Question 1

Refer to data for Glassmaker Corporation.What is Glassmaker's WACC,based on its current capital structure?

Accepted Answer

A)   9.02%
B)   9.50%
C)   9.83%
D)   10.01%
E)   11.29%F) C) and D)
G) A) and C)

Question 2

The market value of Firm L's debt is $200,000 and its yield is 9%.The firm's equity has a market value of $300,000,its earnings are growing at a 5% rate,and its tax rate is 40%.A similar firm with no debt has a cost of equity of 12%.Using the compressed adjusted present value model,what would Firm L's total value be if it had no debt?

Accepted Answer

A)   $358,421
B)   $377,286
C)   $397,143
D)   $417,000
E)   $437,850F) A) and B)
G) B) and E)

Question 3

The present value of the free cash flows discounted at the unlevered cost of equity is the value of the firm's operations if it had no debt.

Accepted Answer

A) True 
 B)False

Question 4

If the capital structure is stable,and free cash flows are expected to be growing at a constant rate at the horizon date,then the compressed adjusted present value model calculates the horizon value by discounting the post-horizon free cash flows and post-horizon expected future tax shields at the weighted average cost of capital.

Accepted Answer

A) True 
 B)False

Question 5

Using the data for Sallie's Sandwiches and the compressed adjusted present value model,what is the total value (in millions) ?

Accepted Answer

A)   $72.37
B)   $73.99
C)   $74.49
D)   $75.81
E)   $76.45F) A) and D)
G) A) and C)

Exam 21: Dynamic Capital Structures and Corporate Valuation

Using the data for Sallie's Sandwiches and the compressed adjusted present value model,what is the total value (in millions) ?

Correct Answer
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Correct Answer
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The present value of the free cash flows discounted at the unlevered cost of equity is the value of the firm's operations if it had no debt.

Correct Answer
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Refer to data for Glassmaker Corporation.What is Glassmaker's WACC,based on its current capital structure?

Correct Answer
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Correct Answer
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Exam 21: Dynamic Capital Structures and Corporate Valuation

Using the data for Sallie's Sandwiches and the compressed adjusted present value model,what is the total value (in millions) ?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The present value of the free cash flows discounted at the unlevered cost of equity is the value of the firm's operations if it had no debt.

Correct AnswerverifiedShow Answer

Refer to data for Glassmaker Corporation.What is Glassmaker's WACC,based on its current capital structure?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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