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BADM 710 Final Actual Exam Newest 2025/2026 Complete Questions And Correct Answers |Already Graded A+||Brand New Version!
Assume the corporate tax rate is 34 percent, the personal tax rate on interest income is 15 percent, and the personal tax rate on dividends is 10 percent. If the firm earns $5 per share in taxable income and pays out 40 percent of its earnings, how much will a shareholder receive in aftertax income?
A: $1.470
B: $1.782
C: $1.096
D: $1.232
E: $1.188 - CORRECT ANSWER -E: $1.188
After tax income of the company:
= $5* (1-.34) = $3.3
Out of which company pays 40% as Dividend 1 / 3
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= .40*3.3 = $1.32
Now Shareholder would pay 105 tax on it
=$1.32* (1-.1) = $1.188
If a project's debt level is known over the life of the project, one should use
A: WACC.
B: APV.
C: FTE.
D: either APV or FTE.
E: either FTE or WACC. - CORRECT ANSWER -B: APV.
In calculating NPV using the flow-to-equity approach the discount rate
is the:
A: all-equity cost of capital.
B: cost of equity for the levered firm.
C: all-equity cost of capital minus the weighted average cost of debt.
D: weighted average cost of capital.
E: all-equity cost of capital plus the weighted average cost of debt. -
CORRECT ANSWER -B: cost of equity for the levered firm. 2 / 3
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The flow-to-equity approach to capital budgeting involves all of the
following except:
A: calculating the levered cost of equity.
B: determining the amount of the investment that is not borrowed.
C: computing the PV of the cash flows using the cost of equity for an
all-equity firm.
D: discounting the levered cash flows using the levered cost of equity.
E: computing the project's NPV. - CORRECT ANSWER -C: computing the PV of the cash flows using the cost of equity for an all-equity firm.
The cost of equity should be lowest when the debt to equity ratio is:
A: zero.
B: .20
C: .25
D: .50
E: 1.00 - CORRECT ANSWER -A: zero.
Filter Corp. maintains a debt-equity ratio of .45. The cost of equity is 14.7 percent, the pretax cost of debt is 8.1 percent, and the marginal tax rate is 34 percent. What is the weighted average cost of capital?
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