Compuvac Company Has Just Completed Its First Pass Forecast Using

question 23

Multiple Choice

Compuvac Company has just completed its first pass forecast using the projected balance sheet method.The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon.Additionally,the firm will sell 500,000 shares of new common equity at $18.10 per share.Next year's expected dividend is $0.48 per share.The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate.Given this information,what is the incremental change in AFN for Compuvac going from the first pass to the second pass?

• A) $240,000
• B) $0
• C) $480,000
• D) $160,000
• E) $640,000

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Definitions:

Masking

A method in perceptual research where a visual stimulus is made less visible to the observer by the presence of another stimulus, hindering the ability to perceive or process the first stimulus.

Memory Recall

The process of retrieving information stored in long-term memory, bringing it into conscious awareness.

Fluid Intelligence

The capacity to solve novel problems, use logic in new situations, and identify patterns.

Working Memory Capacity

The amount of information that can be held and manipulated in working memory at one time, which plays a critical role in comprehension, learning, and reasoning.