FIN101

Q1) Assume a companys preferred stock is selling currently at $125, what is the dividend paid by the firm if the required rate of return is 11 percent?

1. $12.5
2. $13
3. $13.75%
4. 14.25%

Q2) What is the present value of the tax savings in perpetuity for a firm that plans to issue $5,000,000 worth of debt at a yield to maturity of 12% if the marginal corporate tax rate is 40% ?

a. $240,000 b. $600,000 c. $2,000,000 d. $5,000,000

Q3) If the nominal return on U.S. Treasury bills is 14 percent while the rate of expected inflation is anticipated to be 5 percent, then what should real rate of return be?

A. 10.5%

B. 8.5%

C. 9.8%

D. 11%

Q4) Your firm paid a dividend $4.2 this year. The dividend is expected to grow at a constant rate of 8 percent. If the required rate of return is 16%, What is the value of your firms stock?

A. $43.5

B. $56.7

C. $52.5

D. $45