1) The present value of a $25,000 perpetuity at a 14 percent discount rate is
A) $350,000
B)285,000
C)178,571
D)219,298

2) What annual rate of return would Grandma Zoe need to earn if she deposits $1,000 per month into an account beginning one month from today in order to have a total of $1,000,000 in 30 years ?
A)5.98%
B)5.28%
C)6.23%
D)4.55%

3) The advantage of issuing preferred stock from the common stockholder's perspective include all of the following EXCEPT
A)Increased leverage
B)flexibility
C)Use in mergers
D)Seniority of preferred stockholder's claim over common stockholders.

4) Nico Corporation expects to generate free-cash flows of $200,000 per year for the next five years . Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever. If the firm's average cost of capital is 15 percent, the market value of the firm's debt is $500,000, and Nico has a million shares of stock outstanding, what is the value of Nicos's stock ?
A)$0.00
B)$1.43
c)$3.43
D)$2.43

5) The cost to a corporation of each type of capital is dependent upon
A)the risk free rate of each type of capital plus the business risk and the financial risk of the firm.
B)the risk free rate of each type of capital plus the business risk of the firm.
C)the risk free rate of each type of capital plus the financial risk of the firm
D)the risk free rate of bonds plus the business risk of the firm