Question

mportant lesson from corporate finance is that the cost of capital depends primarily on the use of the funds, not the source. Put differently, required return, appropriate mean essentially the same thing. Evaluate the underlined words in italics. True or False? discount rate and the A. True B. False 5. A company has positive net income and no debt. If the effective tax rate of the company were to instantaneously change from 30% to 20%, which of the following staterm ents is (are) TRUE: 1. FCFF would increase Il. FCFE would increase by the same amount as FCFF II WACC would increase A. I E. None of the statements Assume a Company X's stock price today and cost of equity is consistent with the dividend discount model or constant growth; HINT: Cost of Equity Dividend Yield +Capital Gain Yield. Use the information in the table below to answer problems 16-17. Any missing information will need to be solved for. TIME (Years) Ni Dividends Shares Outstanding Book Value Price Per Share Return On Equity Cost of Equity Long Term Growth Dividends Per Share S 1,350.00 $ 135.00 6,750.00 80.00 12.0% 16. Company X's dividend payout ratio is closest to A. 0.3 B. 0.4 C. 0.5 D. 0.6 E 0.7 17. The present value of Company X's first dividend payment one year from now (T-l) is closest to A. $3.33 B. $3.40 C. $3.73 D. $3.81 E. $3.83