Question 1

A firm may cross-list its share to

Accepted Answer

A) establish a broader investor base for its stock. 
B) establish name recognition in foreign capital markets, thus paving the way for the firm to source new equity and debt capital from investors in different markets. 
C) expose the firm's name to a broader investor and consumer groups. 
D) all of the above 
A) establish a broader investor base for its stock. 
B) establish name recognition in foreign capital markets, thus paving the way for the firm to source new equity and debt capital from investors in different markets. 
C) expose the firm's name to a broader investor and consumer groups. 
D) all of the above

Question 2

Solve for the weighted average cost of capital:

Accepted Answer

A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14% 
A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14%

Question 3

Compute the debt-to-total-value ratio for a firm that has a debt-to-equity ratio of 2.

Accepted Answer

A) 1/3 
B) 2/5 
C) 3/2 
D) 2/3 
E) None of the above 
A) 1/3 
B) 2/5 
C) 3/2 
D) 2/3 
E) None of the above

Question 4

Assume that XYZ Corporation is a levered company with the following information: Kl = cost of levered equity capital for XYZ = 13%
I = before-tax borrowing cost = 8%
T = marginal corporate income tax rate = 30%
If XYZ's debt-to-total-market-value ratio is 40%, then its weighted average cost of capital, K, is:

Accepted Answer

A) 8% 
B) 9% 
C) 10% 
D) 12% 
A) 8% 
B) 9% 
C) 10% 
D) 12%

Question 5

Solve for the weighted average cost of capital:

Accepted Answer

A) 7.00% 
B) 6.89% 
C) 6.73% 
D) 6.67% 
E) 6.57% 
A) 7.00% 
B) 6.89% 
C) 6.73% 
D) 6.67% 
E) 6.57%

Question 6

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 5.

Accepted Answer

A) 3/4 
B) 7/9 
C) 4/5 
D) 9/11 
E) 5/6 
A) 3/4 
B) 7/9 
C) 4/5 
D) 9/11 
E) 5/6

Question 7

The firm's tax rate is 34%. The firm's pre-tax cost of debt is 8%; the firm's debt-to-equity ratio is 4; the risk-free rate is 3%; the beta of the firm's common stock is 1.5; the market risk premium is 9%. Calculate the weighted average cost of capital.

Accepted Answer

A) 33.33% 
B) 8.09% 
C) 9.02% 
D) 16.5% 
E) None of the above 
A) 33.33% 
B) 8.09% 
C) 9.02% 
D) 16.5% 
E) None of the above

Question 8

The common stock of Kansas City Power and Light has a beta of 0.80. The Treasury bill rate is 4 percent and the market risk premium is 8 percent. KCP&L is in the 34% tax bracket. What is their cost of equity capital?

Accepted Answer

A) 12.0% 
B) 10.4% 
C) 7.20% 
D) 6.4% 
E) 8.22% 
A) 12.0% 
B) 10.4% 
C) 7.20% 
D) 6.4% 
E) 8.22%

Question 9

Solve for the weighted average cost of capital:

Accepted Answer

A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14% 
A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14%

Question 10

In the notation of the book, K = (1 - λ)Kl + λ(1 - τ)i Which of the following are correct?

Accepted Answer

A) The weighted average cost of capital for a levered firm is K 
B) The tax rate is τ 
C) The after-tax cost of debt capital is i 
D) All of the above 
A) The weighted average cost of capital for a levered firm is K 
B) The tax rate is τ 
C) The after-tax cost of debt capital is i 
D) All of the above

Question 11

Solve for the weighted average cost of capital:

Accepted Answer

A) 7.00% 
B) 6.89% 
C) 6.73% 
D) 6.67% 
E) 6.57% 
A) 7.00% 
B) 6.89% 
C) 6.73% 
D) 6.67% 
E) 6.57%

Question 12

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 4.

Accepted Answer

A) 3/4 
B) 7/9 
C) 4/5 
D) 9/11 
E) 5/6 
A) 3/4 
B) 7/9 
C) 4/5 
D) 9/11 
E) 5/6

Question 13

The majority of publicly traded Swiss corporations have up to three classes of common stock: 1) Registered stock
2) Voting bearer stock
3) Nonvoting bearer stock
Until recently, foreigners were not allowed to buy registered stocks: in the case of Nestlé this had the effect of

Accepted Answer

A) distorting the prices of registered stock downward. 
B) distorting the prices of registered stock upward. 
C) this had no effect on prices. 
D) none of the above 
A) distorting the prices of registered stock downward. 
B) distorting the prices of registered stock upward. 
C) this had no effect on prices. 
D) none of the above

Question 14

One explanation for foreign equity ownership restrictions

Accepted Answer

A) is to make it difficult or impossible for foreigners to gain control of a domestic company. 
B) is to expropriate wealth from domestic shareholders. 
C) is the arguments in favor of free trade. 
D) none of the above 
A) is to make it difficult or impossible for foreigners to gain control of a domestic company. 
B) is to expropriate wealth from domestic shareholders. 
C) is the arguments in favor of free trade. 
D) none of the above

Question 15

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 1.

Accepted Answer

A) ⅓ 
B) ½ 
C) 3/5 
D) ⅔ 
E) 5/7 
A) ⅓ 
B) ½ 
C) 3/5 
D) ⅔ 
E) 5/7

Question 16

Solve for the weighted average cost of capital:

Accepted Answer

A) 7.00% 
B) 6.89% 
C) 6.73% 
D) 6.67% 
E) 6.57% 
A) 7.00% 
B) 6.89% 
C) 6.73% 
D) 6.67% 
E) 6.57%

Question 17

When the parent company fully responsible for the subsidiary's obligations,

Accepted Answer

A) the independent financial structure of the subsidiary is irrelevant. 
B) potential creditors will examine the parent's overall financial condition, not the subsidiary's. 
C) the independent financial subsidiary can have the same capital structure as the parent. 
D) all of the above 
A) the independent financial structure of the subsidiary is irrelevant. 
B) potential creditors will examine the parent's overall financial condition, not the subsidiary's. 
C) the independent financial subsidiary can have the same capital structure as the parent. 
D) all of the above

Question 18

Solve for the weighted average cost of capital:

Accepted Answer

A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14% 
A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14%

Question 19

Solve for the weighted average cost of capital:

Accepted Answer

A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14% 
A) 8.67% 
B) 8.00% 
C) 7.60% 
D) 7.33% 
E) 7.14%

Question 20

The cost of equity capital is

Accepted Answer

A) the expected return on the firm's stock that investors require. 
B) frequently estimated by using the Capital Asset Pricing Model (CAPM). 
C) generally considered to be a linear function of the systematic risk inherent in the security. 
D) all of the above 
A) the expected return on the firm's stock that investors require. 
B) frequently estimated by using the Capital Asset Pricing Model (CAPM). 
C) generally considered to be a linear function of the systematic risk inherent in the security. 
D) all of the above

A firm may cross-list its share to

Solve for the weighted average cost of capital:

Compute the debt-to-total-value ratio for a firm that has a debt-to-equity ratio of 2.

Solve for the weighted average cost of capital:

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 5.

The firm's tax rate is 34%. The firm's pre-tax cost of debt is 8%; the firm's debt-to-equity ratio is 4; the risk-free rate is 3%; the beta of the firm's common stock is 1.5; the market risk premium is 9%. Calculate the weighted average cost of capital.

The common stock of Kansas City Power and Light has a beta of 0.80. The Treasury bill rate is 4 percent and the market risk premium is 8 percent. KCP&L is in the 34% tax bracket. What is their cost of equity capital?

Solve for the weighted average cost of capital:

In the notation of the book, K = (1 - λ)K_l + λ(1 - τ)i Which of the following are correct?

Solve for the weighted average cost of capital:

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 4.

The majority of publicly traded Swiss corporations have up to three classes of common stock: 1) Registered stock 2) Voting bearer stock 3) Nonvoting bearer stock Until recently, foreigners were not allowed to buy registered stocks: in the case of Nestlé this had the effect of

One explanation for foreign equity ownership restrictions

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 1.

Solve for the weighted average cost of capital:

When the parent company fully responsible for the subsidiary's obligations,

Solve for the weighted average cost of capital:

Solve for the weighted average cost of capital:

The cost of equity capital is

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 17: International Capital Structure and the Cost of Capital

A firm may cross-list its share to

Solve for the weighted average cost of capital:

Compute the debt-to-total-value ratio for a firm that has a debt-to-equity ratio of 2.

Solve for the weighted average cost of capital:

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 5.

The firm's tax rate is 34%. The firm's pre-tax cost of debt is 8%; the firm's debt-to-equity ratio is 4; the risk-free rate is 3%; the beta of the firm's common stock is 1.5; the market risk premium is 9%. Calculate the weighted average cost of capital.

The common stock of Kansas City Power and Light has a beta of 0.80. The Treasury bill rate is 4 percent and the market risk premium is 8 percent. KCP&L is in the 34% tax bracket. What is their cost of equity capital?

Solve for the weighted average cost of capital:

In the notation of the book, K = (1 - λ)Kl + λ(1 - τ)i Which of the following are correct?

Solve for the weighted average cost of capital:

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 4.

The majority of publicly traded Swiss corporations have up to three classes of common stock: 1) Registered stock 2) Voting bearer stock 3) Nonvoting bearer stock Until recently, foreigners were not allowed to buy registered stocks: in the case of Nestlé this had the effect of

One explanation for foreign equity ownership restrictions

Find the debt-to-value ratio for a firm with a debt-to-equity ratio of 1.

Solve for the weighted average cost of capital:

When the parent company fully responsible for the subsidiary's obligations,

Solve for the weighted average cost of capital:

Solve for the weighted average cost of capital:

The cost of equity capital is

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

In the notation of the book, K = (1 - λ)K_l + λ(1 - τ)i Which of the following are correct?