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NEW QUESTION: 1
If you take an 18-month USD deposit, when is interest payable?
A. Semi-annually
B. Quarterly
C. After one year and at maturity
D. At maturity
Answer: C

NEW QUESTION: 2
Flood Motors is an all-equity firm with 200,000 shares outstanding. The company's EBIT is $2,000,000 and is expected to remain constant over time. The company pays out all of its earnings each year, so its earnings per share equals its dividends per share. The company's tax rate is 40 percent. The company is considering issuing $2 million worth of bonds (at par) and using the proceeds for a stock repurchase. If issued, the bonds would have an estimated yield to maturity of 10 percent. The risk-free rate in the economy is 6.6 percent, and the market risk premium is 6 percent. The company's beta is currently 0.9, but its investment banker's estimate that the company's beta would rise to 1.1 if they proceed with the recapitalization. Assume that the shares are repurchased at a price equal to the stock market price prior to the recapitalization. What would be the company's stock price following the recapitalization?
A. $53.85
B. $56.02
C. $51.14
D. $68.97
E. $76.03
Answer: C
Explanation:
Explanation/Reference:
Explanation:
First, find the company's current cost of capital, dividends per share, and stock price: k = 0.066 + (0.06)0.9
= 12%. To find the stock price, you still need the dividends per share or DPS = ($2,000,000 (1 -
0.4))/200,000 = $6.00. Thus, the stock price is Po = $6.00/0.12 = $50.00. Thus, by issuing $2,000,000 in new debt the company can repurchase $2,000,000/$50.00 = 40,000 shares.
Now after recapitalization, the new cost of capital, DPS, and stock price can be found: k = 0.066 + (0.06)
1.1 = 13.20%. DPS for the remaining (200,000 - 40,000) = 160,000 shares are thus [($2,000,000 - ($2,000,000 x 0.10))(1 - 0.4)]/160,000 = $6.75. And, finally, Po = $6.75/0.132 = $51.14.

NEW QUESTION: 3

A. Option C
B. Option D
C. Option B
D. Option A
Answer: D
Explanation:


NEW QUESTION: 4
A company maintains about 300 TB m Amazon S3 Standard storage month after month. The S3 objects are each typically around 50 GB m size and are frequently replaced with multipart uploads by their global application. The number and size of S3 objects remain constant but the company's S3 storage costs are increasing each month How should a solutions architect reduce costs in this situation?
A. Configure S3 inventory to prevent objects from being archived too quickly
B. Configure Amazon CloudFront to reduce the number of objects stored in Amazon S3
C. Enable an S3 Lifecycle policy that deletes incomplete multipart uploads
D. Switch from multipart uploads to Amazon S3 Transfer Acceleration
Answer: B

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