# ADMS3530_FinalExam_S - Name Section ID Professor Bert Kohen B(Tuesdays/Thursdays 4-7 pm and Professor Tissenbaums Sections D(Tuesdays/Thursdays

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1. What is the standard deviation of a portfolio's returns if the mean return is 15 percent, the variance of returns is 184, and there are three stocks in the portfolio? A) 7.83 percent B) 13.56 percent C) 41.00 percent D) 225.00 percent Ans: B Response: standard deviation = VAR = 184 = 13.56% 2. When a project's internal rate of return equals its opportunity cost of capital, then: A) the project should be rejected. B) the project has no cash inflows. C) the net present value will be positive. D) the net present value will be zero. Ans: D 3. What dividend is paid on preferred stock if investors require a 9 percent rate of return and the stock has a market value of \$54.00 per share and a book value of \$50.00 per share? A) \$2.92 B) \$4.50 C) \$4.68 D) \$4.86 Ans: D Response: 9% = Dividend/Price 9% = 4.86/54.00
4. common stock is held for two years, during which time it receives an annual dividend of \$10. The stock was sold for \$100 and generated an average annual return of 16 percent. What price was paid for the stock? A) \$61.60 B) \$64.80 C) \$88.00 D) \$90.90 Ans: D Response: .32 = P 20 P 100 + - .32P = 120 – P P = \$90.91 5. What is the most likely value of the PVGO for a stock with current price of \$50, expected earnings of \$6 per share, and a required return of 20 percent? A) \$10 B) \$20 C) \$25 D) \$30 Ans: B Response: With 100 percent payout ratio, the stock would be valued at \$30 (\$6/.2 = \$30). Thus, the \$20 of additional price must represent PVGO 6. What percentage change in sales occurs if profits increase by 3 percent when the firm's degree of operating leverage is 4.5? A)

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## This note was uploaded on 04/11/2011 for the course ADMS 3530 taught by Professor Unknown during the Spring '09 term at York University.

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ADMS3530_FinalExam_S - Name Section ID Professor Bert Kohen B(Tuesdays/Thursdays 4-7 pm and Professor Tissenbaums Sections D(Tuesdays/Thursdays

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