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Finance multiple choice; EPS, stock price, leverage, annuity

Can you help me with the following financial questions (multiple choice)?

*Investor in 40% tax bracket owning a tax emempt bond yielding 6% realizes an equivalent before tax yield of which of the following? 12%, 10%, 8%, 6%

*Optimal capital structure is achieved when?

When a firm's expected profits are maximized, when a firm's expected EPS are maimized, when a firm's expected stock price is maximized, when a firm's break even point is achieved

*Stock currently sells for $63 per share & the required return on the stock is 10%. Assuming a growth rate of 5%, calculate the stock's last divident paid: $1, $3, $5, $7

*Firm has a degree of combined leverage of 1.25. Price per unit is $15 & variable cost per unit is $5. Interest expense is $10,000 & fixed costs are $190,000. Calculate the quanity of output produced:

100,000 units, 120500 units, 150000 units or 200,000 units

*If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year & have nothing remaining at the end of 5 yrs? $3,525.62 / $5,008.76 / $3408.88 / $2465.78

*Firm has total asset turnover of 2, a net profit margin of 5% and debt ratio of 50%. If the firm has a divident payout of 20%, calculate the sustainable growth rate: 14%, 16% , 18%. 20%

*IBM has current assets of $4.5 million & current liabilities of $3.6 million. Current ratio is 1.25 and quick ratio is 0.75. How much does IBM have invested (in millions): $0.8 / $1.8 / $2.4 / $2.9 / $3.6

*Company's average collection period is higher than the industry average, then the company might be: enforcing credit conditions upon customers which are too stringent / allowing customers too much time to pay their bills / too tough in collecting its accounts / too liquid

*Investor owned 5,000 of IBM common stock prior to the purchase of unknown prior company merger. At the time of the merger, the dollar was worth 1.7848 German marks. Assume the purchase price was equal to 107.09 marks per share. What was the sales price IBM common stock per share in the US dollars? $50, $191, $107, $60 or none noted

*In the event that IBM which as a low P/E ratio, were to acquire Smith INC which has a higher P/E ratio, an analyst can be certain that one of the following will happen: IBM will see immediate decrease in P/E, IBM will see immediate decrease in EPS, IBM will see immediate increase in the growth rate of EPS, IBM will see immediate increase in EPS

Solution Preview

Please find my response below.

1. Investor in 40% tax bracket owning a tax exempt bond yielding 6% realizes an equivalent before tax yield of which of the following? 10%

6%/(1-.4) = 10%

2. Optimal capital structure is achieved when? when a firm's expected stock price is maximized

This is by the definition of optimal capital structure.

3. Stock currently sells for $63 per share & the required return on the stock is 10%. Assuming a growth rate of 5%, calculate the stock's last divident paid: $3

63*(.1-.05)/1.05 = 3

4. Firm has a degree of combined leverage ...

Solution Summary

The solution answers and explains several multiple choice questions below.

$2.19