Question : Normaltown Corporation An analyst has predicted the free cash flows for : 1325680

 

 

Normaltown Corporation

An analyst has predicted the free cash flows for Normaltown Corporation for the next four years:

 

YEARFCF

2004$10 million

2005$15 million

2006$22 million

2007$29 million

 

 

74.After 2007, the free cash flows are expected to grow at an annual rate of 5%. If the weighted average cost of capital is 12% for Normaltown, find the enterprise value of the firm.

a.$54.98 million

b.$301.81 million

c.$313.00 million

d.$331.43 million

 

 

 

75.After 2007, the free cash flows are expected to grow at an annual rate of 5%. The weighted average cost of capital for Normaltown is 12%. If the market value of the firm’s debt is $100 million, find the value of the firm’s equity.

a.$201.81 million

b.$213.00 million

c.$231.43 million

d.$271.20 million

 

 

 

76.Debt holders:

a.are the residual owners of a corporation.

b.have little say in how the firm conducts its business.

c.cannot force the firm into bankruptcy court if it fails to make the scheduled interest and principal payments on time.

d.are willing to accept more risk than the stockholders in the corporation.

 

 

 

77.Stockholder voting rights include:

a.voting on the amount of dividends the firm will pay to current stockholders.

b.voting as to whether or not the firm should file for bankruptcy.

c.voting for members on the Board of Directors.

d.voting on whether or not the firm will issue additional debt.

e.all of the above

 

 

 

78.Which of the following statements is false?

a.Dual-class stock is more prevalent in the United States than it is in other countries.

b.When a corporation has dual-class stock, the corporate insiders generally concentrate their holdings in the superior voting-share class, while ordinary investors tend to hold relatively more of the inferior voting-class stock.

c.One purpose of a dual-class structure is to allow insiders to raise the capital needed to finance growth without losing voting control.

d.All of the above statements are false.

e.Only statements (a) and (b) are false.

 

 

 

79.The decision as to whether or not a firm will pay dividends is explicitly made by the:

a.stockholders

b.bondholders

c.Board of Directors

d.Chief Financial Officer

e.Chief Executive Officer

 

 

 

80.Which of the following activities is not one of the three principal lines of business for U.S.-based investment banks?

a.Working capital management

b.Corporate finance

c.Trading

d.Asset management

 

 

 

81.One of the most time-consuming aspects of preparing for an equity offering is:

a.preparing the necessary documents for filing with regulators.

b.putting on the road show so that managers can pitch their business plan to prospective investors.

c.oversubscribing the offering.

d.none of the above

 

 

 

82.A Green Shoe option is:

a.the option of the issuing firm to buy back stock from a select group of stockholders.

b.the option to sell more shares than were originally planned.

c.the option to use a selling group to distribute shares of stock.

d.the option to sell fewer shares than were originally planned.

 

 

 

83.When evaluating the secondary market based upon how the securities are traded, we can divide the market into two segments:

a.a bull market and a bear market.

b.a stock market and a bond market.

c.a primary market and a secondary market.

d.a broker market and a dealer market.