Week 6 Exam and 5 assignment - Week 6 Exam Numeric Grade:...

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Week 6 Exam Numeric Grade: 90 / 100 pts Letter Grade: Comments: Grading Summary These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. Date Taken: 10/12/2011 Time Spent: 4 h , 49 min , 11 secs Points Received: 90 / 100 (90%) Question Type: # Of Questions: # Correct: Multiple Choice 9 9 Essay 1 N/A Grade Details 1. Question : (TCO D) A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 11.4%, what is the stock price? Student Answer: $16.28 $16.70 $17.13 CORRECT $17.57 $18.01 Instructor Explanation: Chapter 7 Points Received: 10 of 10 Comments: 2. Question : (TCO D) If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $50, what is the stock’s expected dividend yield for the coming year? Student Answer: 4.42% CORRECT 4.66% 4.89% 5.13% 5.39% Instructor Explanation: Chapter 7 Points Received: 10 of 10 Comments: 3. Question : (TCO D) Carter's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $45.00, what is its nominal (not effective) annual rate of return?
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Student Answer: 8.03% 8.24% 8.45% 8.67% CORRECT 8.89% Instructor Explanation: Chapter 7 Points Received: 10 of 10 Comments: 4. Question : (TCO E) Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be so large that it would have to issue new common stock. Since new stock has a higher cost than retained earnings, Bankston would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock? Student Answer: Increase the dividend payout ratio for the upcoming year. CORRECT Increase the percentage of debt in the target capital structure. Increase the proposed capital budget. Reduce the amount of short-term bank debt in order to increase the current ratio. Reduce the percentage of debt in the target capital structure. Instructor Explanation: Chapter 9 Points Received: 10 of 10 Comments: 5. Question : (TCO E) If a typical U.S. company correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely Student Answer: become riskier over time, but its intrinsic value will be maximized. become less risky over time, and this will maximize its intrinsic value. accept too many low-risk projects and too few high-risk projects. CORRECT become more risky and also have an increasing WACC. Its intrinsic value will not be maximized. continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital. Instructor Explanation:
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This note was uploaded on 01/31/2012 for the course FINANCIAL f1515 taught by Professor Karylfriedman during the Spring '11 term at Keller Graduate School of Management.

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Week 6 Exam and 5 assignment - Week 6 Exam Numeric Grade:...

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