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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..




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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