1. What are the 3 types of business organization?
2. What are the various types of corporations and which ones are required to pay corporate income tax?
3. Is “owner’s equity” an asset for a business firm?
4. List and explain several ways to measure whether a business firm is financially successful.
5. Which of the following is considered internal equity financing: debentures, mortgages, retained earnings or common stock? Do you know why?
6. Calculate the after tax cost of new debt (like a mortgage bond) if the corporate income tax rate is 21%, the coupon rate is 6% and the yield to maturity of the bond is 8%.
7. Calculate the cost in percentage terms of preferred stock to a company whose price is $50/share and pays a dividend of $3.80.
8. List the names of three ways financial analysts “estimate” the cost of common equity.
9. The weighted cost of capital refers to the cost of financing a new investment project. If the firm doesn’t finance with preferred stock, what weight would you assign to the cost of preferred stock?
10. Which is the cheapest form of financing? Which is the most expensive form of financing for a corporation? Why don’t corporations use only the cheapest form? Under what circumstances would a corporation use the most expensive form?
11. Please answer Problem 10-5 in the back of the chapter.
12. The weighted average cost of capital is like the rubric for your course grade in FNC213. Assume Anna got the following grades in FNC345: Exam1 = 74, Exam2 = 85, Exam 3 = 91, Discussions were worth 10 points each and the student got full credit for participation in both discussions and the Assignments were worth 5 points each and she successfully completed 10 out of the 13 assignments and got full credit of 10 points each for the projects. What is her average for the course? What’s her course grade A, B+, B?
13. Find out about the Prelude project that Shell Oil invested in. Google it, it’s not in the text book. It’s fairly current. What went wrong with this $18 billion project to make it financially unsuccessful? The costs outweighed the benefits. Were the costs too high or the benefits too low? Was the expected WACC too high or was the expected IRR too low?
14. Please answer Question 10-1, parts a-f
Calculate the after tax cost of new debt (like a mortgage bond) if the corporate income tax rate is 21%, the coupon rate is 6% and the yield to maturity of the bond is 8%