multiple choice to answer
9/ Lets assume that the company issues $5,000 of debt at an interest rate of 10% and repurchases 500 shares. Assuming that the operating income does not change, what will be the impact on return per share a) It will increase b) It will decrease c) It will not change d) There is not enough information 10/ Keeping this assumption ($5,000 debt at 10% interest and $5,000 equity), what operating income will make the return per share equal to 15%? a) $750 b) $1,250 c) $1,500 d) $2,000 11/ You are an investor and the company's that you have invested in company ABC) generates a yearly return on of 10% from its assets. At the same time, you have spotted an opportunity in the market where an investment at $1000 would generate $120 per annum. Keeping this in mind, what is your preference lignoring tones): a) Receive dividends from company ABC Have company ABC's managers repurchase stock cl Have company ABC's manager retain the earnings dj You are indifferent between A and 3 - though against 12/ Assume that you are an investor and that you are about to invest in a company. The company can borrow money for an interest equal to 10%, while you can personally borrow money for 12%. After investing would you encourage the company to borrow. a) Yes, borrowing will generate e value b) Yes borrowing will boost my HOE No, I can borrow myself at a cheaper rate d) I am indifferent 5/ 1 yr US treasuries have a yield to maturity of 2%. Moreover, securities that fully represent the market have a yield of 3%. Assume that company XYZ has a beta of 1.5. What is the company's cost of equity (Re): a) 2.5% b) 3.0% c) 3.5% d) 4,0% 6/ You are the manager of company wXY and you have to allocate the yearly earnings Assuming that your sele objective is to focus on the company's stock price. Would you: a) distribute the earnings as dividends b) Repurchase stocks c) Pay half as dividends and distribute half dit does not matter since they will impact the shares price in the same way Assume that you are running a company that has the following features: Number of Shares: Price per Share: Market Value of Shares: Operating Income: 1,000 $10 $10,000 $1,500 7/ What are the company's earnings per share: a) $0.50 b) $1.00 c) $1.50 d) $2.00 8/ What is the company's return per share a) 5% b) 10% c) 15% d) 20% 9/ Lets assume that the company issues $5,000 of debt at an interest rate of 10% and repurchases 500 shares. Assuming that the operating income does not change, what will be the impact on return per share a) It will increase b) It will decrease c) It will not change d) There is not enough information 10/ Keeping this assumption ($5,000 debt at 10% interest and $5,000 equity), what operating income e will make the return per share equal to 15%? a) $750 b) $1,250 c) $1,500 d) $2,000 11/ You are an investor and the company's that you have invested in company ABC) generates a yearly return on of 10% from its assets. At the same time, you have spotted an opportunity in the market where an investment of $1000 would generate $120 per annum. Keeping this in mind, what is your preference lignoring tones): a) Receive dividends from company ABC Have company ABC's managers repurchase stock c) Have company ABC's manager retain the earnings d) You are indifferent between A and 3 - though against 12/ Assume that you are an investor and that you are about to invest in a company. The company can borrow money for an interest equal to 10%, while you can personally borrow money for 12%. After investing, would you encourage the company to borrow. a) Yes, borrowing will generate value b) Yes borrowing will boost my HOE No, I can borrow myself at a cheaper rate d) I am indifferent Multiple Choice Questions - 24 Points 1/ Company ABC has $100 Millions of Assets and $70 Millions of Liabilities. Moreover, the company has 15 Million Shares Outstanding Company ABC's stock trades at $20 per share. What is the shares P/B ratio ? a) 5 b) 10 c) 15 d) 20 2/ The same year, company had earnings of $7,500,000. What is the company's P/E ratio ? a) 10 b) 20 c) 30 d) 40 3/ Company ABC has a cost of debt equal to Ex. Moreover, its cost of equity is 9% while the corporate tax rate is equal to 30%. What is the company's WACC (round to 2 decimals)? a) 5,64% b) 5,68% C) 5,72% d) 5,74% 4/ Company ABC is about to invest in a pipeline project. In order to finance the project, the company aims at borrowing $5 million, while issuing $5 million worth of common stock. What is the WACC of the project? a) 5.5% by 6% c) 6.9% d) 7,8%
