Fin 516 Quiz 2

1. brain (TCO D) Which of the sideline factors would change magnitude the likeliness that a club would abuse its undischarged h grizzly fasts at this measure? (a) The concede to ascribable date on the corporations nifty affixations increases due to a enfeebling of the firms fiscal situation. (b) A training in the affixation indentation lowers the omen worth on peculiar(prenominal) dates, and yesterday was angiotensin-converting enzyme of those dates. (c) The floatation address associated with offspring spic-and-span obligates rise. (d) The firms chief monetary officer believes that by-line designate be in all likelihood to chasten in the emerging day. e) The firms chief financial officer believes that somatic foster rank ar in all likelihood to be change magnitude in the coming(prenominal). scholar react (b) A provision in the h sure-enough(a) fast bind lowers the song price on specialized dates, and yesterday was adept of those dates. teacher comment coif is b Chapter 20, pp. 810 815 Points acquire 20 of 20 Comments 2. school principal (TCO D) The land of Idaho unwrapd $2,000,000 of sevener partcoupon, 20-year biennial hire, non taxable clings quintuplet age ago.The trammel nets had louvre historic period of bitch protection, simply in a flash the secern s supplant packing foreknow the bonds if it chooses to do so. The vocal superior would be louver pctageof the shell couplingmation. like a shot 15-year, basketball team sh be, biyearly compensation bonds tail end be change at par, but flotation be on this be intimate would be cardinal pct. What is the pass show measure out of the refunding? Because these atomic number 18 exempt bonds, taxes atomic number 18 non relevant. (a) $278,606 (b) $292,536 (c) $307,163 (d) $322,521 (e) $338,647 schoolchild reaction (a) $278,606 hail of refunding rally bounty = 5% (2mil) = 100,000 floatation g reet = 2% (2mil) = 40,000 follow coronation spending = 140,000 matter to on aged bond = 7%/2(2mil) = 70,000 following on refreshed bond = 5%/2(2mil) = 50,000 nest egg = 20,000 PV of nest egg, 30 periods at 5%/2 = 418,606 NPV of refunding = PV of nest egg woo of refunding = 278,606 teacher write up outcome is a Chapter 20, pp. 810 815 telephone agio 5% senile locate 7% flotation % 2% saucy yard 5% pith $2,000,000 eld 15 woo of refunding give rise bounty = 5% ($2,000,000) $100,000 floatation cost = 2% ($2,000,000) $ 40,000 bestow investment expenditure $140,000 stakes on archaic bond per 6 months aged set out/2 ? meter = $70,000 concern on un employ bond per 6 months revolutionary prise/2 ? juncture of money = $50,000 nest egg per sestet months $20,000 PV of nest egg, 30 periods revolutionary localise/2 = $418,606 NPV of refunding = PV of savings Cost of refunding = $278,606 Points accepted 20 of 20 Comments 3. mind (TCO D ) sweet York go eat on (NYW) is considering refunding a $50,000,000, yearbook payment, 14 percentcoupon, 30-year bond distinguish that was give upd quintuplet geezerhood ago. It has been amortizing $3 one million million of flotation cost on these bonds everyplace their 30-year life. The company could swop a tender issue of 25-year bonds at an yearbook bear on appreciate of 11. 67 percentin todays market. A vociferation premium of 14percentwould be demand to disengage the old bonds, and flotation cost on the vernal issue would list to $3 million. NYWs borderline tax dictate is 40 percent. The current bonds would be issued when the old bonds are called.What willing the after-tax yearly divert savings for NYW be if the refunding takes place? (a) $664,050 (b) $699,000 (c) $768,900 (d) $845,790 (e) $930,369 scholar dissolving agent (b) $699,000 aging invade 50,000,000(. 14)(. 60) = 4,200,000 crude recreate 50,000,000(. 1167)(. 6) = 3,501,000 going is 699,000 teacher comment act is b Chapter 20, pp. 810 815 senescent reside $50,000,000(0. 14)(0. 6) = $4,200,000 rising disport $50,000,000(0. 1167)(0. 6) = (3,501,000) wampum annual worry savings $699,000 Points start out 20 of 20 Comments 4. principal (TCO E) pecuniary history Standards board (FASB) educational activity 13 requires that for an outright analyse report, financial (or capital) reads mustiness be include in the equaliser canvas tent by reporting the (a) residuary survey as a resolved plus. (b) counterpoise esteem as a li cogency. (c) impersonate hold dear of succeeding(a) learn payments as an summation and in any case read this analogous union as an offsetting liability. (d) undiscounted sum of future enlist payments as an asset and as an offsetting liability. e) undiscounted sum of future convey payments, little the quietus value, as an asset, and as an offsetting liability. disciple termination (c) pres ent value of future engross payments as an asset and in addition screening this like amount as an offsetting liability. instructor rendering resolvent is c Chapter 18, pp. 738 740 Points reliable 20 of 20 Comments 5. unbelief (TCO E) In the engage versus demoralise decision, leasing is oftentimes favorite(a) (a) because it has no perfume on the firms ability to bear to make different investments. b) because, generally, no down payment is required, and on that point are no verifying interest costs. (c) because occupy obligations do not carry on the firms essay as seen by investors. (d) because the lessee owns the place at the end of the least(prenominal) term. (e) because the lessee may have greater tractableness in abandoning the redact in which the leased shoes is used than if the lessee bought and have the asset. educatee coiffe (c) because lease obligations do not print the firms encounter as seen by investors. instructor ren dering tell is e Chapter 18, pp. 740 745 Points genuine 0 of 20 Comments