Quiz 3 with Answers - Financial Management | FINA 3000, Quizzes of Finance

Download Quiz 3 with Answers - Financial Management | FINA 3000 and more Quizzes Finance in PDF only on Docsity! 3(. FNft Joo? Quiz 3 spring tooo ^il(. You have 50 minutes toif,14[J .!='- 5u are alloived.a non programmable calculator. HP l0B,-TI BA II Plus, Hp l2C - No Calculator with t€xt virit ile'attoweO" iri *y circumstance. y<;u must"tum{in your sczrntron sheet with ,h;;;;;;;; special codes on the left in'leners K,L,M(Test I would be test 001,'test ll would be test 0l I and tests with three numbers just put that number in) at the end of the period. Students who do not turn in the quiz when requested may have points deducted from their grzide. Choose the BEST answer to each question. Choose the closest numerical answer if your number is not exact. s Interest rates or rates ofretum on investment that have not been adjusted for the effects ofinflation areballed: Circle ,'oo o, /iil\-y l. A) B) .c) D) iE) Coupon rates. Stripped rates. Effective rates, Real rates. Nominal rates. I I I n 2. What would you pay for a share of ABC Corporation stock today if the dividend next year wilt be $3 per share, your required retum on equity investments is l5%q and the expected groMh rate is ll.3o/o. A) $78.26 , B)- $81.08-c) $82.56 D) $90.00 E)-r$98.12 A) 2-0oa B) 3.6% t'.'*tA { t-f l \( v j-l \+ -, ;'r.; *. ... I .rl 3. If Big Amp, Inc. stock closed at $36 and the current quarterly dividend is $0.75 per sharg what dividend yietd would be reported for the stock in.The llatl Street Journol or on the Yahoo lrwestment Site? -t -r I-Ib\l4'i -:-::{-">lo* .,ic) s.7% D)-,6.6% 'flE),'8.:X 4. Payments made by a corporation to its shareholders, in the form <if either cash, stock, or payments in kind, are called; A) Retained bamings. ; " B) Net income. ' l ,C)', Dividends D) Redistributions. - cHApTEd 7rE) Infused equity. l- po:(D, + p,/(l + r) 17.11 cHAptEB 6 2' Po= P1' I,q l. Bodvalneifbodhas(l)afaccvalueofFpaidarmaturity, 3' Po:A#f:2L ilsl (2)'acor{oonofCpardperperio4p)rperiodstomaturity,and r.>r rr* -. ^(4)ayieldo,frperperiod: s'r"..u l- 4:D'x(l+ el.:4! Bondvalue=cxll -y(l+rlltr+Ft(t+rf -n- '' r-8 !-c V'41 " D^-i-.-r..^ - Preseotvalue * Presenrvalue' 15;11 5' '- 8-= DrlPosoDovalue=ofgrecoupons+ofrhefaccamount r---r ' ' r=DlPo+g I75l 2. ThcFisheretrect l+.R:(l+r)x(l+tr) wbcre i is th inllatioD ratc 3. l+n:(l+r)x(l+r) R=r* h* rxh 4. R:r*h C}IAPTEB 9 hoject cash flow : hoject operating cash flow - Project change in net working capital -. hoject capital spcrditrg Operating cash flow : EBIT * Depreciatioa - Taxes EHAPTEB A , l. Netpre$ntvalue (NpV): ; NPy: hesent value of frrture cash flows - InvestneDt cost j 2. Payback per-iod: Payback period = Number of years that pass before the surn of' an investnent's cash flows eguals the cost of i Oe iovestrnent I 3. Tbeaverageaccounting return (AdR): . ** _ Averagenetincome Average book value 4. lnternal mte of retum (IRR): IRR = Discount rare ofreguired retum such that tbe net present valoe of an investrtrent is zero - "t@l t63l t6,l )otffi} 7o/@o zo/0af,1 tgjSw- sa,$w 30/ffi- 3!qEis' hofirabllirYinder' holirabilitv;116", - PV of casb flows,- ,r"i ^ - CosrofinvestmenlLolffi page'i ,-+- a6/W / 6. Suppose that you have just purchased a sliare of stock for $50. The most recent (annual) dividend was $2 and \ / dividends are expected to grow atarate of 7o/oindefinitely. What must your required return be on the stock? V ll 14s% L r/,' dl Tii!;^ *,Sb = :- ?r K+(l + ,oiQ,' * s,! 2,r,{ D)_ tz.3s% t-_-:*- 6J;'4 -, 0+ :.C,_r L , r:ttE) t3.6s% .. t \ / : ,,"opnerar F,,rnneanc,iprrrrhcrmerinana^^n^-i^.r,c,andd. 5o(r -,9?) * z.\4 (-.--- li,l f! 7. In general, Europeans vi€w the american economic system as: \/ a)'rhlueJinttr;-,i,o.raandtheywanttocopyit.* r - r 0? ?- ,Oq Lg ' B)*The worst-inJae.world and theyrhink-it-would-be great'if the Unit'ed States would just"go away: 5. Wlrich one of the following typically applies to prefered stock but NOT to common stock? A)-paryalue" N 'B) dividend yield @ffiquity. i E), none,of the above ^ _l-d' ! ,;!). It might grow fast, but the unnecessary short term volatility caused by the US system is not worth the cost. D) That all vegtables should be cooked until ttrey ire no longer recognizable. (Don't answer this one.)J/ / / 8. The _ decision rule is considered the "best" in piihcipte. \/ A; inte.nilEt.ofrerum' B) payback period C) average accounting return '"C) r0% tv t't ' .1:j" 9i !)D) n% l-) , (!r.fi. -:, 2-.* ur ,fr 1"'i, * {I'" 10. Tlrediscountratethatmakesthe'netpresentvalud*dfaninvestmentexactlyequaltozeroisthe: d*: A) Payback period. , B) Internal rate of retum.'C) Average accounting return. D) Profitabiliry index. F,),D.i scounted payback period. -/"-'.) i -.'ll.)SrJpposePaleHose, Inc.hasjustpaidadividendof$l.s0pershare.salesandprofitsforPaleHoseareexpectedto. " ll.)SrJpposePaleHose, l I jrEro* at a rate of 60/o per year. Its dividend is expected to grow by the same amorint. If the required return is 147o, \\fl,y,Y,^t:thevalueofashareofPaleHose? - ,., ^S.\., t t-0 t ttif ./ t nA 12. Calculate the NPV of the following project using a discount rate of lZYo: " Yr0:-$800; Yr l:-$80; Yr2:$100; Yr3 =$300; Yr4:$500; Yr 5:$500 1A) $ 23.30 B) $ 87.28 c) $208.04 D) $459.17 E) $887.28 Page2 't'?) net present value f ", profitability index f 9. Llano's stock is curently selling for $ I 00.00. The expected dividend one year from now is $2 and the required retum/V is 137o. What is this firm's dividend grbwth rate assuming the constant dividend growth model is appropriate? A) 8% -aP.),?:f^ loo:ffi -lti{tg' -{i ff,$flf'1hevarueorashare""i,To:r&, &)..lJi r 9(, t-?- L1)3r--DJ e.t.rv _v-v-- e\:L)_Z_)-'.' " ,, L-. t:tl . r-..,c) $27.80 ;ilr.1.1' ,: -ihAi .- IL{ .ro . - ult'i * *C{T "L.,tD) $30.60 - 'o (rt = , \-r\.,