1 points QUESTION 30 At an annual interest rate of 7% the future value of $5,000 in five years is: $7,035 $3,569 $6,757 $7,013 1 points QUESTION 31...
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1 points  QUESTION 30At an annual interest rate of 7% the future$3,569 $6,757$7,013 1 points  QUESTION 31

  1.  value of $5,000 in five years is: 

$7,035 

  1. ABC Corp presently pays an annual dividend of $1.50 per share and it is expected that these dividend payments will continue indefinitely. If ABC's equity cost of capital is 12%, then the value of a share of ABC's stock is: 

$18.50 

$16.50 

$14.50 

$12.50 

1 points  

QUESTION 32

  1. Consider a bond with a zero percent coupon rate with 20 years to maturity and a face value of $1,000. What is the price of the bond if the yield-to-maturity is 6%?: 

$215 

$306 

$312

$335 

1 points  

QUESTION 33

  1. GM is expected to pay a dividend of $2.00 in the coming year. Dividends are expected to grow at the rate of 2% per year. The risk-free rate is 4% and the market risk premium is 5%. GM has a beta of 1.2. The value of the stock is: 

$20.00 

$25.00 

$30.00 

$40.00 

1 points  

QUESTION 34

  1. A company has determined that a certain project will produce revenue of $14 million 1 year from now. The costs are projected to equal $5 million each 2, 3 and 4 years from now. Given a cost of capital of 10%, the Net Present Value of the project equals: 

$1.42 million 

$1.56 million 

$12.72 million 

$14.00 million 

1 points  

QUESTION 35

  1. You have $10,000 to invest - $3,500 in Company A, the remaining amount in Company B. The expected returns for these stocks are 20% and 15%, respectively. The expected return on your portfolio is: 

18.25% 

16.75% 

13.50% 

17.50% 

1 points  

QUESTION 36

  1. Company XYZ is funded with $500 million equity and $475 million debt. The yield on bonds issued by XYZ is 7.85%. Its beta is 1.15 and the tax rate is 40%. The risk-free rate is 5% with the market risk premium 9%. The weighted average cost of capital for this firm is: 

10.17% 

11.02% 

12.02% 

12.85%

13.60% 

1 points  

QUESTION 37

  1. A stock had returns of 5, 14, 11, -8, and 6 percent over the past 5 years. The standard deviation for this stock's returns is: 

9.68% 

7.74% 

8.44% 

7.49% 

1 points  

QUESTION 38

  1. The relative proportions of debt, equity and other securities that a firm uses to finance itself is referred to as its: 

Paid out capital 

Dividend and interest expense 

Capital structure 

Retained earnings 

1 points  

QUESTION 39

  1. A company makes $1 million in after-tax profits for the year. It spends the entire amount on new equipment. Which of the following is true?

Its leverage ratio at the end of the year is higher than it was one year before

Its retained earnings for the year equal zero.

Its book value at the end of the year is $1 million greater than that of one year before.

Its book value at the end of the year is the same as that of one year before.

1 points  

QUESTION 40

  1. Schmaltz Herring's revenue and costs are forecast to be unchanged this year from last. But the IRS has announced an increase in the corporate profits tax rate. If Schmaltz pays the same amount of dividends, its payout ratio will:

rise

not change

fall

1 points  

QUESTION 41

  1. Should the economy's current fragile recovery gather momentum, it is likely the Federal Reserve will decide to subtract liquidity from the economy. How will it do that?

By selling U.S. Treasury bonds

By purchasing U.S. Treasury bonds

By having the U.S. Treasury purchase goods and services

By having the U.S. Treasury lower taxes

By having the U.S. Treasury raise taxes

1 points  

QUESTION 42

  1. Quirky Quiche earned $22,220,000 in after-tax profits last year. But it paid a dividend of $25,000,000 to its shareholders using its balance sheet cash. What is the result of the dividend payment?

Its profit is reduced to zero.

Its book value is now higher by $2,780,000

Its cash positon is reduced by $2,780.000

Its profits tax is lower than it would have been if the dividend equaled $22,220,000.

1 points  

QUESTION 43

  1. A company produced (after-tax) profits $1 billion. If this represents an ROE of 4%:

its book value must be $25 billion.

Its market value must be $25 billion

neither of these

both of these

1 points  

QUESTION 44

  1. Which of the following is a false statement concerning the market value of a company? 

All else the same, the higher the ROE expected by investors, the greater the market value

Market value equals book value plus retained earnings

Market value equals price per share multiplied by number of shares

Market value is forward looking; book value reflects the past

1 points  

QUESTION 45

  1. Suppose you are in the 33% income tax bracket. You own shares in Carefree Casinos, whose profits are taxed at a 25% rate. "Double taxation" means:

Carefree pays 25% tax on before-tax profits, then another 25% tax is applied to its after-tax profits.

Carefree pays 25% tax on its before-tax profits, then another 33% tax is applied to its after-tax profits.

Carefree pays 25% tax on before-tax profit and 33% on its retained earnings, and you pay 33% tax on dividends which are distributed to you.

Carefree pays 25% tax on before-tax profit but 0 tax on its retained earnings, and you pay 33% tax on dividends which are distributed to you.

Carefree pays 25% tax on before-tax profit and 25% on its retained earnings, and you pay 33% tax on dividends which are distributed to you.

1 points  

QUESTION 46

  1. A company's market value is $25 billion. It has 1 billion shares outstanding. Which of the following can you discern from this information? Choose two.

The price of its stock is $25

Market value per share equals $25

Book value per share equals $25

Its book value is $25 billion

2 points  

QUESTION 47

  1. Which of the following would be considered debt of a company?

Accounts payable

Bank loan

Bond issuance

All these

1 points  

QUESTION 48

  1. The original owners of Jam Up And Jelly Tight Music Corporation began the company some years ago with $100,000 of their own funds and purchased $150,000 in assets. The total (cumulative) amount of retained earnings to the present are $820,000. No additional common or preferred shares were issued. What is Jam Up & Jelly Tight's current book value?

$50,000

$100,000

$150,000

$820,000

$920,000

$970,000

1 points  

QUESTION 49

  1. Brooklyn Beer earned $450 million last year, when its book value was $2.5 billion. What was its ROE on a per-share basis?

11.25%

5.56%

18%

need to know number of shares!

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