study guide for FI360
1. a balloon payment is a large lump sum payment at maturity of a debt.
2.
a company that seeks to pay a fixed dollar amount in dividends each period will likely experience a decrease in its payout ratio over time.
3.
a particular asset has a beta of 1.2 and an expected return of 10%. The expected return on the market portfolio is 13% an the risk-free is 5%. Which of the following statement is correct?
This asset lies below the security market line.
4.
all else equal the higher the call premium the larger the drop in rates necessary for a call to be beneficial.
5.
an annuity may be defined as a series of consecutive payments of equal amounts
6.
an important consideration in the lease versus purchase decision is the loss of the depreciation tax shield if leased. the benefit of the lease payment as a tax deduction the effect on financial structure and future funding needs.
7.
Bavarian has a cost equity of 22% and a beta of 1.8. the expected market return is 14%. What is the risk free rate?
.22 = Rf + 1.8(.14-Rf) Rf = .04 or 4%
8.
Bavarian is planning on going public. Underwriting discount is $1.30. Offering price of the stock is set at $12.50 per share. How many shares does the company have to issue to raise $75 million?
75m(12.50-1.30)= 6,696,429
9.
Bavarian is planning on going public. Underwriting discount is 7.25%. Offering price of the stock is set at $12.50 per share, what is the per share proceeds that bavarian will receive?
$11.59 12.50(1-.0725= 11.59
10.
bavarian sausage just issued a 10yr 7% coupon bond. the face value of the bond is $1000 and the bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond's price.
$815.66 FV: 1000 PMT: 70 I/Y: 10 N: 10 CAL: PV:
11.
bonds issued by US states or local governments are called: municipal bonds
12.
Brew is a unlevered firm, has an expected EBIT of 500k. The required return on assets for the firms assets is 10%. The company has 250k shares
2.
a company that seeks to pay a fixed dollar amount in dividends each period will likely experience a decrease in its payout ratio over time.
3.
a particular asset has a beta of 1.2 and an expected return of 10%. The expected return on the market portfolio is 13% an the risk-free is 5%. Which of the following statement is correct?
This asset lies below the security market line.
4.
all else equal the higher the call premium the larger the drop in rates necessary for a call to be beneficial.
5.
an annuity may be defined as a series of consecutive payments of equal amounts
6.
an important consideration in the lease versus purchase decision is the loss of the depreciation tax shield if leased. the benefit of the lease payment as a tax deduction the effect on financial structure and future funding needs.
7.
Bavarian has a cost equity of 22% and a beta of 1.8. the expected market return is 14%. What is the risk free rate?
.22 = Rf + 1.8(.14-Rf) Rf = .04 or 4%
8.
Bavarian is planning on going public. Underwriting discount is $1.30. Offering price of the stock is set at $12.50 per share. How many shares does the company have to issue to raise $75 million?
75m(12.50-1.30)= 6,696,429
9.
Bavarian is planning on going public. Underwriting discount is 7.25%. Offering price of the stock is set at $12.50 per share, what is the per share proceeds that bavarian will receive?
$11.59 12.50(1-.0725= 11.59
10.
bavarian sausage just issued a 10yr 7% coupon bond. the face value of the bond is $1000 and the bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond's price.
$815.66 FV: 1000 PMT: 70 I/Y: 10 N: 10 CAL: PV:
11.
bonds issued by US states or local governments are called: municipal bonds
12.
Brew is a unlevered firm, has an expected EBIT of 500k. The required return on assets for the firms assets is 10%. The company has 250k shares