STR 581 help A Guide to career/uophelp.com STR 581 help A Guide to career/uophelp.com | Page 8

Common stock: 3,000,000 shares outstanding at a par value of $1,
selling for $35 a share. The expected dividend is $2.8, and the growth
rate is 10%.
Preferred stock: 5,000 shares of 6% preferred stock outstanding, selling
for $103 a share and having a par value of $100. The flotation cost is $3,
and the dividend is $9.
The corporate tax rate is 35%.
A. 8.4%

B. 16.5%

C. 9.96%
D. 13.65%
17 Raul needs to choose one alternative from the four alternatives given
below. Applying the concept of time value of money, which of the
following alternatives should he select?
A. Receiving $130 at the end of two years at an interest rate of 8%
compounded annually

B. Receiving $100 at the end of two years at an interest rate of 9%
compounded annually

C. Receiving $150 at the end of three years at an interest rate of 7%
compounded annually
D. Receiving $90 at the end of one year at an interest rate of 5%
compounded annually
18 Josh and Mike are discussing the pros and cons of the Sarbanes-
Oxley Act. While Josh argues that the act has a high compliance cost,
Mike is of the opinion that companies can easily avoid these costs by
choosing to go dark and delisting their shares from exchanges. Josh, in
turn, states that such a choice comes with its own drawbacks. Which of
the following statements best supports Josh’s argument?
A. Companies that choose to go dark typically have only limited access
to capital markets.

B. Mandatory annual audits by independent auditors are carried out
regardless of whether or not companies choose to go dark.