96 . Which of the following actions would most likely have a positive influence on shareholder value?
A) Executive board members regularly attend the board meetings.
B) Only one class of common equity has been issued.
C) Adopting a poison pill.
97 . Which of the following is used to illustrate a firm’s weighted average cost of capital (WACC) at different levels of capital?
A) Schedule of marginal capital break points.
B) Marginal cost of capital schedule.
C) Cost of capital component schedule.
98 . Two projects being considered by a firm are mutually exclusive and have the following projected cash flows:
Year Project 1 Cash Flow Project 2 Cash Flow
0 ?$4.0 ?
1 $3.0 $1.7
2 $5.0 $3.2
3 $2.0 $5.8
The crossover rate of the two projects’ NPV profiles is 9%. What is the initial cash flow for Project 2?
A) ?$4.51.
B) ?$4.22.
C) ?$5.70.
99 . The following information reflects the projected operating results for Opstalan, a catalog printer.
§ Sales of $5.0 million.
§ Variable Costs at 40% of sales.
§ Fixed Costs of $1.0 million.
§ Debt interest payments on $1.5 million issued with an annual 7.0% coupon (current yield is 8.0%).
§ Tax Rate of 0.0%.
Opstalan’s degree of total leverage (DTL) is closest to:
A) 2.58.
B) 1.59.
C) 1.41.
100. A board of directors is most likely to protect the shareholders’ interests when:
A) the board requires that management attend all meetings.
B) the board includes representatives from the firm’s key customers and suppliers.
C) one individual can be identified as the leading board member from outside the firm.
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