For a firm having common and preferred equity as well as debt, common equity value can be estimated in which of the following ways?
A. By subtracting the book value of debt and preferred equity from the enterprise value of the firm
By subtracting the market value of debt from the enterprise value of the firm
C. By subtracting the market value of debt and the market value of preferred equity from the enterprise value of the firm
D. By adding the market value of debt and preferred equity to the enterprise value of the firm
E. By adding the market value of debt and book value of preferred equity to the enterprise value of the firm
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All of the following are true about the marginal tax rate for the firm except for
A. The marginal tax rate in the U.S. is usually about 40%.
B. The effective tax rate is usually less than the marginal tax rate.
C. Once tax credits have been used and the ability to further defer taxes exhausted, the effective rate can exceed the marginal rate at some point in the future.
D. It is critical to use the effective tax rate in calculating after-tax operating income in perpetuity.
E. It is critical to use the marginal rate in calculating after-tax operating income in perpetuity.
The calculation of free cash flow to equity includes all of the following except for
A. Operating income
B. Preferred dividends
Change in working capital
D. Gross plant and equipment spending
E. Principal repayments
The calculation of free cash flow to the firm includes all of the following except for
A. Net income
B. Marginal tax rate
Change in working capital
D. Gross plant and equipment spending
E. Depreciation
The cost of capital reflects all of the following except for
A. Cost of equity
B. The firm's beta
C. The book value of the firm's debt
D. The after-tax cost of interest paid by the firm
E. The risk free rate of return
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