HIGHLIGHT ANSWERS

Done Photo 1. The present value of a perpetuity can be determined by: A. Dividing the interest rate by the payment. B. Dividing the payment by the interest rate. C. Multiplying the payment by the interest rate. D. Multiplying the payment by the number of payments to be made. 2. What is the WACC for a firm using 55% equity with a required return of 15%, 35% debt with arequired return of896, 10% preferred stock with a required return of 10% and a tax rate of 35%? A. 11.70% B. 10.72% C. 11.07% D. 12.05% 3. How much must be invested today in order to generate a 5-year annuity of $1,000 per year, with the first payment 1 year from today, at an interest rate of 12%? A. $4,037.35 B. $3,604.78 C. $4,604.78 D. $3,746.25 4. The current ratio is a good proxy for a firm's: A. liquidity B. efficiency. C. leverage D. profitability