D. $39.76 13. Southern Foods just paid an annual dividend of $1.10 a share. Management estimates the dividend will increase by 10 percent a year for the next four years. After that, the annual dividend growth rate is estimated at 3.2 percent. The required rate of return is 12 percent. What is the value of this stock today? A SI2.SS B. $13.00 C. $16.21 D. $15.81 14. The free cash flow to the firm is reported as $198 million. The interest expense to the firm is S15 million. If the tax rate is 35% and the net debt of the firm increased by $20 million, what is the approximate market value of the firm if the FCFE grows at 3% and the cost of cquity is 14%? A $1.950 billion B. S2,497 billion C. $2,585 billion D. $3.098 billion 15. Ultra Fine Furnishings is in the process of selling its peripheral businesses and focusing on its upscale clients. In conjunction with this reorganization, the dividend will be decreased by 10 percent for the next three years. After that, the dividend will resume increasing at an annual rate of 5 percent. The required retum on this stock is 14 percent and the last dividend paid was $2.40 a share. What is one share of this stock worth today? A. SI7 34 B SI8.08 C. $18.35 D. $19.68 Chapters 15 and 16: Options Market and Option Valuation 16. All else equal, call option values are if the is lower. A higher; stock price B. higher, exercise price C. lower, dividend payout D. lower, stock volatility D. lower, stock volatility 17. A longer time to maturity will unambiguously increase the value of a call option because 1. The longer maturity time reduces the effect of a dividend on call price. II. With a longer time to maturity the present value of the exercise price falls. III. With a longer time to maturity the range of possible stock prices at expiration increases. A. I only B. I and II only C. II and III only D. I, II and III 18. You purchase one MBI July 120 call contract (equaling 100 shares) for a premium of 55. You hold the option until the expiration date, when MBI stock sells for $123 per share. You will realize a on the investment. A. 200 profit B. S200 loss C. $300 profit D. S300 loss 19. You sell one Huge-Packing August 50 call contract and sell one Huge-Packing August 50 put contract. The call premium is S1.25 and the put premium is $4.50. Your strategy will pay off only if the stock price is in August A. either lower than $44.25 or higher than $55.75 B. between $44.25 and $55.75 C. higher than $55.75 D. lower than $44.25 20. Suppose you purchase one Texas Insurance August 75 call contract quoted at $8.50 and write one Texas Insurance August 80 call contract quoted at $6. If, at expiration, the price of a share of Texas Instruments be C. higher than $55.75 D. lower than $44.25 20. Suppose you purchase one Texas Insurance August 75 call contract quoted at $8.50 and write one Texas Insurance August 80 call contract quoted at $6. If, at expiration, the price of a share of Texas Instruments stock is $79, your profit would be A S150 B. $400 C. S600 D. S1.850 21. A put on Sanders stock with a strike price of S35 is priced at $2 per share, while a call with a strike price of $35 is priced at $3.50. The maximum per-share loss to the writer of an uncovered put is and the maximum per-share gain to the writer of an uncovered call is A. S33: $3.50 B. $33; $31.50 C. $35; 3.50 D. $35: 535 Table: Wildwood Corporation: You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is S50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: 22. (Table: Wildwood Corporation) If in June the stock price is S53. your net profit on the bull money spread would be A S300 B. -S400 C. $150 D. 550 23. (Table: Wildwood Corporation) Suppose you establish a bullish money spread with the puts. In June the stock's price turns out to