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Fall FIN-315-01D Business Finance I exam 3




Question;Question 1;Last year Mike bought 100 shares of Dallas Corporation common;stock for $53 per share. During the year he received dividends of $1.45 per;share. The stock is currently selling for $60 per share. What rate of return;did Mike earn over the year?;Answer;11.7;percent;13.2;percent;14.1;percent;15.9 percent;Question 2;Emmy Lou, Inc. has an expected dividend next year of $5.60 per;share, a growth rate of dividends of 10 percent, and a required return of 20;percent. The value of a share of Emmy Lou, Inc.'s common stock is ________.;Answer;$28.00;$56.00;$22.40;$18.67;Question 3;Systematic risk is also referred to as;Answer;diversifiable;risk.;economic;risk.;nondiversifiable risk.;not;relevant.;Question 4;Nico Corporation's common stock is expected to pay a dividend of;$3.00 forever and currently sells for $21.42. What is the required rate of;return?;Answer;10%;12%;13%;14%;Question 5;A firm has experienced a constant annual rate of dividend growth;of 9 percent on its common stock and expects the dividend per share in the;coming year to be $2.70. The firm can earn 12 percent on similar risk;involvements. The value of the firm's common stock is ________.;Answer;$22.50/share;$9/share;$90/share;$30/share;Question 6;Tangshan China Company's stock is currently selling for $80.00;per share. The expected dividend one year from now is $4.00 and the required;return is 13 percent. What is Tangshan's dividend growth rate assuming that;dividends are expected to grow at a constant rate forever?;Answer;8%;9%;10%;11%;Question 7;Tangshan China's stock is currently selling for $160.00 per;share and the firm's dividends are expected to grow at 5 percent indefinitely.;Assuming Tangshan China's most recent dividend was $5.50, what is the required;rate of return on Tangshan's stock?;Answer;7.3%;8.6%;9.5%;10.6%;Question 8;The expected value, standard deviation of returns, and;coefficient of variation for asset A are ________. (See table below.);Answer;10;percent, 8 percent, and 1.25, respectively;9.33;percent, 8 percent, and 2.15, respectively;9.35;percent, 4.68 percent, and 2.00, respectively;9.35 percent, 2.76 percent, and;0.295, respectively;Question 9;An investment banker;has recommended a $100,000 portfolio containing assets B, D, and F. $20,000;will be invested in asset B, with a beta of 1.5, $50,000 will be invested;in asset D, with a beta of 2.0, and $30,000 will be invested in asset F;with a beta of 0.5. The beta of the portfolio is;Answer;1.25.;1.33.;1.45.;unable;to be determined from the information provided.;Question 10;Nico Custom Cycles;common stock currently pays no dividends. The company plans to begin paying;dividends beginning 3 years from today. The first dividend will be $3.00 and;dividends will grow at 5 percent per year thereafter. Given a required return;of 15 percent, what would you pay for the stock today?;Answer;$25.33;$18.73;$29.86;$22.68;Question 11;The ________ are sometimes referred to as the residual owners;of the corporation.;Answer;preferred;stockholders;unsecured;creditors;common stockholders;secured;creditors;Question 12;Asset P has a beta of 0.9. The risk-free rate of return is 8;percent, while the return on the market portfolio of assets is 14 percent. The;asset's required rate of return is;Answer;13.4 percent.;6.0;percent.;5.4;percent.;10;percent.;Question 13;Asset Y has a beta of;1.2. The risk-free rate of return is 6 percent, while the return on the market;portfolio of assets is 12 percent. Asset Y's risk premium is;Answer;7.2 percent.;6.0;percent.;13.2 percent.;10 percent.;Question 14;Table 8.3;Consider the following two securities X and Y.;Which asset (X or Y) in Table 8.3 has the least total risk? Which has the least;systematic risk?;Answer;X;X.;X, Y.;Y;X.;Y;Y.;Question 15;A firm has an expected dividend next year of $1.20 per share, a;zero growth rate of dividends, and a required return of 10 percent. The value;of a share of the firm's common stock is ________.;Answer;$120;$10;$12;$100;Question 16;An investment advisor has recommended a $50,000 portfolio;containing assets R, J, and K, $25,000 will be invested in asset R, with an;expected annual return of 12 percent, $10,000 will be invested in asset J, with;an expected annual return of 18 percent, and $15,000 will be invested in asset;K, with an expected annual return of 8 percent. The expected annual return of;this portfolio is;Answer;12.67%.;12.00%.;10.00%.;unable;to be determined from the information provided.;Question 17;Julian is considering purchasing the stock of Pepsi Cola because;he really loves the taste of Pepsi. What should Julian be willing to pay for;Pepsi today if it is expected to pay a $2 dividend in one year and he expects;dividends to grow at 5 percent indefinitely? Julian requires a 12 percent;return to make this investment.;Answer;$28.57;$29.33;$31.43;$43.14;Question 18;What is the expected market return if the expected return on;asset X is 20 percent, its beta is 1.5, and the risk free rate is 5 percent?;Answer;5.0%;7.5%;15.0%;22.5%;Question 19;Patrick Company expects to generate free-cash of $120,000 per;year forever. If the firm's required return is 12 percent, the market value of;debt is $300,000, the market value of preferred stock is $70,000, and the;company has 100,000 shares of stock outstanding. What is the value of Patrick's;stock?;Answer;$6.30;$10.00;$7.00;$9.70;Question 20;A firm has an issue of preferred stock outstanding that has a;stated annual dividend of $4. The required return on the preferred stock has;been estimated to be 16 percent. The value of the preferred stock is ________.;Answer;$64;$16;$25;$50


Paper#51234 | Written in 18-Jul-2015

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