SOLVED

31) The Islands Tanning Spa acquired its tanning beds from the franchisor for $125,000. The equipment will last for six years. If the CCA is 30% for tanning beds, the company’s tax rate is 35% and the company’s discount rate is 9%, what is the present value of The Islands tax shield? A) $7,175 B) $20,500 C) $27,314 D) $29,398 E) $43,750 32) A company has won a four- year contract to produce extraction equipment for the Athabasca Oil Sands project. It is buying $79.5 million worth of machinery for its Lachine, Quebec plant to be able to fulfill the order. The machinery is financed by a four-year loan at 8% per year, with the current portion of the principal and the interest, equaling $24 million, due at the end of each year. Salvage value is expected to be $29.3 million. If the company’s tax rate is 32%, the capital cost allowance (CCA) rate is 25% and the discount rate is 8%, what is the net present value of the company’s tax shield over the life of the contract? A) $6.5 million B) $17.9 million C) $19.3 million D) $21.3 million E) $27.5 million 33) What is the main role of a stock exchange? A) To act as a primary and secondary capital market for businesses. B) To act as a primary capital market for businesses. C) To act as a secondary capital market for businesses. D) To act as a primary capital market for businesses and government. E) To act as a secondary capital market for businesses and government. 34) Whole Plumbing Supplies Ltd. (WPS) graduated from the TSX Venture exchange to the TSX when its share price rose above $7.00. Which of the following minimum listing requirements did WPS finally meet? A) Pre-tax income greater than $300,000. B) Pre-tax cash flow greeter than $700,000. C) Net tangible assets greater than $7,000,000. D) Public float greater than 1,000,000. E) Market value of float greater than $10,000,000. 35) What is the purpose of investment analysts dividing the universe of listed companies into small cap, medium cap and large cap companies? A) It is required to meet various government regulations. B) It measures whether certain sectors are outperforming others. C) It is done in order to calculate the stock market indexes. D) It determines which companies qualify for the small business deduction. E) It is used by the TSX to try to get more listings. 36) During the Great Recession of 2008-2009, stock markets fell about 40%. Which of the following best indicates the short-term thinking by investors during this period of widespread financial turmoil? A) The share price of high earnings companies generally held up the best. B) The share price of high price/earnings companies generally held up the best. C) The share price of high yielding companies generally held up the best. D) The share price of high long term investing companies generally held up the best. E) The share price of high growth companies generally held up the best. 37) The share price of Royal Software Inc. bottomed out at $15.00 and over the next two months gradually rose through $16.00 to where it currently stands at $17.50. Which of the following stock patterns is a technical analyst investor following if he buys the stock at $17.50? A) Channel. B) Head and shoulders. C) Line trend. D) Triangle. E) Cup with handle. 38) Kiera Jones bought 100 shares of XLNX at $4.00 per share. One year later the share price of XLNX was $10.00 per share. During this period the S&P/TSX went from 8,000 to 12,000, the NASDAQ went from 1,600 to 2,400, the Dow-Jones Industrial average went from 6,000 to 11,000 and the S&P 500 went from 750 to 1,300. Which of the following statements best describes this market action? A) A weak form of efficiency mispriced XLNX a year ago. B) A semi-strong form of efficiency mispriced XLNX a year ago. C) A strong form of efficiency mispriced XLNX a year ago. D) An inefficient market a year ago had mispriced the stock of XLNX. E) The market is creating a bubble in the price of XLNX stock. 39) Digby Drilling Ltd. (DDL) has hired an investment banker to advise it about a forthcoming convertible bond issue. After surveying institutions the advisor had informed DDL that it can sell $1,000,000 worth of convertible bonds at 10% interest and the same amount of non-convertible bonds at 12% interest. Which of the following lesson about stock market efficiency does this information illustrate? A) Timing DDL financing doesn’t matter. B) DD is an undervalued business. C) DDL cannot fool the market. D) DDL does not decide the level of risk. E) DDL is championing shareholder interests. 40) Barrie Mountains Resort did a one-for-two rights offering at $25.00 per share. The value of the rights offer is $3.33. What is the original price of a share before doing the rights issue. A) $25.00 B) $28.33 C) $30.00 D) $60.00 E) $85.00 41) Assuming the share price did not change much, when would an investor be worse off? A) An investor buys the rights shares. B) An investor ignores the rights shares. C) An investor sells the rights shares. D) An investor receives a stock dividend. E) An investor’s stock has a stock split. 42) Labrador Gold Inc. (LG) made a tender offer of shares to the investing public and found the following information. At $1.00 per share, LG could sell 1 million shares. At $2.00, LG could sell eight hundred thousand shares. At $3.00, LG could sell half a million shares. At $4.00, LG could sell four hundred thousand shares. At $5.00, LG could sell three hundred thousand shares. What striking price should LG set? A) $1.00 or $2.00. B) $2.00 or $3.00. C) $3.00 or $4.00. D) $4.00 or $5.00.