##### Reference no: EM13508663

Question 1

Giraldo's Bass and Pro Shops offer a common stock that pays an annual dividend of $2.00 a share. The company has every intention of maintaining a constant dividend. How much are you willing to pay for one share of this stock if you want to earn 15 percent return on your equity investments?

Answer

A. $10.00

B. $13.33

C. $16.67

D. $18.88

Question 2

Helmke's International Mercenary Boutique offers a 15-year bond that pays a 4 percent coupon. The bond is currently priced at $757.60 and has a par value of $1,000. Coupons are paid quarterly. What is the yield to maturity for these bonds?

Answer

A. 5.00%

B. 6.55%

C. 9.10%

D. 10.39%

Question 3

Markels' Sky's The Limit Ceilings offers a 7 percent coupon bond with semi-annual payments and a yield to maturity of 8.70 percent. The bond matures in 9 years. What is the market price of a $1,000 face value bond?

Answer

A. $895.39

B. $965.18

C. $989.20

D. $1,058.11

Question 4

Prescilia's Multicultural Enterprises offers a 9-year, zero coupon bond. The yield to maturity is 8.8 percent. What is the current market price of this $1,000 face value bond?

Answer

A. $422.66

B. $460.67

C. $835.56

D. $919.12

Question 5

Consider an asset that costs $1,600,000. It is depreciated straight-line to zero over its eight-year tax life. What is the book value at the end of 6 years?

Answer

A. $200,000

B.$400,000

C.$600,000

D.$800,000

Question 6

The asset from the above problem can be sold at the end of six years for $200,000. If the relevant tax rate is 20 percent, the after tax cash salvage from the sale of this asset is:

Answer

$158,875

$180,000

$200,000 (since the ATCS can never exceed the sale price.)

$240,000

Question 7

An investment project provides cash inflows of $1433 per year for 8 years. If the initial cost is $5,000, the project payback period is:

Answer

a. 3.11 years

b. 3.49 years

c. 3.86 years

d. 4.21 years

Question 9

For the cash flows of the above question, what is the Internal Rate of Return (IRR)?

Answer

A. 9.18%

B. 11.00%

C. 22.07%

D. 75.28%

Question 10

For the project data of the above two problems, the Profitability Index is:

Answer

A. 0.93

B. 1.02

C. 1.58

D. 2.41

Question 11

For the project data of the above 3 problems, if there were 100,000 shares of stock outstanding and your company proceeded with this project, what would be the expected increase in stock price?

Answer

A. $0.06

B. $0.36

C. $0.42

D. $0.72

Question 12

Suppose you know a company's stock currently sells for $25 and the required return is 11%. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it is the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

Answer

A. $1.14

B. $1.22

C. $1.30

D. $1.38

Question 13

The first comic book featuring Gitman was sold in 1962. In 2005, the estimated price for this comic book in good condition was $500. This represented a return of 21.91 percent per year. For this to be true, the comic book must have sold for how much originally?

Answer

A. 0.25 cents

B. A dime

C. 20 cents

D. About a dollar.