1. With respect to valuation, stocks and bonds are dissimilar in that

a. bond cash flows are contractual commitments, stock cash flows are not

b. periodic bond interest payments form an annuity while dividends are unlikely to be constant

c. bond cash flows are known precisely while stock cash flows are estimates

d. all of the above

2. During 2009, Raines Umbrella Corp. had sales of $734,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $573,000, $94,000, and $127,000, respectively. In addition, the company had an interest expense of $98,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.) Assume Raines Umbrella Corp. paid out $17,000 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the firm's net new long-term debt?

$0

$67,450

$19,500

$84,000

$48,000