A Firm Has a Capital Structure of 40% Debt and 60

question 73

Multiple Choice

A firm has a capital structure of 40% debt and 60% equity.The firm has bonds outstanding with a face value of $20 million.The bonds pay,on average,a 8% annual coupon and have an average maturity length of 7 years.The market value of the bonds is 110% of face value and the tax rate facing the firm is 40%.The firm has common stock with a beta of 1.25.The risk free rate on Treasury bonds is 2%,while the market risk premium is 8%.A project requires an investment of $10,000 today and will pay $2,500 annually for six years.What is the NPV of the project?

• A) $825
• B) $1,320
• C) $1,460
• D) $1,540

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Definitions:

Obsessive-Compulsive Disorder

A mental disorder characterized by recurring, unwanted thoughts (obsessions) and repetitive behaviors (compulsions) that an individual feels compelled to perform.

Pharmacological Treatment

The use of drugs or medications as part of a treatment plan for managing or curing illness, diseases, or disorders.

Conduct Disorder

A mental disorder diagnosed in childhood or adolescence characterized by a repetitive and persistent pattern of behavior in which the basic rights of others or major age-appropriate societal norms or rules are violated.

DSM-5

The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, a comprehensive classification of officially recognized psychiatric disorders.