1. ABC's last dividend paid was $4.4, its required return is 13%, its growth rate is 6%, and its growth rate is expected to be constant in the future. What is ABC's expected stock price in 19 years?
a. $104.37
b. $201.59
c. $98.15
d. $120.31
2. What is the net present value of the following cash flows? Assume an interest rate of 3.5%
|
Year
|
|
CF
|
|
0
|
|
- $11,895
|
|
1
|
|
$7,722
|
|
2
|
|
$5,687
|
|
3
|
|
$5,120
|
a. $5,492.69
b. $17,387.92
c. $6,247.34
d. $8,235.81
3. A bond is currently selling for $1,087. If the yield to maturity is 10%, the coupon rate will be:
a. less than 10%.
b. equal than 10%.
c. more than 10%.
d. None above
4. A cost that has already been incurred and cannot be recouped is called as a(n):
a. sunk cost
b. financial cost
c. opportunity cost
d. side cost
e. relevant cost
5. A stock just paid a dividend of D0 = $3.4. The required rate of return is rs = 15.8%, and the constant growth rate is g = 3%. What is the current stock price?
a. $35.76
b. $24.469
c. $3.45
d. $27.359
6. The ABC Co. has $1,000 face value stock outstanding with a market price of $937.6. The stock pays interest annually, matures in 9 years, and has a yield to maturity of 10.7 percent. What is the current yield?
a. 5.11%
b. 10.22%
c. 7.34%
d. 14.94%
7. What is the effective rate of 18% compounded monthly?
a. 26.97%
b. 13.56%
c. 17.46%
d. 19.56%
8. How many years will it take to quadruple (i.e. 4 times) your money at 9% compounded quarterly?
a. 7.2424
b. 15.5759
c. 5.6478
d. 3.3168
9. A bond that sells for less than face value is called as:
a. discount bond
b. premium bond
c. par value bond
d. debenture
e. perpetuity
10. A project has the following cash flows. What is the internal rate of return?
Year 0 1 2 3
Cash flow -$121,000 68,150 $42,200 $39,100
a. 12.71%
b. 14.39%
c. 13.47%
d. 13.85%
e. 14.82%
11. The common stock of ABC Industries is valued at $49 a share. The company increases their dividend by 3.1 percent annually and expects their next dividend to be $1.84. What is the required rate of return on this stock?
a. 2.82%
b. 3.61%
c. 4.87%
d. 6.86%
12. Uptown Insurance offers an annuity due with semi-annual payments for 19 years at 4.9 percent interest. The annuity costs $176,239 today. What is the amount of each annuity payment?
a. $7,008.06
b. $5,670.26
c. $8,300.23
d. $4,607.98
13. Suppose the real rate is 9.83% and the inflation rate is 4.65%. Solve for the nominal rate.
a. 11.32%
b. 12.87%
c. 14.93%
d. 21.74%
14. The principal amount of a bond that is repaid at the end of term is called the par value or the:
a. call premium
b. perpetuity value
c. face value
d. back-end value
e. coupon value
15. Given the following cash flows, calculate the payback period:
|
Year
|
CF
|
|
0
|
-921
|
|
1
|
368
|
|
2
|
253
|
|
3
|
291
|
|
4
|
784
|
a. 3.0115
b. 3
c. 2.0125
d. 4.5209
16. Suppose an investment offers to double your money in 39 years. What annual rate of return are you being offered if interest is compounded semi-annually?
a. 1.79%
b. 1.56%
c. 0.98%
d. 0.89%
17. ABC is reviewing a project that will cost $1,431.The project will produce cash flows $210 at the end of each year for the first two years and $772 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 4%.
a. 1.56
b. 0.95
c. 1.22
d. 2.56
18. Suppose that today's stock price is $49.8. If the required rate on equity is 18.6% and the growth rate is 7.9%, compute the expected dividend (i.e. compute D1)
a. $7.2447
b. $10.6483
c. $5.3286
d. $2.5643
19. A 8.9 percent $1,000 bond matures in 17 years, pays interest semiannually, and has a yield to maturity of 16.02 percent. What is the current market price of the bond?
a. $587.92
b. $456.23
c. $143.24
d. $693.22
20. An investment is acceptable if the profitability index (PI) of the investment is:
a. less than the net present value (NPV).
b. less than one.
c. greater than one.
d. greater than the internal rate of return (IRR).
e. greater than a pre-specified rate of return.
21. ABC Corp. just paid a dividend of $2.4 per share at the end of the year. The stock has a required rate of return is 18%. The dividend is expected to grow at 6.9%. What is dividend at time = 8? (solve for D8?)
a. $7.667
b. $3.175
c. $6.451
d. $4.093