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##### What's the value of a preferred stock if we assume it has an annual dividend \$5 per share and the required..

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Question;1What'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;2 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;3 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;4 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;1.40;1.20;5 For a;discount bond, the coupon interest rate should be greater than its yield to;maturity.;True;False;6 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.;7 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;8 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;9 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;\$12,000;10 John;purchased 1000 shares of Facebook common stock at IPO. This transaction occurs;in the;Primary market.;Secondary market.;Credit market.;Money market.;11At;maturity, the value of either premium bond or discount bond is always equal;to its par;value.;True.;False.;12 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;13 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;14 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.;15 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.;16 Other;things held constant, for a given change in the market interest rate, the;the;time to maturity of bond, the change in the bond price.;longer, smaller.;shorter, larger.;longer, greater.;17 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;18 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.;19 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.;20 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%;21 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;22 Based on;the information in Question 35, the bond is a;Par value bond;Discount bond;Premium bond;23 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;24 Based on;the information in Question 37, the bond is a;Par value bond;Discount bond;Premium bond;25 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;26 Based on;the information from Question 39, What's the estimated value of the stock?;\$17.2;\$19.1;\$21.5;\$30.8;27 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.;Buy;Hold;Sell;28 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;29 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;30 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;31 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%;32 Based on;the information from Question 43, what is the profitability index (PI) of this;project?;0.87;1.11;1.31;1.83.;33 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;34 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;35 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;36 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

Paper#37783 | Written in 18-Jul-2015

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