FIN2010Test2 S2 0910 April22 Questions only

FIN2010Test2 S2 - FIN2010 Financial Management Test 2 Student Part I Multiple Choice Questions(50 1 Gloria's Boutique recently paid $1.65 as an

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FIN2010 Financial Management Test 2 (April 26, 2010) Student: ___________________________________________________________________________ Part I: Multiple Choice Questions (50%) 1. Gloria's Boutique recently paid $1.65 as an annual dividend. Future dividends are projected at $1.68, $1.72, $1.76, and $1.80 over the next four years, respectively. Beginning five years from now, the dividend is expected to increase by 2.5 percent annually. What is one share of this stock worth to you if you require an 11 percent rate of return on similar investments? A. $18.49 B. $19.68 C. $21.33 D. $24.33 E. $25.90 2. Shares of Do Naught common stock are currently selling for $46.90. The last dividend paid was $2.21 per share and the market rate of return is 15.8 percent. At what rate is the dividend growing? A. 7.69 percent B. 9.73 percent C. 10.59 percent D. 11.09 percent E. 11.39 percent 3. Berber Mills has a capital structure which includes bonds, preferred stock, and common stock. The firm's common stock shareholders are most to apt to have which of the following rights? I. right to all the corporate profits II. sole right to elect the corporate directors III. right to vote on proposed mergers IV. right to the residual assets in a liquidation A. I and II only B. II and III only C. I and IV only D. II, III, and IV only E. I, II, III, and IV 4. Corey is considering two projects both of which have an initial cost of $20,000 and total cash inflows of $25,000. The cash inflows of project A are $3,000, $5,000, $8,000, and $9,000 over the next four years, respectively. The cash inflows for project B are $9,000, $8,000, $5,000, and $3,000 over the next four years, respectively. Which one of the following statements is correct if Corey requires a 10 percent rate of return and has a required discounted payback period of 3 years? A. Both projects should be accepted. B. Both projects should be rejected. C. Project A should be accepted and project B should be rejected. D. Project A should be rejected and project B should be accepted. E. You should be indifferent to accepting either or both projects.
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5. Tailored Clothing is considering a proposed project with the following cash flows. Should this project be accepted based on the combination approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 14.5 percent? Why or why not? A. Yes; The MIRR is 10.69 percent. B. Yes; The MIRR is 11.47 percent. C. No; The MIRR is 9.84 percent. D. No; The MIRR is 10.69 percent. E. No; The MIRR is 11.47 percent. 6. Which one of the following will increase the net present value of a project? A. an increase in the discount rate B. decreasing the amount of each cash inflow C. increasing the amount of the initial cash outflow D. decreasing the required rate of return E. having all incoming cash flows occur in the final year of a project rather than periodically over a five-year period 7. If a project has a net present value equal to zero, then: A. the present value of the cash inflows must exceed the initial cost of the project.
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This note was uploaded on 12/06/2010 for the course FIN 2010 taught by Professor Elenakeung during the Spring '07 term at CUHK.

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FIN2010Test2 S2 - FIN2010 Financial Management Test 2 Student Part I Multiple Choice Questions(50 1 Gloria's Boutique recently paid $1.65 as an

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