1) Which of the following is an anti-takeover provision?
a. Greenmail
b. poison pills
c. restrictive voting right plans
d. all of the above
e. statement a and b are correct
2) The Herron Company's cost of common equity is 16 percent, its before-tax cost of debt is 11 percent, and it marginal tax rate is 35 percent. Given Herron's market value captial structure below, calculate its WACC.
Long term $ 40,000,000
Common equity $50,000,000
Total capital $ 90,000,000
Select one:
a. 12.07%
b. 10.60%
c. 8.96%
d. 13.78%
e. 11.58%
3) When a division of a firm is quite different from average firm operations, which of the following statement is TRUE regarding the cost of captial for the division project?
a. We cannot use firm's WACC as the cost of captial for the divison projecdt.
b. We can adjust the firms WACC to estiamte the cost of capital for the division project based on the relative riskness of the division to the average firm.
c. We can use pure play method to find the opportunity cost of capital for the division project.
d. We can estimate accounting beta to find the cost of capital fo teh divison project.
e. All statement are true.