Author Question: Mountain Retreat and Resort is undergoing a major expansion. The expansion will be financed by ... (Read 176 times)

sheilaspns

  • Hero Member
  • *****
  • Posts: 567
Mountain Retreat and Resort is undergoing a major expansion. The expansion will be financed by
  issuing new 15-year, 1,000 par, 9 annual coupon bonds. The market price of the bonds is 1,070
  each.
 
  The firm's flotation expense on the new bonds will be 50 per bond. The firm's marginal tax
  rate is 35. What is the relevant cost of the new bonds for capital budgeting purposes?
  A) 5.14 B) 8.45 C) 5.69 D) 4.82

Question 2

Assume that a firm has a steady record of paying stable dividends for years. Market analysts had
  expected management to increase the dividend by 7.5 in the latest quarter.
 
  However,
  management announced a 15 increase in the current year's dividend. The market value of the
  stock rose 20 on the day of the announcement. Which of the following would best explain the
  stock market's reaction to the announcement?
  A) residual dividend theory B) expectations theory
  C) dividend irrelevance theory D) agency theory


katheyjon

  • Sr. Member
  • ****
  • Posts: 331
Answer to Question 1

C

Answer to Question 2

B



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Prostaglandins were first isolated from human semen in Sweden in the 1930s. They were so named because the researcher thought that they came from the prostate gland. In fact, prostaglandins exist and are synthesized in almost every cell of the body.

Did you know?

According to the National Institute of Environmental Health Sciences, lung disease is the third leading killer in the United States, responsible for one in seven deaths. It is the leading cause of death among infants under the age of one year.

Did you know?

In women, pharmacodynamic differences include increased sensitivity to (and increased effectiveness of) beta-blockers, opioids, selective serotonin reuptake inhibitors, and typical antipsychotics.

Did you know?

The Babylonians wrote numbers in a system that used 60 as the base value rather than the number 10. They did not have a symbol for "zero."

Did you know?

Every 10 seconds, a person in the United States goes to the emergency room complaining of head pain. About 1.2 million visits are for acute migraine attacks.

For a complete list of videos, visit our video library