Multiple Choice- Need ASAP 25-30 mins?

Milano Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debtequity ratio of 30 percent and makes interest payments of $59,000 at the end of each year. The cost of the firms levered equity is 15 percent. Each store estimates that annual sales will be $1.66 million; annual cost of goods sold will be $850,000; and annual general and administrative costs will be $585,000. These cash flows are expected to remain the same forever. The corporate tax rate is 40 percent.

Use the flow to equity approach to determine the value of the companys equity.

A.	$1,889,000
B.	$1,984,000
C.	$1,876,000
D.	$1,992,000

A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 4.8 percent, and the interest rate is expected to be 4.3 percent. A stock has a beta of 2.5 on the percentage change in GNP and a beta of .71 on the interest rate.

If the expected rate of return on the stock is 11 percent, what is the revised expected return on the stock if GNP actually grows by 4.4 percent and the interest rate is 4.6 percent?

A.	9.79
B.	9.65
C.	8.56
D.	8.95

A stock has had returns of 17.52 percent, 12.36 percent, 6.36 percent, 27.82 percent, and 13.89 percent over the past five years, respectively.

What was the holding period return for the stock?

A.	54.32
B.	57.81
C.	54.58
D.	57.26

Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $173,000 received two years from today. Subsequent annual cash flows will grow at 3.3 percent in perpetuity.

What is the present value of the technology if the discount rate is 10 percent?

A.	2,347,354.14
B.	2,344,344.14
C.	2,343,334.14
D.	2,340,359.14

If Wilkinson, Inc., has an equity multiplier of 1.51, total asset turnover of 1.3, and a profit margin of 6.1 percent, what is its ROE?

A.	11.89
B.	11.82
C.	11.97
D.	11.65

What is the profitability index for an investment with the following cash flows given a 8 percent required return?

Year	Cash Flow
0	$-20,500
1	$7,300
2	$9,800
3	$8,800

A.	1.02
B.	1.06
C.	1.08
D.	1.10

Mullineaux Corporation has a target capital structure of 75 percent common stock and 25 percent debt. Its cost of equity is 14 percent, and the cost of debt is 8 percent. The relevant tax rate is 30 percent.

What is the companys WACC?

A.	10.50
B.	11.50
C.	10.80
D.	11.90

An investment offers $5,100 per year for 65 years, with the first payment occurring one year from now.

If the required return is 5 percent, what is the value of the investment today?

97,746.46

97,716.46

97,726.46

97,721.46