1) Given an anticipated market return of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4.0%, what is the expected return for Benson Industries?
2) Jolly Roger Kite Company has a payment cycle of 17 days, a collection cycle of 31 days, and a production cycle of 12 days. What is the average cash conversion cycle for the Jolly Roger Company?
A) 2 days
B) 60 days
C) 26 days
D) 36 days
3) What is the present value today of an ordinary annuity cash flow of $3,000 per year for forty years at an interest rate of 6.0% per year if the first cash flow is six years from today?
4) Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Bacon bonds is now 9%. Given this information, what is the price today for a Bacon Signs bond?
5) Endicott Enterprises Inc. has issued 30-year semi-annual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 15%, what is the firm's current price per bond?
6) Benson Biometrics Inc., has outstanding $1,000 face value 8% coupon bonds that make semiannual payments, and have 14 years remaining to maturity. If the current price for these bonds is $987.24, what is the annualized yield to maturity?
7) Consider the following four-year project. The initial outlay or cost is $180,000. The respective cash inflows for years 1, 2, 3 and 4 are: $100,000, $80,000, $80,000 and $20,000. What is the discounted payback period if the discount rate is 11%?
A) About 2.135 years
B) About 2.000 years
C) About 2.427 years
D) About 1.667 years
8) Geronimo, Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000 and $80,000. Geronimo uses the net present value method and has a discount rate of 11%. Will Geronimo accept the project?
A) Geronimo rejects the project because the NPV is about -$12,375.60.
B) Geronimo rejects the project because the NPV is about -$2,375.60.
C) Geronimo rejects the project because the NPV is about -$22,375.73.
D) Geronimo accepts the project because the NPV is greater than $10,000.00.
9) Opie, Inc. is considering an eight-year project that has an initial after-tax outlay or after-tax cost of $180,000. The future after-tax cash inflows from its project for years 1 through 8 are the same at $38,000. Opie uses the net present value method and has a discount rate of 11.50%. Will Opie accept the project?
A) Opie rejects the project because the NPV is less than -$12,000.
B) Opie rejects the project because the NPV is about -$11,114.
C) Opie accepts the project because the NPV is greater than$12,000.
D) Opie accepts the project because the NPV is about $11,114.
10) Dice, Inc. is considering a very risky five-year project that has an initial outlay or cost of $70,000. The future cash inflows from its project for years 1, 2, 3, 4, and 5 are all the same at $35,000. Dice uses the internal rate of return method to evaluate projects. Will Dice accept the project if its hurdle rate is 41.00%?
A) Dice will accept this project because its IRR is about 41.50%.
B) Dice will probably accept this project because its IRR is about 41.04%, which is slightly above its hurdle rate.
C) Dice will probably reject this project because its IRR is about 39.74%, which is slightly below its hurdle rate.
D) Dice will accept this project because its IRR is over 45.50%.
11) Find the Modified Internal Rate of Return (MIRR) for the following annual series of cash flows, given a discount rate of 10.50%: Year 0: -$75,000; Year 1: $15,000; Year 2: $16,000; Year 3: $17,000; Year 4: $17,500; and, Year 5: $18,000.
A) About 6.35%
B) About 7.88%
C) About 7.35%
D) About 6.88%
12) Pigeon, Inc. is currently considering an eight-year project that has an initial outlay or cost of $80,000. The future cash inflows from its project for years 1 through 8 are the same at $30,000. Pigeon has a discount rate of 13%. Because of concerns about funds being short to finance all good projects, Pigeon wants to compute the profitability index (PI) for each project. What is the PI for Pigeon's current project?
A) About 1.70
B) About 1.80
C) About 1.60
D) About 1.50
13) Baldwin Co. purchases an asset for $50,000. This asset qualifies as a five-year recovery asset under MACRS, with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. Baldwin has a tax rate of 35%. If the asset is sold at the end of four years for $5,000, what is the after-tax cash flow from disposal?
14) Your firm has issued a 20-year $1,000.00 par value semiannual 10% coupon bond that sells for $1,000 in the market place. The proceeds from the sale of the bond issue is $975.00 per bond. What is your firm's yield to maturity on this new bond issue? Use a financial calculator to determine your answer.
15) The following information comes from the Galaxy Construction balance sheet. The value of common stock is $10,000, retained earnings equal $7,000, total common equity equals $17,000, preferred stock has a value of $3,000, and long-term debt totals $15,000. If the cost of debt is 8.00%, preferred stock has a cost of 10.00%, common stock has a cost of 12.00%, and the firm has a corporate tax rate of 30%, find out the firm's WACC adjusted for taxes.
D) There is not enough information to answer this problem.