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Solved by verified expert :What’s the value of a preferred stock if we
assume it has an annual dividend \$5
per share and the required rate of return is 20%? ______

\$ 5

\$ 10

\$ 25

\$ 100

How to
compute the real risk-free rate? ______

Equal
to nominal risk-free rate

Equal
to nominal risk-free rate plus the expected inflation rate

Equal
to nominal risk-free rate minus the expected inflation rate

By maximizing the net income of a firm we
will ensure that the price per share of
common stock is maximized, hence shareholders’ wealth will also be maxi-
mized._______
True

False

A firm
has \$900 millions of current assets, including \$300 millions of inventory. It

has \$500 millions of current liabilities. What’s the firm’s quick ratio?

0.60

1.80

For a
discount bond, the coupon interest rate should be greater than its yield to

maturity. ______
True

False

1.40

1.20

A firm has a times interest earned
ratio of 2. This means that the firm has twice
as much _______

net
income as it owes in interest.

interest
expense as it does net income.

earnings
before interest and taxes as it does interest expense.

earnings
before interest and taxes plus depreciation as it does interest
expense.

If we assume a perpetuity pays \$100
per year forever. What would the
perpetuity be worth if the required rate of return is 10%? ______

\$100

\$500

\$1,000

\$2,000

Under straight voting, each share of stock allows the
shareholder one vote, and
each position on the board of directors is voted on separately. But with
cumulative voting, each share of stock allows the stockholder a number of votes

equal to the number of directors being selected. So cumulative voting procedure

helps protect minority shareholders. _____True
False
You just inherited \$10,000. You are
investing this money for two years at 10%
simple interest. In whole dollars, how much money will you have at the end of
the two years?

\$10,500

\$11,000

\$12,025

F12,000

John purchased 1000 shares of
Facebook common stock at IPO. This transaction
occurs in the:

Primary
market.

Secondary
market.

Credit
market.

Money
market.

At maturity, the value of either
premium bond or discount bond is always equal
to its par value. ______

True.

False.

The percentage of a firm’s net
income which is transferred into retained earnings
is known as the _______.

Profit
margin

Dividend
payout ratio

Retention
ratio

Return
on equity

Theresa borrows \$800 today in
exchange for one payment of \$1,000 five years
from now. This is an example of a(n) ________

interest-only
loan

amortized
loan

pure
discount loan

quoted
rate loan

Project
selection ambiguity can arise if you rely on the internal rate of return
(IRR)
instead of the net present value (NPV) when

A
project’s cash flows are non-conventional.

There
are multiple IRRs.

Projects
are mutually exclusive.

All
of the above.

Which of
the following statements is most correct?______

Preferred
stockholders have claim priority over common stockholders.

A
big advantage of preferred stock is that preferred stock dividends are tax
deductible for the issuing corporation.

Preferred
stockholders have claim priority over bondholders.

None
of the above statements is correct.

Other
things held constant, for a given change in the market interest rate, the
_______the time to maturity of bond, the the change in the bond price.

longer;
smaller.

shorter;
larger.

longer;
greater.

When evaluating two
mutually-exclusive project, the best method to use is the:

internal
rate of return

net
present value

payback
rule

average
accounting return

What’s
the future value of the initial \$1,000 investment after 20 years? We
assume the expected annual return is 8%_____

\$4,078.23

\$4,660.96

\$4,810.15

\$5,020.78.

What’s
the present value of the \$1,000 due in 20 years (FV=\$1,000)? We assume
current interest rate is 8%, compounded annually_____

\$190.39

\$205.14

\$214.55

\$365.67.

EA store
is offering a diamond ring for sale for 36 months at \$135 per month.
The retail price of the ring is \$3,900. What is the interest rate on this
offer?

13.8%

14.9%

15.5%

16.6%

What’s
the value of a 15-year, \$1,000 par value, 9% coupon rate bond if the yield
to maturity (YTM) is 9%? ______

\$800

\$950

\$1,000

\$1,100

What’s
the value of a 15-year, \$1,000 par value, 9% coupon rate bond if the yield to
maturity (YTM) increases to 12%? ______

\$795.67

\$813.26

\$1,000

\$1,123.15

Based on the information in Question
35, the bond is a: ______

Par
value bond

Discount
bond

bond

What’s the value of a 15-year,
\$1,000 par value, 9% coupon rate bond if the yield
to maturity (YTM) decreases to 6%? ______

\$916.23

\$1000

\$1,176.30

\$1,291.37

Based on
the information in Question 37, the bond is a: ______

Par
value bond

Discount
bond

bond

A
stock has the required rate of return at 16%. The most recent dividend paid
D0 = \$2.00 and the expected dividend
growth rate g = 5%. What’s the first dividend expected to pay at the end of
this year?_____

\$2.00

\$2.10

\$2.20

\$2.50

Based
on the information from Question 39, What’s the estimated value of the
stock?_____

\$17.2

\$19.1

\$21.5

\$30.8

Based
on the information from Question 39~40, if the current trading price of the
stock on the stock market is \$22.28 per share, we should give a _____ recommendation
to the stock.

Hold

Sell

A
company has a net working capital of \$4,800, total liabilities of \$15,900,
and
long-term debt of \$9,500. What is the value of the current assets?

\$4,800

\$11,200

\$20,700

\$30,200

A
firm is considering a new inventory system that will cost \$120,000. The
system is expected to generate positive cash flows over the next four years
in the amounts of \$35,000 in year 1, \$55,000 in year 2, \$65,000 in year 3,
and \$40,000 in year 4. The firm’s required rate of return is 9%.
What
is the payback period of
this project? _______

1.95
years

2.46
years

2.99
years

3.10
years

Based
on the information from Question 43. What is the net present value (NPV)
of the project? _____

\$28,830.29

\$30,929.26

\$36,931.43

\$39,905.28

Based
on the information from Question 43, what is the internal rate of return
(IRR) of this project?

14.03%

17.56%

19.26%

21.78%

Based on the information from
Question 43, what is the profitability index (PI) of
this project?

0.87

1.11

1.31

1.83.

A firm has total assets of \$13,200,
fixed assets of \$8,500, current liabilities of
\$2,700, and long-term liabilities of \$5,200. What is the total debt ratio?

0.47

0.60

0.72

0.83

You want to receive \$5,000 per month
in retirement. If you can earn 0.75% per
month and you expect to need the income for 25 years, how much do you need
to have in your account at retirement?

\$623,798

\$686,453

\$798,204

What is the value of a stock that is
expected to pay a constant dividend of \$5 per
year if the required return is 10%?

\$15

\$50

\$100

\$105

Based on the information from
Question 49, what the value of the stock if the
company starts increasing dividends by 5% per year, beginning with the next
dividend?

\$15

\$50

\$100

\$105

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