【導(dǎo)讀】Inetaxexpense:. years.

　　

【正文】 on ID: 14969 The following information is regarding an asset a firm purchased for $100,000. ? The asset has a 5year useful life and no salvage value. ? The asset generates $30,000 of annual revenue for 5years. ? Tax rate is 35 percent. ? The business depreciates the asset over 4 years on a straightline basis. Taxes payable in year 5 are? A. $8750. B. $5250. C. $10500. D. $1750. C By year five the asset has been fully depreciated. $30,000 revenue $0 depreciation = $30,000 ine ($30,000 ine)(.35 tax rate) = $10,500 : Analysis of Financing Liabilities Question ID: 15004 23 Which of the following statements is FALSE? When a bond is issued at a discount: A. the interest expense will increase over time. B. the interest expense will be equal to the coupon payment plus the amortization of the discount. C. the initial liability listed in the balance sheet will be less than the par value of the bond. D. cash flows from financing will be increased by the par value of the bond issue. D Setup Text: A firm issues a $5 million zero coupon with a maturity of four years when market rates are 8 percent. Question ID: 15012 The initial liability is: A. $4,629,630. B. $3,675,149. C. $5,000,000. D. $3,653,451. D n = 4, i/yr = 8%, PMT = 0, FV = $5,000,000, Compute PV = $3,673,451. Question ID: 15012 The value of the liability at the end of 6 months is: A. $5,000,000. 24 B. $3,675,149. C. $3,969,161. D. $3,799,589. D [$3,653,451+{($3653,451)}] Setup Text: A pany issued an annualpay bond with the following characteristics: ? Face value $67,831 ? Maturity 4 years ? Coupon % ? Market interest rates % Question ID: 24687 What is the present value of the interest payments on the date when the bonds are issued? A. $65,582. B. $18,992. C. $15,726. D. $49,857. C Present value of the interest payments on the date of issue is $15,726 = [I/Y = %, N = 4, PMT = $4, ($67,831 x .07 ), FV= $0 ] Question ID: 24687 What is the unamortized discount on the date when the bonds are issued? 25 A. $1,748. B. $2,249. C. $15,729. D. $499. B The unamortized discount rate at the time bonds are issued will be $2,249. Face value of bonds = $67,831 Proceeds from bond sale = $65,582 [I/Y = %, N = 4, PMT = $4, ($67,831 ′ .07 ), FV= $67,831 ] Unamortized discount = $2,249 ($67,831 $65,582) Question ID: 24687 What is the unamortized discount at the end of the first year? A. $538. B. $2,247. C. $1,209. D. $1,750. D The unamortized discount will decrease by $499 at the end of first year and will be $1,750. Interest expense = $5,247 ($65,582 x .08) Coupon payment = $4,748 ($67,831 x .07) Change in discount = $499 ($5,247 $4,748) Discount at the end of first year = $1,750 ($2,249 $499) Question ID: 15013 A $1000 bond is issued with an percent semiannual coupon rate and 5 years to maturity when market interest rates are 10 percent. What is the initial liability? 26 A. 1023. B. 855. C. 923. D. 835. C FV=1000。 PMT = 80/2。 N=5*2。 I/Y=10/2。 solve for PV = 923. Question ID: 15016 Which of the following statements about bonds issued at a discount is FALSE? A. Interest expense will equal the cash paid plus the amortization of the discount. B. Cash flow from operations will be overstated and cash flow from financing will be understated. C. The original liability will be higher than the bond39。s par value. D. Interest expense will have an upward trend for each period. C Bonds issued at a discount will have an original liability that is lower than the bond39。s par value. Question ID: 24732 A zero coupon bond, pared to a bond issued at par, will have higher: A. debt at the end of the year. B. cash flows from financing (CFF). C. cash flows from operations (CFO). D. interest expense. 27 C The zerocoupon bond will have higher cash flows from operations, as the cash interest expense in this case is zero and no cash is paid until maturity. Candidates should remember that any bond issued at a discount will have more cash flow from operations and less cash flow from financing. Question ID: 15025 A firm issues a $5 million zero coupon with a maturity of four years when market rates are 8 percent. Proceeds from this issue are: A. $5,000,000. B. $3,675,149. C. $3,653,451. D. $4,629,630. C [FV = $5,000,000。 i = 4%。 n=8] Question ID: 24735 If the cash proceeds from a bond issue are held constant, a zerocoupon bond will have: A. a lower cash times interest earned ratio pared to a bond with a coupon. B. a cash times interest earned ratio of zero. C. a lower times interest earned ratio pared to a bond with a coupon. D. the same times interest earned ratio pared to a bond with a coupon. D The times interest earned ratio of a zerocoupon bond and a bond issued with a coupon will be the same if the proceeds from the issue are constant. However, the times interest earned on 28 cash basis will be affected. The cash times interest earned ratio will be infinity for a zerocoupon bond, since no cash interest is paid. Question ID: 24731 Which of the following debt issues will have the highest cash flows from financing? A. Bonds issued at discount. B. Zerocoupon bond. C. Bonds issued at par. D. Bonds issued at premium. D The bonds issued at premium will have the highest cash flows from financing, while bonds issued at par will have higher cash flows from financing than bonds issued at a discount. Candidates should remember that any bond issued at a premium will have more cash flow from financing and less cash flow from operations. Question ID: 24734 Which of the following statements regarding the issuan