 10 years. The bonds have a par value of $1,000 and a coupon rate of 13%. Coupon payments are made semi-annually. What is the market price of the bond if the yield to maturity is 15%?

$931.14

$912.38

$898.06

$879.16

$846.86

QUESTION 8

Last year, Solar Energy had sales of $400 million, and its inventory turnover ratio was 4.0. The company’s current assets totaled $200 million, and its current ratio was 1.2. What was the company’s quick ratio?

0.60

0.45

1.20

0.55

1.39