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exam 3a - Name Peoplesoft Number University of Houston...

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Name _________________________________ Peoplesoft Number _________________________________ University of Houston Bauer College of Business Finance 3332 Principles of Financial Management Exam 3A: Fall, 2009 Show equations either in variable form or equations with numbers plugged in, unless instructed differently Calculator financial function inputs must be shown. Clearly indicate your (one) answer Carry all decimals, rounding only final answer Decimal places on answers should be rounded to 4 places (2 in percent form) Currency answers rounded to the nearest cent, where applicable Include applicable units on answers Point values are in parentheses. 1.  ABC Corporation’s current annual common stock dividend is $0.20 per share. Over the coming year, earnings and  dividends are expected to grow at an annual rate of 10 percent, the next year growth is estimated and at 8 percent, and  then growth is expected to slow to a constant rate of 6 percent thereafter. What is the value per share of the stock to an  investor who requires a 14 percent rate of return? (8) 2. An investment project requires a net investment of $500,000. The project is expected to generate annual net cash flows  of $90,000 for the next 11 years. The firm's cost of capital is 14 percent and marginal tax rate is 40 percent.  a) Calculate the project’s NPV, determine whether or not the project should be accepted, and state your conclusion.  (Show calculator inputs; no equation required.) (6) b)  Evaluate  the  project  using  IRR. (Show  calculator  inputs;  no  equation  required.)  (4) 3.  Circle the  correct  respons e.  (2)  A ten- year,  4 percent  coupon  bond,  with a par  value  of $1000  sells  at $992.75   bond  is said  to be  selling  at: par a premium a discount 4.  A project  has  an  installed  cost  of $50,000.  The  project  replaces  an  existing  piece  of equipment  that has  an  est   salvage  value  of $4,000  and  has  a book  value  of $2000.  The  firm’s  marginal  tax rate  is 40  percent,  and  a return   percent  is required  on  projects  of this  type.  What is the   Net Investment  for this  project?  (4)
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5. You  own  stock  in a firm  whose  stock  is selling  for $80  per  share  and  has  the  following  stockholder  equity  acco Common  Stock  ($1.50  par,  100,000  shares) $  150,000 Additional  Paid  in Capital     600,000 Retained  Earnings     900,000   Total Stockholders  Equity $1,650,000 a)  The  firm  declared  a 5 for 1 stock  split. Show  the  effect  of the  stock  split on  the  stockholders  equity  account.  (4 Common  Stock  ($___  par,  ____________  shares) $ __________          
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