Which of the following statements is true about foreign bonds?
A. The interest rate on foreign bonds is adjusted annually for inflation.
B. Foreign bonds are bonds sold in a foreign country and are denominated in the currency of the country in which the issue is sold.
C. Foreign bonds are bonds sold by a foreign borrower but convertible to bonds issued in the foreign country.
D. The term Eurodebt specifically applies to any foreign bonds denominated in U.S. dollars.
E. The interest rate on foreign bonds is adjusted annually for exchange rate fluctuations.
Answer: B
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What financial statement is considered the cornerstone of financial reporting?
A) the income statement B) the statement of cash flows C) the statement of shareholders' equity D) the balance sheet
The current market price of a share of TSCO stock is $75. If a put option on this stock has a strike price of $79, the put
A. is out of the money. B. is in the money. C. can be exercised profitably. D. is out of the money and can be exercised profitably. E. is in the money and can be exercised profitably.
Which of the following statements is not true of S corporations?
A. S corporations are corporations that receive tax treatment similar to that given partnerships. B. Section 1231 gains and losses pass through separately to stockholders of an S corporation. C. The amount of S corporation losses that a shareholder of an S corporation may report on his or her tax return is limited to the basis of the stock plus any loans made by the shareholder to the corporation. D. If a taxpayer purchases stock in an S corporation from another shareholder during the year, the new shareholder may report the entire amount of any loss for the year attributable to the shares purchased. E. If an otherwise qualifying shareholder acquires 40 percent of the stock of an S corporation, the new shareholder cannot cause the corporation to lose its S corporation election.
Juicers Inc is thinking of acquiring Fast Fruit Company. Juicers expects Fast Fruit's NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Fast Fruit is expected to have NOPAT of $25 million and interest expense of $5 million. Also, in the second year only, Fast Fruit will need $10 million of net new investment in
operating capital. Fast Fruit's marginal tax rate is 40%. After the second year, the free cash flows and the tax shields from Fast Fruit to Juicers will both grow at a constant rate of 4%. Juicers has determined that Fast Fruit's cost of equity is 17.5%, and Fast Fruit currently has no debt outstanding. Assume that all cash flows occur at the end of the year, Juicers must pay $45 million to acquire Fast Fruit. What it the NPV of the proposed acquisition? Note that you must first calculate the value to Juicers of Fast Fruit's equity. a. $45.0 million b. $68.2 million c. $86.5 million d. $113.2 million e. $133.0 million