Income taxes have the effect of
A) increasing the cost of debt.
B) decreasing the cost of debt.
C) decreasing the cost of capital for the firm.
D) both b and c are correct.
Answer: B
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FIN303
- Option payoffs: What is the payoff for a put option with a strike price of $20 if the price of the underlying stock at expiration is $18?
- Option payoffs: You have sold a call option on ABC Co. stock with a strike price of $40. You do not intend to make any other transactions before the options expiration date. The current stock price is $20. Which of the following statements best describes your hopes for the stock?
- Option payoffs: You own a put option on ABC. Co. stock with a strike price of $40. The current stock price is $40. You will benefit if
- Option payoffs: What is the payoff for a call option with a strike price of $45 if the underlying stock price at expiration is $75?
- A local city government has awarded a contract to sequentially build five new elementary schools over the next 10 years. The price for each school has been spelled out in the contract, but at the beginning of each year the city can cancel the order for the remaining schools. The city government is concerned that if the population of the town does not grow as expected it may not need all of the schools. What sort of financial option does the option to cancel the order resemble?
- RealEstates LLP is considering the construction of a new development of condominiums in downtown Austin, Texas. The site for the new development is currently occupied by an office building owned by the city. The project's profitability will depend largely on the population increase in Austin over the next several years. Rather than buy the site, RealEstates has entered into an agreement with the city to pay $200,000 for the right to purchase the site for $10 million two years from now. The real option embedded in this contract is best described as
- Suppose you own a put option on a stock with a strike price of $35 that expires today. The price of the underlying stock is $25. If you purchase the stock and exercise the put option,
- Suppose you own a call option on a stock with a strike price of $20 that expires today. The price of the underlying stock is $15. If you exercise the option and immediately sell the stock,
- Which one of the following statements about the sustainable growth rate (SGR) is NOT true?
- Which one of the following statements about the sustainable growth rate (SGR) is NOT true?
- The sustainable growth rate (SGR)
- Firms that achieve higher growth rates without seeking external financing
- Firms that achieve higher growth rates without seeking external financing
- Which one of the following statements is NOT true?
- External funding needed (EFN) is
- In accounting for changes in fixed assets, which one of the following statements is NOT true?
- In accounting for changes in fixed assets, which one of the following statements is NOT true?
- Some weaknesses in financial planning models include:
- In using more sophisticated planning models, which one of the following statements is NOT true?
- In using more sophisticated planning models, which one of the following statements is NOT true?
- Which one of the following statements is NOT true?
- Which statement is NOT true for a firm that is operating at full capacity?
- One statement that is NOT true about more sophisticated financial planning model is that:
- Planning models that are more sophisticated than the percent of sales method have
- Which one of the following statements is NOT true about financial planning models?
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.