6 questions

1. Burns Nuclear Power common stock has a beta of 0.8 and currently pays a dividend of $3. The USTreasury bill rate is 2.5% and the market risk premium is 9.5%. What is the value of this stock if aconstant annual growth rate of 4% is expected in dividends and earnings?

A) $51.15

B) $64.82

C) $73.17

D) $49.18

E) $76.10

2 Company A has a beta of 0.70, while Company B's beta is 1.30. The required return on the stock market is11.00%, and the risk-free rate is 4.25%. What is the difference between A's and B's required rates of return?(Hint: First find the market risk premium, then find the required returns on the stocks.

A) 4.05%

B) 3.73%

C) 4.90%

D) 4.74%

E) 3.60%

3 Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return. The risk-free rate is 4.20%. You now receive another $8.50 million, which you invest in stocks with an average betaof 0.65. What is the required rate of return on the new portfolio? (Hint: You must first find the market riskpremium, then find the new portfolio beta.)

A) 8.57%

B) 9.00%

C) 7.80%

D) 8.14%

E) 7.97%

4. You must estimate the intrinsic value of Mega Dynamics stock in our universe. Mega Dynamics current freecash flow is $25 billion, and it is expected to grow at a constant annual rate of 8.5%. The companys WACC is11%. Mega Dynamics has $200 billion of long-term debt and preferred stock, and there are 30 billion shares ofcommon stock outstanding. What is Mega Dynamics estimated intrinsic value per share of common stock?

A) $26.67

B) $29.50

C) $22.67

D) $28.00

E) $24.00

5. Goode Inc.'s stock has a required rate of return of 11.50%, and it sells for $18.00 per share. Goode's dividend isexpected to grow at a constant rate of 7.00%. What was the last dividend, D ?

A) $0.77

B) $0.76

C) $0.57

D) $0.62

E) $0.92.

6. MeFirst Corporation has a cumulative preferred share issue that is suppose to pay a quarterly dividend of $2.MeFirst failed to pay 3 consecutive dividends to investors and then managed to pay a common share dividend thevery next quarter. How much cash must MeFirst have paid to each preferred share holder at that time?

A) $2 per share

B) $8 per share

C) $6 per share

D) $10 per share