1.Violin is a manufacturer of radios. It earned a return on capital of 14% last year and expects to maintain this next year. If the current years after-tax operating income is $150 million and the firm reinvests 40% of this income back, what is the FCFF next year?

Select one:

a. $95.04

b. $78.09

c. $82.40

d. $63.90

2.

You have run a regression of dividend payout ratios against expected growth and risk (beta) for all companies in the market and arrived at the following equation:

Payout ratio=0.80 -1.2 Expected Growth -0.25 Beta

Using this regression, estimate the dividend payout ratio for a firm with an expected growth rate of 20% and a beta of 1.2.

Select one:

a. 26%

b. 56%

c. 40%

d. 10%

3.

LandRover Inc. is a publicly traded company that reported net income of $90 million in the most recent year, after depreciation of $40 million. The firm reported capital expenditures of $85 million and an increase in working capital of $10 million. If total debt at LandRover increased by $20 million during the course of the year, how much could LandRover have afforded to pay out in dividends during the course of the year?

Select one:

a. $55 million

b. $20 million

c. $30 million

d. $80 million

4.

You just ran a regression of monthly returns on Magna International against monthly returns on the S&P/TSX Composite Index and arrived at an estimate of beta of 1.5 with a standard deviation of 0.12. What would be the range of beta with 99% confidence interval?

Select one:

a. {1.26, 1.74}

b. {1.14, 1.86}

c. {1.38, 1.62}

d. {1.02,1.98}