M&M Proposition I with tax states that the value of a levered firm increases as the:

Multiple Choice

• Debt-equity ratio increases.

• Inflation rate increases.

• Level of debt decreases.

• Tax rate of the firm decreases.

• Unlevered value of the firm decreases

Absent taxes and market imperfections, the market value of a stock will tend to decrease by roughly the amount of the dividend on the:

Multiple Choice

• Dividend declaration date.

• Date of payment.

• Date of record.

• Ex-dividend date.

• Day after the date of payment.

June Corp, $5,000,000 of taxable income. One of the states in which it does business is Kentucky, which uses the three-factor formula with a double-weighted sales factor to apportion income. If June Corp’s property factor in Kentucky is 0.05, its payroll factor is 0.05, and its sales factor is 0.15, what amount of its taxable income has to be apportioned to Kentuck

Sam manufacturing Inc. does business in two states. Each state used the single-factor sales formula to apportion income. State 1 imposes a 5% tax on income, and State 2 imposes an 8% tax on income. The company’s federal taxable income was $3,000,000. Each state uses federal taxable income as its base for imposing its tax. If the company has $1.5 million in sales in State 1 and $1 million in sales in State 2 and no income allocable to either state, how much does the company owe each state?

3. Holt Industries, Inc. does business in State 1. That state uses federal taxable income as the starting point for calculating state income tax. Interest on state obligations is taxed, but interest on federal obligations is not taxed. Only straight-line depreciation may be deducted. Holt Industries’ income and expenses for the year are:

Sales                                                                                $200,000

Interest income on federal obligations                       $4,000

Interest income on state obligations                         $5,000

State taxes                                                                     $10,000

MACRS                                                                            $15,000

(straight-line depreciation)                                          $8,000

Cost of sales                                                                   $60,000

Other business expenses                                            $20,000

Other business expenses                                            $20,000

You are considering investing in a project with the following possible outcomes:

     Probability of Investment
States    Occurrence Returns
State 1: Economic boom 20% 16%
State 2: Economic growth       40% 12%
State 3: Economic decline       20% 5%
State 4: Depression        20% -5%

Calculate the standard deviation of returns for this investment. Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.)

There are only two possible states of the economy. State 1 has a 49% chance of occurring. In State 1, Asset A returns 8.75% and Asset B returns 11.75%. In State 2, Asset A returns -4.50% and Asset B returns -7.50%. A portfolio of just these two assets is invested 61% in Asset A (with Asset B comprising the remainder without any negative weights). What is the standard deviation of the portfolio's returns?

a) 7.01%

b) 7.21%

c) 7.40%

d) 7.60%

e) 7.79%

There are only two possible states of the economy. State 1 has a 71% chance of occurring. In State 1, Asset A returns 6.00% and Asset B returns 9.00%. In State 2, Asset A returns -3.40% and Asset B returns -6.40%. A portfolio of just these two assets is invested 39% in Asset A (with Asset B comprising the remainder without any negative weights). What is the standard deviation of the portfolio's returns?

The US southern states advantage in cotton production that emerged in the 1800s reflected in part a “Biological Revolution” catalyzed in 1806 when a Mississippi planter and diplomat, Walter Burling, returned from Mexico City with seeds from some unusually appealing cotton plants. Explain how this could have impacted southern regional economic history and affect the lives of American Negro Slaves.

There are only two possible states of the economy. State 1 has a 69% chance of occurring. In State 1, Asset A returns 6.25% and Asset B returns 9.25%. In State 2, Asset A returns -3.50% and Asset B returns -6.50%. A portfolio of just these two assets is invested 41% in Asset A (with Asset B comprising the remainder without any negative weights). What is the standard deviation of the portfolio's returns?

Your boss at an investment firm states that they would like a required return of 5% on all investments. This boss then discovers a bio-tech stock that pays a $1 dividend next quarter. Your junior analyst discovers on the internet that the stock will give dividends at a rate of 5%. Given that this is the only information you have, you defy your boss and do not buy the stock, why? Explain.

There are only two possible states of the economy. State 1 has a 65% chance of occurring. In State 1, Asset A returns 6.75% and Asset B returns 9.75%. In State 2, Asset A returns -3.70% and Asset B returns -6.70%. A portfolio of just these two assets is invested 45% in Asset A (with Asset B comprising the remainder without any negative weights). What is the standard deviation of the portfolio's returns?

Question 6 options: