1 Smith LLC as base sale of 100 and cost of goods sold is 50% of sales. assuming a 15% increase in sales cost of goods sold for the first pro forma year is

a. 57.50

b. 65.50

c. 75.50

d. none of the above

2. Which of the following elements is needed to calculate the present value index?

a. Total present value of annual cash flows

b. Initial investment

c. Both A and B

d. Neither A or B

3. Charles Corporation has a beta of 2.0. The current T-bill rate is 2% and the stock markets historical return has exceeded the risk-free rate by 8%. The cost of equity for Charles is?

a. 18%

b. 20%

c. 22%

d. none of the above

4. Balfour Corporation has a current stock price of $30. Next year’s dividend is projected to be $3.00. The payout ratio is 30% and projected ROE is 10%. The cost of equity is

a. 16%

b. 17%

c. 18%

d. none of the above

5. Chester Corporation has a beta of 1.0. The current T-bill rate is 2% and the stock markets historical return has exceeded the risk-free rate by 8%. The cost of equity for Chester’s is

a. 6%

b. 8%

c. 10%

d. none of the above