1. UVP preferred stock pays $5.00 in annual dividends. If your required rate of return is 13%, how much will you be willing to pay for one share?
2. A project costs $10,000 and is expected to return after-tax cash flows of $3,000 each year for the next 10 years. This project's payment period is ________.
3. ABC services can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV if the required rate of return is 12%. (round to the nearest $1.)
4. A project has an initial outlay of $4,000. It has a single payoff at the end of Year 4 of $6,996,46. What is the IRR for the project? (Round to the nearest %).
5. Delta.com has achieved an average return on equity of 36.5% for the last five years. If Delta generates a 17.2% net profit margin on sales of $3 billion and pays no dividends, what is Delta.com's sustainable rate of growth?
a. 4.0% b. 2.8% c. 17.2% d. 36.5%
6. Miller Metalworks had sales in November of $60,000, in December of $40,000, and in January of $80,000. Miller collects 40% of sales in the month of the sale and 60% one month after the sale. Calculate Miller's cash receipts for January.
a. $44,000 b. $56,000 c. $64,000 d. $72,000
7. To compound $100 quarterly for 20 years at 8%, we must use:
a. 40 periods @ 4% b. 5 periods @ 12% c. 10 periods @ 4% d. 80 periods @ 2%
8. How much money do I need to place into a bank account which pays a 6% rate in order to have $500 at the end of seven years?
a. $332.53 b. $381.82 c. $423.77 d. $489.52
9. What is the present value of an annuity of $12 received at the end of each year for seven years? Assume a discount rate of 11%. The first payment will be received one year from today. (Round to the nearest 1$.)
a. $25 b. $40 c. $57 d. $118
10. Huit Industries's common stock has an expected return of 14.4% and a beta of 1.2. If the expected risk-free return is 8%, what is the expected return for the market? (Round to the nearest %).
a. 7.7% b. 9.6% c. 12% d. 13.3%
11. Bell Weather, Inc. has a beta of 1.25. The return on the market portfolio is 12.5%, and the risk-free rate is 5%. According to CAPM, what is the required return on the stock?
a. 20.62% b. 9.37% c. 14.37% d. 15.62%
12. Marjen stock has a required return of 20%. The expected market return is 15%, and the beta of Marjen's stock is 1.5. Calculate the risk-free rate.
a. 4% b. 5% c. 6% d. 7%
13. You bought Chemtron stock for $45 a year ago. It is selling for $54 today. What is your holding period return?
a. 9% b. 11% c. 6% d. 20%