Investment activity is driven by both rational value maximization and behavioral influences on the part of managers. Dis
Bringing security prices quickly back to an efficient equilibrium, rational investors capitalize on the irrational actions of o
fails
1.
Your company's stock sells for $50 per share, its last dividend (D 0) was $2.00, and its growth rate
is a constant 5 percent. What is the cost of common stock, rs?
2.
The Global Advertising Company has a marginal tax rate of 40 percent. The last divide
i
.
Your company's stock sells for $50 per share, its last dividend (D 0) was $2.00, and its growth rate
is a constant 5 percent. What is the cost of common stock, rs?
rs =
ii
.
The Global Advertising Company has a marginal tax rate of 40 percent. The las
Final Examination-Fall 2014
Corporation Finance-BAA609.A22
Max: 100 points
Max: 2 hours
Part A: Multiple choice and True/False
True/False (9 points)
1. The primary reason that the NPV method is conceptually superior to
the IRR method for evaluating mutual
Final Examination-Sp 2014
Corporation Finance-BAA609.A22
Max: 100 points
Max: 2 hours
PLEASE SHOW ME ALL WORK FOR PARTIAL CREDIT
Mutliple choice and True/False
True/False (9 points)
1. The primary reason that the NPV method is conceptually superior to the
Project selection
Answer: e Diff: E
i
.
Your company has a cost of capital equal to 10%. If the following projects are mutually exclusive,
and you only have the information that is provided, which should you accept?
Payback (years)
IRR
NPV (Millions)
A
1
Column1
Column2
MSFS 670 XBRL Mapping Assignment
Column3
Column4
Column5
Boson Clothes Inc Balance Sheet 20XX
in millions
ASSETS
Cash & Cash Equivalents
Short term Investments`
Merchandise Inventory
Other Current Assets
Total Current Assets
$1,885
$0
$1,6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2012
OR
TRANSITION REPORT PURSUANT TO SECTIO
a. What would Sue/Bob rather have: $1 today or $1.10 next year? Explain
t
0
1
1
1.1
Sue
1
1.03
Bob
1
0.88
t
0
1
$
1
1.1
Sue
1
1.028037
Bob
1
0.88
For Sue, receiving $1.10 next year would be the best option because it is more valuable than
receiving a doll
The market price of any security is not determined by a single factor. Although in simplified valuation models we ass
determine the value of the firm based on current dividends and making an assumption about the future dividends. I
1996-2003, the share pr
According to prospect theory, which is preferred?
a. Prospect A or B?
Decision (i). Choose between:
A(0.80, $50, $0) and
B(0.40, $100, $0)
b. Prospect C or D?
Decision (ii). Choose between:
C(0.00002, $500,000, $0) and
D(0.00001, $1,000,000, $0)
c. Are th
a. What is the expected value of wealth?
E(w) = .4 * .5 + .6 * 10 = 6.2
And,
U(P) = .4e0.50 + .6e10
= 13,216.54
b. See utility graph
c. Is this person risk averse, risk neutral, or a risk seeker?
Risk seeker because here draw graph is convex.
d. What is t
Yes, the stock of eBay was efficiently priced in April 2003.
This is because prior to the split of stock of eBay the stock price was $89.22 and EPS was $1.45 which provid
ratio of 61.
Post split, on April 30 2004, eBays stock price close above $82 and the
A:
p = $50
q = 100 - 50 = 50 units
B:
p = $50
q = (150 - 50) / 2 = 50 units
Answer b.
A:
p = $30
q = 100 - 30 = 70 units
B:
p = $30
q = (150 - 30) / 2 = 60 units
So, A will increase his holding by 20 units and B will increase by 10 units. Investor A is mo
1. A firm has a policy of paying 45 percent of its earnings in dividends and these earnings
are expected to increase at 5 percent forever. If the earnings in the current period are
$3.20 per share what is the value of this share according to the Dividend