Chapter 16: Capital Structure Decisions
V
V
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
False
PREFACE NAME:
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
TOPICS:
KEYWORDS:
QUESTION TYPE:
False
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
Opt cap struc, Hamada equation–nonalgorithmic
KEYWORDS:
OTHER:
10/30/2017 8:12 PM
DATE MODIFIED:
Pennewell Publishing Inc. (PP)
Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and
taxes (EBIT) are $80,000. PP’s current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of
common stock outstanding selling at a price per share of $48.00.
66. Refer to the data for Pennewell Publishing Inc. (PP). PP is considering changing its capital structure to one with 30%
debt and 70% equity, based on market values. The debt would have an interest rate of 8%. The new funds would be used
to repurchase stock. It is estimated that the increase in risk resulting from the added leverage would cause the required rate
of return on equity to rise to 12%. If this plan were carried out, what would be PP’s new value of operations?
a.
$484,359
b.
$487,805
c.
$521,173
d.
$560,748
e.
$584,653
ANSWER:
b
Chapter 16: Capital Structure Decisions
Debt/Value =
Interest rate = rd =
Equity/Value =
New cost of equity = rs =
= FCF/WACC. Since g = 0, FCF = NOPAT = EBIT(1 − T).
= NOPAT/WACC
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
PREFACE NAME:
VanMannen Foundations, Inc. (VF)
IFMG.DAVE.19.16.06 – LO: 16-6
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
United States – OH – Default City – TBA
TOPICS:
WACC and recapitalization
OTHER:
TYPE: Multiple Choice: Multi-part
DATE CREATED:
10/30/2017 8:12 PM
DATE CREATED:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
VanMannen Foundations, Inc. (VF)
VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown
below. Now the company is considering using some debt, moving to the market value capital structure indicated below.
The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional
leverage would cause the required rate of return on equity to rise somewhat, as indicated below.
EBIT =
$80,000
New Debt/Value =
20%
Growth =
0%
New Equity/Value =
80%
Orig cost of equity, rs =
10.0%
No. of shares =
10,000
New cost of equity = rs =
11.0%
Price per share =
$48.00
Tax rate =
40%
Interest rate = rd =
7.0%
67. Refer to the data for VanMannen Foundations, Inc. (VF). If this plan were carried out, what would be VF’s new
WACC and its new value of operations?
WACC Value
a.
9.64% $497,925
b.
9.83% $507,884
c.
10.03% $518,041
d.
10.23% $528,402
e.
10.74% $538,970
ANSWER:
a
Chapter 16: Capital Structure Decisions
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Page 40
Best Bagels, Inc. (BB)
Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero
growth company. BB’s current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock
outstanding selling at a price per share of $23.08.
68. Refer to the data for Best Bagels, Inc. (BB). BB is considering moving to a capital structure that is comprised of 20%
debt and 80% equity, based on market values. The debt would have an interest rate of 7%. The new funds would be used
to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required
rate of return on equity to rise to 14%. If this plan were carried out, what would BB’s new value of operations be?
a.
$498,339
b.
$512,188
c.
$525,237
d.
$540,239
e.
$590,718
V
= FCF/WACC. Since g = 0, FCF = NOPAT = EBIT(1 − T).
V
1
Difficulty: Moderate
False
Best Bagels, Inc. (BB)
United States – BUSPROG: Analytic
United States – OH – Default City – TBA
WACC and recapitalization–nonalgorithmic
TYPE: Multiple Choice: Multi-part
1/6/2018 11:26 PM
Anson Jackson Court Company (AJC)
The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt
outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero
growth company. AJC’s current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common
stock outstanding selling at a price per share of $60.00.
69. Refer to the data for the Anson Jackson Court Company (AJC). What is AJC’s current total market value and weighted
average cost of capital?
a.
$600,000; 7.5%
b.
$600,000; 8.0%
Chapter 16: Capital Structure Decisions
V
= FCF/WACC. Since g = 0, FCF = NOPAT = EBIT(1 − T).
V
DIFFICULTY:
Difficulty: Challenging
c.
$800,000; 7.0%
d.
$800,000; 7.5%
e.
$800,000; 8.0%
ANSWER:
d
V
= Debt + Equity = $200,000 + $60(10,000) = $200,000 + $600,000
= (($600,000/$800,000)(0.088)) + ($200,000/$800,000)(1 − 0.4)(0.06)
V
= $100,000(1 − 0.4)/0.075 = $800,000.
POINTS:
1
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Anson Jackson Court Company (AJC)
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.06 – LO: 16-6
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Market value and WACC–nonalgorithmic
KEYWORDS:
OTHER:
TYPE: Multiple Choice: Multi-part
DATE CREATED:
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
70. Refer to the data for the Anson Jackson Court Company (AJC). The firm is considering moving to a capital structure
that is comprised of 40% debt and 60% equity, based on market values. The new funds would be used to replace the old
debt and to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the
required rate of return on debt to rise to 7%, while the required rate of return on equity would rise to 9.5%. If this plan
were carried out, what would be AJC’s new WACC and total value?
a.
7.38%; $800,008
b.
7.38%; $813,008
c.
7.50%; $813,008
d.
7.50%; $790,008
e.
7.80%; $790,008
ANSWER:
b
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Page 42
71. Daylight Solutions is considering a recapitalization that would increase its debt ratio and increase its interest expense.
The company would issue new bonds and use the proceeds to buy back shares of its common stock. The company’s CFO
thinks the plan will not change total assets or operating income, but that it will increase earnings per share (EPS).
Assuming the CFO’s estimates are correct, which of the following statements is CORRECT?
a.
If the plan reduces the WACC, the stock price is also likely to decline.
b.
Since the plan is expected to increase EPS, this implies that net income is also expected to increase.
c.
If the plan does increase the EPS, the stock price will automatically increase at the same rate.
d.
Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the
interest rate on the currently outstanding bonds.
e.
Since the proposed plan increases Daylight’s financial risk, the company’s stock price still might fall even if
EPS increases.
ANSWER:
e
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.07 – LO: 16-7
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
United States – OH – Default City – TBA
TOPICS:
Financial leverage and EPS
KEYWORDS:
TYPE: Multiple Choice: Conceptual
DATE CREATED:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
72. Which of the following statements is CORRECT?
a.
The capital structure that maximizes the stock price is also the capital structure that maximizes earnings per
share.
b.
The capital structure that maximizes the stock price is also the capital structure that maximizes the firm’s times
QUESTION TYPE:
Multiple Choice
PREFACE NAME:
Anson Jackson Court Company (AJC)
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.06 – LO: 16-6
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
United States – OH – Default City – TBA
TOPICS:
WACC and recapitalization–nonalgorithmic
KEYWORDS:
TYPE: Multiple Choice: Multi-part
The problems referring to the Preface for the data for the Anson Jackson Court Company
(AJC) MUST be kept together, and they cannot be changed algorithmically.
DATE CREATED:
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
Chapter 16: Capital Structure Decisions
interest earned (TIE) ratio.
c.
Increasing a company’s debt ratio will typically reduce the marginal costs of both debt and equity financing;
however, this still may raise the company’s WACC.
d.
If Congress were to pass legislation that increases the personal tax rate but decreases the corporate tax rate,
this would encourage companies to increase their debt ratios.
e.
The capital structure that maximizes the stock price is also the capital structure that minimizes the weighted
average cost of capital (WACC).
ANSWER:
e
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
United States – OH – Default City – TBA
Capital structure, WACC, TIE, and EPS
KEYWORDS:
OTHER:
TYPE: Multiple Choice: Conceptual
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
73. Merriwether Building has operating income of $20 million, a tax rate of 40%, and no debt. It pays out all of its net
income as dividends and has a zero growth rate. The current stock price is $40 per share, and it has 2.5 million shares of
stock outstanding. If it moves to a capital structure that has 40% debt and 60% equity (based on market values), its
investment bankers believe its weighted average cost of capital would be 10%. What would its stock price be if it changes
to the new capital structure?
a.
$40
b.
$48
c.
$52
d.
$54
e.
$60
b
POINTS:
1
Chapter 16: Capital Structure Decisions
Value of operations
+ value of T-bills
Total value
Value of equity
Divide by # shares
Price per share
1
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
False
PREFACE NAME:
Pennewell Publishing Inc. (PP)
IFMG.DAVE.19.16.07 – LO: 16-7
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
TOPICS:
Stock price, recapitalization–nonalgorithmic
Pennewell Publishing Inc. (PP)
Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and
taxes (EBIT) are $80,000. PP’s current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of
common stock outstanding selling at a price per share of $48.00.
74. Refer to the data for Pennewell Publishing Inc. (PP). Assume that PP is considering changing from its original capital
structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal
to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold
until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the
repurchase?
a.
$45.90
b.
$48.12
c.
$51.06
d.
$53.33
e.
$58.75
ANSWER:
c
DIFFICULTY:
Difficulty: Challenging
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.07 – LO: 16-7
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
United States – OH – Default City – TBA
TOPICS:
Capital structure and stock price–nonalgorithmic
KEYWORDS:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
Value of operations
+ value of T-bills
Total value
Value of equity
Divide by # shares
Price per share
Value of operations
+ value of T-bills
Total value
Value of equity
Divide by # shares
Price per share
POINTS:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
Pennewell Publishing Inc. (PP)
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.07 – LO: 16-7
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
United States – OH – Default City – TBA
Stock price, recapitalization–nonalgorithmic
75. Refer to the data for Pennewell Publishing Inc. (PP). Assume that PP is considering changing from its original capital
structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal
to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold
until it makes the stock repurchase. PP then sells the T-bills and uses the proceeds to repurchase stock. How many shares
remain after the repurchase, and what is the stock price per share immediately after the repurchase?
a.
7,500; $71.49
b.
7,000; $59.57
c.
6,500; $51.06
d.
6,649; $53.33
e.
6,959; $58.78
ANSWER:
c
OTHER:
TYPE: Multiple Choice: Multi-part
be kept together, and they cannot be changed algorithmically.
DATE CREATED:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
Chapter 16: Capital Structure Decisions
Value of operations = EBIT(1 − T)/WACC
+ value of T-bills
213,333
Total value
Value of equity
$533,333
Divide by # shares
Price per share
1
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
False
PREFACE NAME:
VanMannen Foundations, Inc. (VF)
IFMG.DAVE.19.16.07 – LO: 16-7
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
VanMannen Foundations, Inc. (VF)
VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown
below. Now the company is considering using some debt, moving to the market value capital structure indicated below.
The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional
leverage would cause the required rate of return on equity to rise somewhat, as indicated below.
EBIT =
$80,000
New Debt/Value =
20%
Growth =
0%
New Equity/Value =
80%
Orig cost of equity, rs =
10.0%
No. of shares =
10,000
New cost of equity = rs =
11.0%
Price per share =
$48.00
Tax rate =
40%
Interest rate = rd =
7.0%
76. Refer to the data for VanMannen Foundations, Inc. (VF). Now assume that VF is considering changing from its
original zero debt capital structure to a new capital structure with even more debt. This results in changes in the cost of
debt and equity, and thus to a new WACC and a new value of operations. Assume VF raises the amount of new debt
indicated below and uses the funds to purchase and hold T-bills until it makes the stock repurchase. What is the stock
price per share immediately after issuing the debt but prior to the repurchase?
Debt/Value =
40%
Value of new debt =
$213,333
Equity/Value =
60%
New WACC =
9.0%
a.
$50.67
b.
$53.33
c.
$56.00
d.
$58.80
e.
$61.74
ANSWER:
b
OTHER:
TYPE: Multiple Choice: Multi-part
DATE CREATED:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
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Page 47
77. Refer to the data for VanMannen Foundations, Inc. (VF). What would the stock price be if VF issued the new debt and
immediately used the proceeds to repurchase stock?
a.
$49.43
b.
$50.70
c.
$52.00
d.
$53.33
e.
$56.00
d
Value of operations = EBIT(1 − T)/WACC
+ value of T-bills
New shares = old − Debt/Price =
Stock price = Equity divided by # shares
1
Difficulty: Moderate
False
VanMannen Foundations, Inc. (VF)
United States – BUSPROG: Analytic
United States – OH – Default City – TBA
TYPE: Multiple Choice: Multi-part
1/6/2018 11:26 PM
Best Bagels, Inc. (BB)
Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero
growth company. BB’s current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock
outstanding selling at a price per share of $23.08.
Stock price, recapitalization
TYPE: Multiple Choice: Multi-part
10/30/2017 8:12 PM
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Page 48
78. Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital
structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal
to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to
hold until it makes the stock repurchase. BB then sells the T-bills and uses the proceeds to repurchase stock. How many
shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?
a.
11,001; $28.85
b.
12,711; $35.62
c.
13,901; $42.57
d.
15,220; $54.31
e.
17,105; $89.67
ANSWER:
a
Value of operations
+ value of T-bills
Total value
Value of equity
Divide by # shares
Price per share
Value of operations
+ value of T-bills
Total value
Value of equity
Divide by # shares
Price per share
POINTS:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
PREFACE NAME:
Best Bagels, Inc. (BB)
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.07 – LO: 16-7
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
United States – OH – Default City – TBA
TOPICS:
Stock price, recapitalization–nonalgorithmic
KEYWORDS:
TYPE: Multiple Choice: Multi-part
together, and they cannot be changed algorithmically.
DATE CREATED:
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
79. Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital
Chapter 16: Capital Structure Decisions
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Page 49
structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal
to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to
hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to
the repurchase?
a.
$14.42
b.
$19.36
c.
$23.91
d.
$28.85
e.
$35.62
d
Value of operations
+ value of T-bills
Total value
Value of equity
Divide by # shares
Price per share
1
Difficulty: Moderate
Multiple Choice
False
Best Bagels, Inc. (BB)
IFMG.DAVE.19.16.07 – LO: 16-7
United States – BUSPROG: Analytic
United States – OH – Default City – TBA
Stock price, recapitalization–nonalgorithmic
TYPE: Multiple Choice: Multi-part
together, and they cannot be changed algorithmically.
10/30/2017 8:12 PM
1/6/2018 11:26 PM
Anson Jackson Court Company (AJC)
The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt
outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero
growth company. AJC’s current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common
stock outstanding selling at a price per share of $60.00.
80. Refer to the data for the Anson Jackson Court Company (AJC). Now assume that AJC is considering changing from
its original capital structure to a new capital structure that results in a stock price of $64 per share. The resulting capital
structure would have a $336,000 total market value of equity and a $504,000 market value of debt. How many shares
would AJC repurchase in the recapitalization?
a.
4,250
b.
4,500
c.
4,750
Chapter 16: Capital Structure Decisions
1
DIFFICULTY:
Difficulty: Challenging
QUESTION TYPE:
Multiple Choice
d.
5,000
e.
5,250
ANSWER:
c
POINTS:
1
QUESTION TYPE:
Multiple Choice
False
PREFACE NAME:
Anson Jackson Court Company (AJC)
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.07 – LO: 16-7
STATE STANDARDS:
United States – ak – DISC: Capital structure
TOPICS:
No. shares repurchased–nonalgorithmic
KEYWORDS:
DATE CREATED:
10/30/2017 8:12 PM
81. Refer to the data for the Anson Jackson Court Company (AJC). Now assume that AJC is considering changing from
its original capital structure to a new capital structure with 50% debt and 50% equity. If it makes this change, its resulting
market value would be $820,000. What would be its new stock price per share?
a.
$58
b.
$59
c.
$60
d.
$61
e.
$62
ANSWER:
e
POINTS:
1
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.08 – LO: 16-8
STATE STANDARDS:
United States – ak – DISC: Capital structure
82. Other things held constant, an increase in financial leverage will increase a firm’s market (or systematic) risk as
measured by its beta coefficient.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
HAS VARIABLES:
False
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
TOPICS:
Financial leverage
KEYWORDS:
DATE CREATED:
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
83. When a firm has risky debt, its equity can be viewed as an option on the total value of the firm with an exercise price
equal to the face value of the debt.
a.
True
b.
False
ANSWER:
True
PREFACE NAME:
Anson Jackson Court Company (AJC)
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
TOPICS:
Stock price, recapitalization–nonalgorithmic
KEYWORDS:
OTHER:
TYPE: Multiple Choice: Multi-part
DATE CREATED:
10/30/2017 8:12 PM
DATE MODIFIED:
= $485.98 − $172.17
84. When a firm has risky debt, its debt can be viewed as an option on the total value of the firm with an exercise price
equal to the face value of the equity.
a.
True
b.
False
False
POINTS:
1
Difficulty: Moderate
False
IFMG.DAVE.19.16.08 – LO: 16-8
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
United States – OH – Default City – TBA
Equity as an option
DATE CREATED:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
Wilson Dover Inc.
The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1-year coupon debt is
$200 million. The volatility (σ) of Wilson Dover’s total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) =
0.9720 and N(d2) = 0.9050.
85. Refer to the data for Wilson Dover Inc. What is the value (in millions) of Wilson Dover’s equity if it is viewed as an
option?
a.
$228.77
b.
$254.19
c.
$282.43
d.
$313.81
e.
$345.19
ANSWER:
d
Equity as an option
KEYWORDS:
10/30/2017 8:12 PM
1/6/2018 11:26 PM
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Page 53
86. Refer to the data for Wilson Dover Inc. What is the value (in millions) of Wilson Dover’s debt if its equity is viewed
as an option?
a.
$167.57
b.
$186.19
c.
$204.81
d.
$225.29
e.
$247.82
ANSWER:
b
POINTS:
1
DIFFICULTY:
Difficulty: Moderate
Multiple Choice
HAS VARIABLES:
False
Wilson Dover Inc.
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.08 – LO: 16-8
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
United States – OH – Default City – TBA
Equity as an option
KEYWORDS:
OTHER:
TYPE: Multiple Choice: Multi-part
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
87. Refer to the data for Wilson Dover Inc. What is the yield on Wilson Dover’s debt?
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Wilson Dover Inc.
LEARNING OBJECTIVES:
IFMG.DAVE.19.16.08 – LO: 16-8
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
United States – OH – Default City – TBA
Equity as an option
KEYWORDS:
TYPE: Multiple Choice: Multi-part
together.
10/30/2017 8:12 PM
DATE MODIFIED:
1/6/2018 11:26 PM
Chapter 16: Capital Structure Decisions
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Page 54
a.
6.04%
b.
6.36%
c.
6.70%
d.
7.05%
e.
7.42%
ANSWER:
e
1
DIFFICULTY:
Difficulty: Moderate
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Wilson Dover Inc.
IFMG.DAVE.19.16.08 – LO: 16-8
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – ak – DISC: Capital structure
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Equity as an option
OTHER:
TYPE: Multiple Choice: Multi-part
DATE CREATED:
10/30/2017 8:12 PM