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##### (TCO D) A stock just paid a dividend of D0 = \$1.50

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Question;Question 1.1. (TCO D) A stock just paid a dividend of D0 = \$1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. Which is the current stock price? (Points: 10)\$23.11\$23.70\$24.31\$24.93\$25.57Question 2.2. (TCO D) If D0 = \$2.25, g (which is constant) = 3.5%, and P0 = \$50, which is the stock?s expected dividend yield for the coming year? (Points: 10)4.42%4.66%4.89%5.13%5.39%Question 3.3. (TCO D) Rebello's preferred stock pays a dividend of \$1.00 per quarter, and it sells for \$55.00 per share. Which is its effective annual (not nominal) rate of return? (Points: 10)6.62%6.82%7.03%7.25%7.47%Question 4.4. (TCO E) Which of the following is not a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting? (Points: 10)Long-term debtAccounts payableRetained earningsCommon stockPreferred stockQuestion 5.5. (TCO E) Duval Inc. uses only equity capital, and it has two equally sized divisions. Division A?s cost of capital is 10.0%, Division B?s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A?s projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept? (Points: 10)A Division B project with a 13% returnA Division B project with a 12% returnA Division A project with an 11% returnA Division A project with a 9% returnA Division B project with an 11% returnQuestion 6.6. (TCO D) Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = \$0.67, P0 = \$27.50, and g = 8.00% (constant). Which is the cost of common from retained earnings based on the DCF approach? (Points: 10)9.42%9.91%10.44%10.96%11.51%Question 7.7. (TCO F) Cornell Enterprises is considering a project that has the following cash flow and WACC data. Which is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected.WACC: 10.00%Year 0 1 2 3-----------------------------------------------Cash flows -\$1,050 \$450 \$460 \$470 (Points: 10)\$92.37\$96.99\$101.84\$106.93\$112.28Question 8.8. (TCO F) Data Computer Systems is considering a project that has the following cash flow data. Which is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected.Year 0 1 2 3-----------------------------------------------Cash flows -\$1,100 \$450 \$470 \$490 (Points: 10)9.70%10.78%11.98%13.31%14.64%Question 9.9. (TCO F) Masulis Inc. is considering a project that has the following cash flow and WACC data. Which is the project's discounted payback?WACC: 10.00%Year 0 1 2 3 4---------------------------------------------------------Cash flows -\$950 \$525 \$485 \$445 \$405 (Points: 10)1.61 years1.79 years1.99 years2.22 years2.44 yearsQuestion 10. 10. (TCO H) TexMex Food Company is considering a new salsa, which has data as shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project?s 3-year life. However, this project would compete with other TexMex products and would reduce its pretax annual cash flows. What is the project?s NPV? (Hint: Cash flows are constant in Years 1?3.)WACCPre-tax cash flow reduction for other products (cannibalization)Investment cost (depreciable basis)Straight-line deprec. rateSales revenues, each year for three yearsAnnual operating costs (excl. deprec.)Tax rate 10.0%\$5,000\$80,00033.333%\$67,500\$25,00035.0%a. \$3,636b. \$3,828c. \$4,019d. \$4,220e. \$4,431Indicate your choice for your answer (a, b, c, d, e) first, and then show your work and explain your answer so as to earn partial credit in the event you selected the incorrect answer. (Points: 10)

Paper#38518 | Written in 18-Jul-2015

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