1. Nissan Company is expected to pay a $1.00 per-share dividend at the end of the year (D1 = $1.00). The stock sells for $20 per share and its required rate of return is 11 percent. The dividend is expected to grow at a constant rate, g, forever. What is the growth rate, g, for this stock?

2. What is the market value of a bond that will pay a total of 40 semi-annual coupons of $50 per period, over the remainder of its life? Assume the bond has a $1,000 face value and a 14% yield to maturity.

3. Suppose that IBM has stocks with an expected dividend of $10 in period 1. The company is expected to grow at the rate of 5% and the required rate of return of stocks for the company is 15%. If BMI did not re-invest, then EPS = $12. What is the fair price of IBM stock today?

4. Your bank offers to sell you some shares of Best Buy common stock that just paid a dividend of $2. You expect the dividend to grow at the rate of 5 percent per year for the next 3 years, and, if you buy the stock, you plan to hold it for 3 years and then sell it. The required return is 12%

a. Find the expected dividend for each of the next 3 years; that is, find D1, D2, D3.

b. If you plan to buy the stock, hold it for 3 years, and then sell it for $34.73, what is the most you should pay for it?

c. Calculate the present value of this stockassume g = 5% and is constant

5. Aggfa Corp's sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times-interest-earned (TIE) ratio?

6. Metak Corp's sales last year were $280,000, and its net income was $23,000. What was its profit margin?

7. Allen Corp's total assets at the end of last year were $415,000 and its net income was $32,750. What was its return on total assets?

8. Grubder firms total assets at the end of last year were $405,000 and its EBIT was 52,500. What was its basic earning power (BEP) ratio?

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