1. If the average annual rate of return for common stocks is 7.5%, and for treasury bills it is 2.5%, what is the MRP or Market Risk Premium (%)?

2. A stock with a beta of 1. 15 would be expected to:

A. Increase in returns 15% faster than the market in down markets

B. Increase in returns 115% faster than the market in up markets

C. Increase in returns 15% faster than the market in up markets

D. Increase in returns 115% faster than the market in down markets

3.The covariance between Druze Inc stock and the market index S&P 500 is 0.042.

The standard deviation of the stock market is 19%.

What is the beta of Druze Inc stock?

4. The covariance between stock A and stock B is 0.02.

The standard deviation of stock A is 12% and that of stock B is 25%.

Calculate the correlation coefficient between the two securities.

5. Kasper Inc has an Earnings per Share (EPS) of $2.

It declares a Dividend of $1.5 per share (DPS).

What is the company's Ploughback Ratio (PBR)?

6. If you invest $75,000 today at an APR (Annual Percentage Rate) of 7%, how much will you receive at the end of 9 years (interest compounded quarterly)?

(Round your answer to the nearest $)

7.Helen is considering an investment of $3,500 each year for 18 years, starting at the end of the this year.

The investment will pay 5 % interest.

How much will this investment ($) be worth at the end of the 12 years?

Round your answer to the nearest $.

8.You have just won the lottery and received $10,000.

You deposited your winnings into an account that pays 7.5 % interest compounded annually.

How long will you have to wait until your winnings are worth $15,000?

9.Dustin is considering an investment that will pay $3,000 a year for 10 years, starting 1 year from today.

How much should Dustin pay for this investment if he wishes to earn a 9% rate of return?

10.Warren's Diner needed a new location.

This establishment spent $65,000 to refurbish an old shop and create the current facility.

The firm borrowed 75 percent of the refurbishment cost at 8 percent interest for 11 years.

What is the amount of each monthly payment?

11.You are given the following data for year 1 for a project.

Revenues = $75 million,

Fixed costs = $20 million;

Total variable costs = $35 million;

Depreciation = $8 million;

Tax rate = 25%.

Calculate the after tax cash flow ($ million) for the project for year-1.

12.Scenic Images paid an annual dividend of $1.85 per share last year.

Management just announced that future dividends will increase by 3 % annually.

What is the amount of the expected dividend in year 4?

13.Merrigo Inc's Earnings and Dividends per share are expected to grow indefinitely by 1.5% a year forever.

The company is expected to pay a dividend per share of $1.75 next year.

The market capitalization rate (discount rate) is 8%.

Estimate the current value of the stock.

14.The beta of Con Edison is 0.40.

The Treasury Bond rate (risk-free rate) is 2%.

The expected rate of return from the market is 6%.

Calculate the expected rate of return (%) from Con Edison (Cost of Equity) as per CAPM.

Hint: Return = Risk-free Rate + beta*(Market Return - Risk-free Rate);

15. The Cost of Equity for a firm is 12%.

The Pre-Tax Cost of Debt is 8%.

The Market Value of the firm's Equity is $1,750 million and the Debt is $1,250 million.

The Tax Rate is 35%.

Calculate the Weighted Average Cost of Capital (WACC) for the firm.

16. Smiline & Co pays a constant yearly dividend of $1.25 per share.

How much are you willing to pay for one share if you require a 5.75 % rate of return?

17. A new boutique line is expected to cost $25 million in initial investment.

It is estimated that the business will generate $7 million after-tax cash flow each year, for the next 5 years.

At the end of 5 years it can be sold for $15 million.

What is the NPV (Net Present Value) of the project at a discount rate of 7%?

18. A 5-year US Government Bond has a Face Value of $1,000 and a Coupon rate of 3% paid annually.

If the current Interest rate is 2% pa, what would be the Bond's Price?

Hint: calculate the Present Value (PV) of the Bond.

19. KaesiCo. has Total Assets of $6,500,000 and a Total Asset Turnover of 1.3 times.

If the return on Assets is 9.25%, what is the Profit Margin (%)?

20. Gap reported the following numbers ($ million) for the year ended Jan 30, 2016:

Calculate the company's Earnings per share (EpS) in $.

Ratio	Value
Net Income	920
Shares o/s (millions)	397
Stock Price ($)	$23.71
Total Equity	2,545

21. Continuing the previous problem:

Gap reported the following numbers ($ million) for the year ended Jan 30, 2016:

Calculate the company's Market-to-Book ratio.

Ratio	Value
Net Income	920
Shares o/s (millions)	397
Stock Price ($)	$23.71
Total Equity	2,545

22. Continuing the previous problem:

Gap reported the following numbers ($ million) for the year ended Jan 30, 2016:

Calculate the company's PE ratio.

Give your answer to 2 decimals, but do not enter $ sign in answer box.

Ratio	Value
Net Income	920
Shares o/s (millions)	397
Stock Price ($)	$23.71
Total Equity	2,545

23.An investor is trying to assess the likely return from a stock he is considering to invest.

The returns in the last 5 years are given in the table below.

Returns %

	5
	9
	7
	11
	8

Calculate the Standard Deviation (%) of Returns for the stock

24. Suppose you invest 30% of your portfolio in Ford stock and the balance in Facebook stock.

The Standard Deviations of their annualized daily returns are 12% & 18%, respectively.

Assume a correlation coefficient of 0.2.

Calculate Portfolio variance.