1.Investors require a 13% rate of return on the Levine Companys stock. If the dividend increase at a constant rate of 6%, what is the capital gain yield?

A. 6%

B. 13%

C. 7%

D. 19%

E. None of the above

2.Negative growth rate stocks have negative values.

A. True B. False

3. If a zero growth rate shock with an annual dividend of $5 sells for $50, what is the stocks expected return?

A. 5%

B. 10%

C. 15%

D. 20%

E. Can not be determined

4.A six-year, semiannual coupon bond is selling for $991.38. The bond has a face value of $1,000 and a yield to maturity of 9.19 percent. What is the coupon rate? [Match time period and interest rate]

A. 4.50 percent

B. 4.60 percent

C. 6.00 percent

D. 9.00 percent

E. 9.20 percent

5. Which of following information is not required to calculate WACC?

A. Weight of debt

B. Weight of common equity

C. Tax rate

D. Cost of preferred stock

E. All of above are required

6. If tax rate increases, WACC will decrease.

A. True B. False

7. If a firm can borrow at an interest rate of 8% and its tax rate is 40%, its after-tax cost of debt is

A. 3.2%

B. 4%

C. 4.8%

D. 6%

E. 8%

8. If a firm pays out $5 preferred dividend per share, and the stock is priced at $40 per share. The component cost of preferred stock is

A. 8%

B. 10%

C. 12.5%

D. 17.5%

E. 25%

9. The cost of preferred stock to a firm must be adjusted to an after-tax figure

. A. True. B. False.