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##### Kaplan Gb550 unit 5 quiz

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Question;1.Senbet Ventures is considering starting;a new company to produce stereos. The sales price would be set at 1.5 times the;variable cost per unit, the VC/unit is estimated to be \$2.50, and fixed costs;are estimated at \$120,000. What sales volume would be required in order to;break even, i.e., to have an EBIT of zero for the stereo business?(Points: 2);86,640;91,200;96,000;100,800;Question;2. 2.O'Brien Inc. has the following data: rRF =;5.00%, RPM = 6.00%, and b = 1.05. What is the firm's cost of common from;retained earnings based on the CAPM? (Points: 2);11.30%;11.64%;11.99%;12.35%;Question;3. 3.Teall;Development Company hired you as a consultant to help them estimate its;cost of capital. You have been provided with the following data: D1 =;\$1.45, P0 = \$22.50, and g = 6.50% (constant). Based on the DCF approach;what is the cost of common from retained earnings? (Points: 2);11.10%;11.68%;12.30%;12.94%;Question;4. 4.A company?s perpetual preferred stock currently;sells for \$92.50 per share, and it pays an \$8.00 annual dividend. If the;company were to sell a new preferred issue, it would incur a flotation cost;of 5.00% of the issue price. What is the firm's cost of preferred stock?;(Points: 2);7.81%;8.22%;8.65%;9.10%;Question;5. 5.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). What is;the cost of common from retained earnings based on the DCF approach?(Points: 2);9.42%;9.91%;10.44%;10.96%;Question;6. 6.When working with the CAPM, which of the following;factors can be determined with the most precision? (Points: 2);The market risk premium (RPM).;The beta coefficient, bi, of a relatively;safe stock.;The most appropriate risk-free rate, rRF.;The expected rate of return on the;market, rM.;Question;7. 7.Which of the following statements is CORRECT?;(Points: 2);The internal rate of return method;(IRR) is generally regarded by academics as being the best single method for;evaluating capital budgeting projects.;The payback method is generally regarded;by academics as being the best single method for evaluating capital budgeting;projects.;The discounted payback method is;generally regarded by academics as being the best single method for;evaluating capital budgeting projects.;The net present value method (NPV) is;generally regarded by academics as being the best single method for;evaluating capital budgeting projects.;Question;8. 8.No conflict will exist between the NPV and IRR;methods, when used to evaluate two equally risky but mutually exclusive;projects, if the projects' cost of capital exceeds the rate at which the;projects' NPV profiles cross. (Points: 2);True;False;Question;9. 9.Which of the following statements is CORRECT? Assume;that the project being considered has normal cash flows, with one outflow;followed by a series of inflows. (Points: 2);The longer a project?s payback;period, the more desirable the project is normally considered to be by this;criterion.;One drawback of the regular payback for;evaluating projects is that this method does not properly account for the;time value of money.;If a project?s payback is positive, then;the project should be rejected because it must have a negative NPV.;The regular payback ignores cash flows;beyond the payback period, but the discounted payback method overcomes this;problem.;Question 10. 10.Which of the following is NOT a;capital component when calculating the weighted average cost of capital;(WACC) for use in capital budgeting? (Points: 2);Long-term debt.;Accounts payable.;Retained earnings.;Common stock.

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