15- IBM is expected to pay dividends of a $4.80 next year and currently trades at a P/E ratio of 5. IBM pays out 40% of earnings each year as dividends, and both are expected to grow at a 3% rate forever. IBM has a WACC of $8.50% and the required return on equity is 11%. The market price per share should be closest to:

a) $24

b) $40

c) $60

d) $100

e) $160

16- General Static Co. generated $2.80 billion in Free Cash Flow last year and reported Net Income equal to $2.25 billion. Both Net income and Free Cash Flow are expected to grow at 6% rate forever. The required return on equity is 12% and the WACC is 9%. The Enterprise Value is closes to:

a) $79 billion

b) $88 billion

c) $93 billion

d) $99 billion

e) $105 Billion

18- Which of the following items is NOT included in free cash flow?

a) Operating Income

b) Interest expense

c) Capital expenditures

d) Net working capital investments

e) All of the above are included in free cash flow

19- The excess return is the ________.

a) rate of return that can be earned with certainty

b) rate of return in excess of the Treasury-bill rate

c) risk adjusted return

d) index adjusted return

20- IBM paid dividends of $4.80 and earned $8.40 per share in the most recently completed full year. Next year earnings and dividends are expected to grow at 8% which is also the long-term expected growth rate. If the required return on IBM stock is 12% the market price per share should be closest to:

a) $50

b) $80

c) $100

d) $120

e) $130

21- A restriction with hedge funds under which investors cannot withdraw their funds for as long as several months or years is called ________.

A) Transparency

B) A lock-up period

C) A back-end load

D) Convert arbitrage

E) Limited liability

22- Hedge fund managers are compensated by ____________.

a) Management fees from fund assets and incentive bonuses

b) Commissions and a share of the gains

c) Commissions and management fees

d) Management fees and a share of the gains

e) Commissions, fees, bonuses, and a share of the gains