A project has an initial cost of RM6,500. The cash inflows are RM900, RM2,200, RM3,600, and RM4,100 over the next four years, respectively. What is the payback period?

2 points

1.73 years

2.51 years

2.94 years

3.51 years

3.94 years

Clear selection

Which of the following represent cash outflows from a corporation? I. issuance of securities II. payment of dividends III. new loan proceeds IV. payment of government taxes

2 points

I and III only

II and IV only

I and IV only

I, II, and IV only

II, III, and IV only

A proposed expansion project is expected to increase sales of JL Ticker's Store by RM35,000 and increase cash expenses by RM21,000. The project will cost RM24,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The store has a marginal tax rate of 30 percent. What is the operating cash flow of the project using the tax shield approach?

2 points

RM5,600

RM14,600

RM7,800

RM11,600

RM13,300

Willy, Inc. preferred stock pays a RM7.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock today if your required return is 9.75 percent?

2 points

RM32.26

RM35.48

RM72.68

RM76.92

RM79.81

Home Dcor & Mine is considering a proposed project with the following cash flows. Should this project be accepted based on the combination approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 16 percent? Why or why not? Year Cash Flow (RM) 0 - 375,000 1 104,500 2 - 35,600 3 244,700 4 271,000

2 points

Yes; The MIRR is 14.78 percent.

Yes; The MIRR is 15.64 percent.

No; The MIRR is 12.91 percent.

No; The MIRR is 14.78 percent.

No; The MIRR is 15.64 percent.

Shareholder A sold 500 shares of ABC stock on the Hong Kong Stock Exchange. This transaction:

2 points

took place in the primary market.

occurred in a dealer market.

was facilitated in the secondary market.

involved a proxy.

was a private placement

Phone Home, Inc. is considering a new 4-year expansion project that requires an initial fixed asset investment of RM3 million. The fixed asset will be depreciated straight-line to zero over its 4-year tax life, after which time it will have a market value of RM231,000. The project requires an initial investment in net working capital of RM330,000, all of which will be recovered at the end of the project. The project is estimated to generate RM2,640,000 in annual sales, with costs of RM1,056,000. The tax rate is 31 percent and the required return for the project is 15 percent. What is the net present value for this project?

2 points

RM714,056

RM733,970

RM741,335

RM742,208

RM744,595

The Plumber Yard is considering adding a new product line that is expected to increase annual sales by RM238,000 and cash expenses by RM184,000. The initial investment will require RM96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield?

2 points

RM5,120

RM13,160

RM25,840

RM32,560

RM41,840

The Ruttle Corporation will pay a RM3.80 per share dividend next year. The company pledges to increase its dividend by 2.4 percent indefinitely. How much are you willing to pay to purchase this company's stock today if you require a 6.9 percent return on your investment?

2 points

RM63.09

RM55.07

RM84.44

RM72.22

RM82.75

Billy Home, Inc. is considering a new 6-year expansion project that requires an initial fixed asset investment of RM5.994 million. The fixed asset will be depreciated straight-line to zero over its 6-year tax life, after which time it will be worthless. The project is estimated to generate RM5,328,000 in annual sales, with costs of RM2,131,200. The tax rate is 31 percent. What is the operating cash flow for this project?

2 points

RM1,894,318

RM2,848,315

RM2,515,482

RM2,663,021

RM2,211,407