Question 1

Louis International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Accepted Answer

The annual before-tax cash outflow on the lease is $750,000. Since the company is in the 40% tax bracket, its tax savings due to the lease will be 40% of the lease payments, or $300,000 ($750,000 x 0.40). Therefore, the annual after-tax cash outflow on the lease is $750,000 - $300,000 = $450,000. 
So, the best choice is B.

Question 2

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 3

For a typical callable bond,what is the call price for 12% coupon bond?

Accepted Answer

1,000 ´ 1.12 = 1,120

Question 4

Which of the following qualifies as a Eurobond?

Accepted Answer

Eurobonds are bonds issued in a currency not native to the country where it is issued. A dollar-denominated bond issued by a U.S. corporation and sold to Western European investors fits this definition.

Question 5

Which of the following has (have)transformed U.S.bond-issuance patterns?

Accepted Answer

Both shelf registration and Rule 144A have transformed U.S. bond-issuance patterns. Shelf registration allows issuers to register a large amount of securities in one filing and then gradually sell them over time, providing flexibility for the issuer. Rule 144A allows for private placement of securities to qualified institutional buyers, increasing access to capital markets for issuers and fostering liquidity in the market.

Question 6

Emma International has a lease with payments of $500,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Accepted Answer

The annual after-tax cash outflow on the lease is calculated by taking the lease payment and subtracting the tax savings from the lease payment. The tax savings are calculated by multiplying the lease payment by the tax rate. Therefore, the after-tax cash outflow is $500,000 - ($500,000 * 40%) = $500,000 - $200,000 = $300,000.

Question 7

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 8

A lease that results when a lessor acquires the assets that are leased to a given lessee is known as a:

Accepted Answer

A direct lease occurs when a lessor purchases assets specifically to lease them out, which matches the description given.

Question 9

Roxy International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Accepted Answer

The after-tax cash outflow is the lease payment minus the tax savings from the interest portion of the lease payment. The interest portion of the lease payment is $750,000 x 40% = $300,000. The after-tax cash outflow is $750,000 - $300,000 = $450,000.

Question 10

Which of the following qualifies as a foreign bond?

Accepted Answer

A foreign bond is issued by a foreign borrower in the domestic market of another country and in the currency of the country where it is issued. Choice A, a Swiss franc-denominated bond issued in Switzerland by a U.S. corporation, fits this definition as it is issued by a foreign corporation (U.S. corporation) in the domestic market of another country (Switzerland) and in the currency of that country (Swiss franc).

Question 11

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 12

When one firm sells an asset to another for cash and then leases the asset from its new owner,it is known as a:

Accepted Answer

This scenario describes a sale-leaseback arrangement, where the firm sells an asset to raise cash and then leases it back from the new owner. This can be beneficial for the firm as they can still use the asset without the burden of ownership, and the new owner can benefit from the lease payments and potential appreciation of the asset. Direct lease and leveraged lease involve different arrangements for leasing assets, but do not involve the sale of the asset from one firm to another.

Question 13

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the after-tax cash flow effect,today,of the accelerated amortization if Roxy is in the 35% marginal tax bracket?

Accepted Answer

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Question 14

Term loans:

Accepted Answer

Term loans are essentially private placements of debt, which bypass investment bankers as an intermediary. They can be more flexible than publicly-traded debt and are often used to finance permanent working capital needs. So, all the given options are correct.

Question 15

An instrument that gives the holder the right to purchase a certain number of shares of a firm's common stock at a specified price over a certain period is known as a(n):

Accepted Answer

The instrument described in the question is a stock purchase warrant, which gives the holder the right to purchase a certain number of shares of a firm's common stock at a specified price over a certain period. The other choices listed are different types of loans or debt instruments and do not match the description provided in the question.

Question 16

For a typical callable bond,what is the call price for 10% coupon bond?

Accepted Answer

1,000 ´ 1.10 = 1,100

Question 17

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the after-tax cash flow effect,today,of the accelerated amortization if Louis is in the 35% marginal tax bracket

Accepted Answer

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Question 18

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 19

A floating-rate,hard-currency loan made by a large number of international banks to international corporate and government borrows is known as:

Accepted Answer

The answer of A floating-rate,hard-currency loan made by a large...

Question 20

The protection of bond collateral

Accepted Answer

Protecting bond collateral is crucial to increasing the safety of the bond issue, as it provides investors with assurance that there are assets backing the bond in case it defaults. This, in turn, can enhance the marketability of the bond issue, as investors are more likely to invest in a bond that is perceived as safe. Therefore, option D - "both (a) and (b)" is the correct answer. Option C - "does not usually occur in a bond issue" is incorrect, as collateral is often used to secure bonds.

Quiz 13: Long-Term Debt and Leasing

Louis International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

For a typical callable bond,what is the call price for 12% coupon bond?

Which of the following qualifies as a Eurobond?

Which of the following has (have) transformed U.S.bond-issuance patterns?

Emma International has a lease with payments of $500,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

A lease that results when a lessor acquires the assets that are leased to a given lessee is known as a:

Roxy International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Which of the following qualifies as a foreign bond?

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

When one firm sells an asset to another for cash and then leases the asset from its new owner,it is known as a:

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the after-tax cash flow effect,today,of the accelerated amortization if Roxy is in the 35% marginal tax bracket?

Term loans:

An instrument that gives the holder the right to purchase a certain number of shares of a firm's common stock at a specified price over a certain period is known as a(n) :

For a typical callable bond,what is the call price for 10% coupon bond?

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the after-tax cash flow effect,today,of the accelerated amortization if Louis is in the 35% marginal tax bracket

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

A floating-rate,hard-currency loan made by a large number of international banks to international corporate and government borrows is known as:

The protection of bond collateral