Multiple Choice (1 pt. each) 1) What is a disadvantage of using traditional NPV analysis for capital budgeting? a) It ignores the time value of money b) It ignores some future cash flows c) It doesn't adjust for the riskiness of a project d) It ignores real options e) It ignores sunk costs f) Other, specify. 2) A bond with face value $1000 pays a 6% coupon annually, on December 31. Assuming the appropriate discount rate is 6%, what is the "dirty" or "full" price of the bond 2/3rds of the time thru the year (on August 31)? a) S970 b) S1000 ) $1030 d) $1040 e) $1060 f) Other specify. 3) Roller Inc. has just paid an annual dividend of $0.61. Analysts expect dividends to grow by 8% per year for the next 9 years, and then by 2% per year thereafter. The company has a required return of 12%. Approximately what should the current stock price be? a) $8 b) $9 c) $10 d) $12 e) $14 f) Other, specify 4) A stock had returns of 8%, 14%, and 2% for the past three years. Assuming these annual returns are normally distributed, what is the probability that this stock will earn at least 20% in any one given year? a) 0.5% b) 1.0% c) 1.5% d) 2.5% e) 5.0%