1-

Gamma Corporations has a target debt-to-equity ratio of 0.4. The companys equity beta is 0.9, risk-free rate is 7%, and expected return on the market is 12%. Given that the companys marginal tax rate is 35% and that its weighted average cost of capital is 10.5%, its before-tax cost of debt is closest to:

2-

An analyst gathered the following information regarding Global Traders:

Current dividend per share = $3.80

Expected growth rate = 12% Required return on equity = 8.6%

The analyst expects the price of the stock after 2 years to be $43.20.

The value of the companys stock today is closest to:

Select one:

a.$46.67

b.$42.34

c. $44.59

3-

Sun Technologies is considering investing in two projects, A and B, which require an initial outlay of $4 million and $5.5 million respectively. The company requires a rate of return of 24% on its investments. Cash flows associated with the two projects are as follows:

Years	1	2	3	4
Project-A ($millions)	1.8	2.4	2.8	2.1
Project-B ($ millions)	1.5	1.8	2.4	3.2

Which of the following statements is most accurate?

The company should invest in:

Select one:

a. Project-A only, because Project-Bs IRR is less than the required rate of return.

b. Project-B only, because Project-As IRR is less than the required rate of return.

c. Both projects, because their IRRs are more than the required rate of return.

4-

Which of the following statements regarding companies in industries in the shakeout stage is least accurate?

a-Companies start to focus on their cost structures.

b.Demand growth remains fairly constant.

c.There is intense competition among existing firms

5- The experience curve most likely shows:

a- Indirect costs per unit of good or service produces as a typically declining function of cumulative output.

b.Direct costs per unit of good or service produced as a typically declining function of cumulative output.

c.Direct costs per unit of good or service produced as a typically increasing function of cumulative output.