Hi, I have an exam right now I need your help I am attaching the questions and I need you to answer it correctly within one and half hour I can not accept more than three mistakes in MCQS because every question has 5 point and I need at least to take 85 out of 100 so please be careful before you accept the questions. I am also attaching you a sample test paper that professor has sent me may be it can help you a little bit with the exam.

As this exam is so important to me I prefer some one who has a good rating inCourse heroor maybe (expert) infinanceto accept this 20 MCQS questions

Thank you

Sample Question Please note: had calculations which the authors make vs. calculator calculations might give slightly different answers. I promise you that the exam answer options will not be that close to each other and as long as you pick the closest answer you find, you will be fine. 1. Compound interest pays interest for each time period on the original investment plus the accumulated interest. TRUE 2. What is the future value of $10,000 on deposit for 5 years at 6% simple interest? A. $7,472.58 B. $10,303.62 C. $13,000.00 D. $13,382.26 FV = PV + (PV r t) ($10,000) + [($10,000 .06) 5] = $13,000.00 3. Approximately how long must one wait (to the nearest year) for an initial investment of $1,000 to triple in value if the investment earns 8% compounded annually? A. 9 years B. 14 years C. 22 years D. 25 years $3,000 = $1,000(1.08)n 3 = (1.08)n 14.27, or approximately 14 years = N Solved with financial calculator; can also be solved with tables or logarithms. With financial calculator: Pv=1000, FV=3000, I/Y = 8, PMT = 0, N=? 4. How much will accumulate in an account with an initial deposit of $100, and which earns 10% interest compounded quarterly for 3 years? A. $107.69 B. $133.10 C. $134.49 D. $313.84 FV = PV (1 + r)2 $100 (1.025)12 = $134.49 With financial calculator: PV=100, PMT=0, N=12, I/Y=2.5, FV=? 5. What is the present value of your trust fund if it promises to pay you $50,000 on your 30th birthday (7 years from today) and earns 10% compounded annually? A. $25,000.00 B. $25,657.91 C. $28,223.70 D. $29,411.76 With financial calculator: PV=?, FV =50,000, N=7, I/Y=10, PMT=0 6. How much more would you be willing to pay today for an investment offering $10,000 in 4 years rather than the normally advertised 5year period? Your discount rate is 8%. A. $544.47 B. $681.48 C. $740.74 D. $800.00 Just find the present values of each alternative and compare. $7,350.30 vs. $6,805.83 $544.47 difference. 7. What is the present value of the following payment stream, discounted at 8% annually: $1,000 at the end of year 1, $2,000 at the end of year 2, and $3,000 at the end of year 3? A. $5,022.11 B. $5,144.03 C. $5,423.87 D. $5,520.00 You can either do this individually as the author did it (above), or go into the cash flow function and don't enter anything for CFo. Since NPV is the difference between PV of money going out vs. PV of all future cash flows, If you put CFo to be zero, then NPV simply becomes the present value of all future cash flows. 8. If the net present value of a project that costs $20,000 is $5,000 when the discount rate is 10%, then the: A. project's IRR equals 10%. B. project's rate of return is greater than 10%. C. net present value of the cash inflows is $4,500. D. project's cash inflows total $25,000. 9. What is the NPV of a project that costs $100,000 and returns $50,000 annually for 3 years if the opportunity cost of capital is 14%? A. $3,397.57 B. $4,473.44 C. $16,085.00 D. $35,000.00 With the calculator in CF function: CFo=-100,000, CF1=50,000 FO1=3, I=14, NPV=? The answer you find will be 16,081.60 (slightly different due to had calculation vs. calculator precision) 10. A bond's par value can also be called its: A. coupon payment. B. present value. C. default value. D. face value 11. What happens to the coupon rate of a bond that pays $80 annually in interest if interest rates change from 9% to 10%? A. The coupon rate increases to 10%. B. The coupon rate remains at 9%. C. The coupon rate remains at 8%. D. The coupon rate decreases to 8%. 12. Assume that a bond has been owned by four different investors during its 20year history. Which of the following is not likely to have been shared by these different owners? A. Coupon rate B. Cash flows C. Par value D. Yield to maturity 13. How much should you pay for a $1,000 bond with 10% coupon, annual payments, and 5 years to maturity if the interest rate is 12%? A. $927.90 B. $981.40 C. $1,000.00 D. $1,075.82 Or with a calculator: PV=? FV=1000 I/Y=12 PMT=100 N=5 14. Which of the following statements is correct for a 10% coupon bond that has a current yield of 7%? A. The face value of the bond has decreased. B. The bond's maturity value exceeds the bond's price. C. The bond's internal rate of return is 7%. D. The bond's maturity value is lower than the bond's price. 15. What is the current yield of a bond with a 6% coupon, 4 years until maturity, and a price of $750? A. 6.0% B. 8.0% C. 12.0% D. 14.7% $60/750 = 8% 16. What is the coupon rate for a bond with 3 years until maturity, a price of $1,053.46, and a yield to maturity of 6%? A. 6% B. 8% C. 10% D. 11% Or with a calculator: PMT=? N=3 PV= -1053.46 I/Y=6 FV=1000 When you find payment you can translate in to \"coupon rate\" terms. Coupon rate is a percentage amount of the face value ($1000). 17. If the dividend yield for year 1 is expected to be 5% based on the current price of $25, what will the year 4 dividend be if dividends grow at a constant 6%? A. $1.33 B. $1.49 C. $1.58 D. $1.67 .05 $25 = $1.25 = DIV1 Then, DIV4 = $1.25 (1.06)3 = $1.49 18. What should be the price for a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%? A. $22.86 B. $28.00 C. $42.00 D. $43.75 19. What price would you expect to pay for a stock with 13% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.50 which will be paid today? A. $27.78 B. $30.28 C. $31.10 D. $31.39 20. ABC common stock is expected to have extraordinary growth of 20% per year for 2 years, at which time the growth rate will settle into a constant 6%. If the discount rate is 15% and the most recent dividend (Do) was $2.50, what should be the approximate current share price? A. $31.16 B. $33.23 C. $37.42 D. $47.77 21. If the correlation of prices between two stocks is 0.35, then the price of one stock would be expected to: A. rise when the other stock price falls. B. rise by 35% when the other stock price is unchanged. C. fall when the other stock price falls. D. fall by 35% when the other stock price is unchanged. 22. What is the approximate variance of returns if over the past 3 years an investment returned 8.0%, 12.0%, and 15.0%? (hint: if there is no probability assigned, always assume that there is equal probability - hence equal weights). A. 31 B. 131 C. 182 D. 961 23. What is the approximate standard deviation of returns for a oneyear project that is equally likely to return 100% as it is to provide a 100% loss? A. 0% B. 50% C. 71% D. 100% 24. What is the expected return on a portfolio that will decline in value by 13% in a recession, will increase by 16% in normal times, and will increase by 23% during boom times if each scenario has equal likelihood? A. 8.67% B. 13.00% C. 13.43% D. 17.33% 25. What is the variance of return of a threestock portfolio (with unequal weights 25%, 50%, and 25%) that produced returns of 20%, 25%, and 30%, respectively? A. 10.00 B. 12.50 C. 15.00 D. 20.00 The weightedaverage cost of capital is the return the company needs to earn after tax in order to satisfy all its security holders. (Points : 5) 1. True False Why is debt financing said to include a tax shield for the company? (Points : 5) Taxes are reduced by the amount of the debt. Question 2.2. Taxes are reduced by the amount of the interest. Taxable income is reduced by the amount of the debt. Taxable income is reduced by the amount of the interest. What is the WACC for a firm with 50% debt and 50% equity that pays 12% on its debt, 20% on its equity, and has a 40% tax rate? (Points : 5) Question 3.3. 9.6% 12.0% 13.6% 16.0% Calculate a firm's WACC given that the total value of the firm is $2,000,000, $600,000 of which is debt, the cost of debt and equity is 10% and 15%, respectively, and the firm pays no taxes. (Points : 5) Question 4.4. 9% 11.5% 13.5% 14.4% Question 5.5. A company's CFO wants to maintain a target debttoequity ratio of 1/4. If the WACC is 18.6%, and the pretax cost of debt is 9.4%, what is the cost of common equity assuming a tax rate of 34%? (Points : 5) 19.90% 20.90% 21.70% 22.73% Question 6.6. If a firm has three times as much equity as debt in its capital structure, then the firm has: (Points : 5) 25% debt 66.7% equity 40% debt 33.3% equity What is the WACC for a firm with 40% debt, 20% preferred stock, and 40% equity if the respective costs for these components are 6% after tax, 12% after tax, and 18% before tax? The firm's tax rate is 35%. (Points : 5) Question 7.7. 9.48% 11.16% 12.00% 15.60% What is the WACC for a firm with 40% debt, 20% preferred stock, and 40% equity if the respective costs for these components are 9.23% before tax, 12% after tax, and 18% before tax? The firm's tax rate is 35%. (Points : 5) Question 8.8. 9.48% 11.16% 12.00% 15.60% Based on the following information, make an estimate of the stock's beta: Month 1 = Stock +1.5%, Market +1.1%; Month 2 = Stock +2.0%, Market +1.4%; Month 3 = Stock 2.5%, Market 2.0%. (Points : 5) Beta is greater than 1.0. Question 9.9. Beta is less than 1.0. Beta equals 1.0. There is no consistent pattern of returns. Calculate the risk premium on stock C given the following information: risk free rate = 5%, market return = 13%, stock C beta = 1.3. (Points : 5) Question 10.10. 8% 10.4% 15.4% 16.9% If Treasury bills yield 6.0% and the market risk premium is 9.0%, then a portfolio with a beta of 1.5 would be expected to yield: (Points : 5) Question 11.11. 12% 17% 19.5% 21.5% An investor was expecting an 18% return on his portfolio with beta of 1.25 before the market risk premium increased from 8 to 10%. Based on this change, what return will now be expected on the portfolio? (Points : 5) Question 12.12. 20% 20.5% 22.5% 26% What is the beta of a company with an expected return of 12% if Treasury bills yield 6% and the market risk premium is 8%? (Points : 5) Question 13.13. 0.5 0.75 0.9 1.5 A stock's risk premium is equal to the: (Points : 5) expected market return times beta. Question 14.14. Riskfree return plus expected market return. expected market risk premium multiplied by beta plus the riskfree return. expected market risk premium times beta. If a project is expected to increase inventory by $17,000, increase accounts payable by $10,000, and decrease accounts receivable by $1,000, what effect does working capital have during the life of the project? (Points : 5) Increases NWC by $4,000. Question 15.15. Increases NWC by $5,000. Increases NWC by $6,000. Working capital has no effect during the life of the project. How does net working capital affect the NPV of a 5year project if working capital is expected to increase by $25,000 at end of 5 years and the firm has a 15% cost of capital? (Points : 5) NPV will increase by $9,322. Question 16.16. NPV will increase by $12,571. NPV will decrease by $25,000. NPV will decrease by $12,571. Question 17.17. Please consider the following information for the next 4 questions (Q17 Q20). TAMU Inc. is for sale and there is a price tag of $225,000. Your company, ABC, who is considering the purchase, has a beta of 1.5, the market is expected to have a 20% return and the risk-free rate is 5%. The forecasted free cash flows for the next 4 years for TAMU are 7000 (FCF1), 22000(FCF2), 0(FCF3), and 50000 (FCF4). The company is expected to grow at 4% indefinitely after that. Your company has a debt/equity ratio of 2/3 and the applicable tax rate is 35%. ABC's cost of debt (before taxes) is 8%. What is the cost of equity for ABC company? (Points : 5) 35% 30% 27.5% 22.5% Question 18.18. Continuing with the information from Q17, what is ABC's WACC? (Points : 5) 18.58% 19.70% 21.41% 15.88% Question 19.19. Continuing with the information from Q17, what is the terminal value for TAMUC Inc. after the 4th year (TV4)? (Points : 5) 342,935.53 254,769.21 269,106.57 356,652.95 Question 20.20. Continuing with the information from Q17, what is the NPV of purchasing TAMU Inc.? (Points : 5) positive 2,220.43 negative 2,220.43 positive 178,490.54 negative 178,490.54