FIN 571 NERD Education Specialist /fin571nerd.com FIN 571 NERD Education Specialist /fin571nerd.com | Page 20

and 390,000 5 percentsemiannual bonds outstanding, par value
$1,000 each. The common stock currently sells for $43 per share
and has a beta of 1.25, and the bonds have 15 years to maturity
and sell for 114 percent of par. The market risk premium is 8.3
percent, T-bills are yielding 4 percent, and the company’s tax
rate is 36 percent. a. What is the firm's market value capital
structure? b. If the company is evaluating a new investment
project that has the same risk as the firm's typical project, what
rate should the firm use to discount the project's cash flows? 33.
Filer Manufacturing has 8.9 million shares of common stock
outstanding. The current share price is $59, and the book value
per share is $4. The company also has two bond issues
outstanding. The first bond issue has a face value of $71.2
million and a coupon rate of 7.6 percent and sells for 107.7
percent of par. The second issue has a face value of $61.2
million and a coupon rate of 8.1 percent and sells for 110.1
percent of par. The first issue matures in 8 years, the second in
27 years. Suppose the company’s stock has a beta of 1.2. The
risk-free rate is 3.7 percent, and the market risk premium is 7.6
percent. 34. When estimating the cost of equity using the DDM,
which one of these is most apt to add error to this estimate? 35.
When computing WACC, you should use the: 36. The cost of
preferred stock: 37. No matter how many forms of investment
analysis you employ: 38. Which statement concerning the net
present value (NPV) of an investment or a financing project is
correct? 39. The net present value method of capital budgeting
analysis does all of the following except: 40. Graham and
Harvey (2001) found that _____ were the two most popular
capital budgeting methods. 41. The primary reason that
company projects with positive net present values are
considered acceptable is that: 42. What is the net present value
of a project with an initial cost of $36,900 and cash inflows of
$13,400, $21,600, and $10,000 for Years 1 to 3, respectively?
The discount rate is 13 percent. 43. Flatte Restaurant is
considering the purchase of a $10,800 soufflé maker. The
soufflé maker has an economic life of five years and will be
fully depreciated by the straight-line method. The machine will