1. The earnings and dividends of MicroSun Computer Co. are expected to grow at an annual rate of 15% over the next 4 years and then slow to a constant growth rate of 8% per year. MicroSun currently pays a dividend of $0.50 per share. What is the value of MicroSun stock to an investor who requires a 14% return?

A. 9.31

B. 15.73

C. 11.35

D. 12.56

2. The largest number of NYSE members are registered as…

A. Specialists

B. Commission Brokers

C. Floor Brokers

D. Floor Traders

3. At the beginning of the year you buy 100 shares of sock for $14.35 per share. During the year the stock pays $1.50 in dividends per share. At the end of the year you sell the stock for $14.00. What is your dividend yield?

A. 8%

B. 6.5%

C. 10.45%

D. 7.2%

4. The disadvantages of the payback approach include:

A. Cash flows after the payback period are ignored in the calculation

B. Payback ignores the time value of money

C. Payback fails to provide an objective decision-making criterion

D. All of the above

5. The relationship between NPV and IRR is such that:

A. Both approaches always provide the same ranking of alternative investment projects

B. The IRR on an investment is the required rate of return that results in a zero NOV when it is used as the discount rate

C. If the NPV of a project is negative, the IRR must be greater than the cost of capital

D. None of the above