No explanation need just choose the correct answer please from question 1 to 20:
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01. Which one of the following best expresses two mutually exclusive investments? A. Constructing a theatre and a restaurant side by side B. Locating a restaurant inside a theatre building C. Building either a gas station or a restaurant on a corner lot D. Building both a restaurant and a parking lot on a vacant lot 2. Max Ltd requires an average accounting return (AAR) of at least 30% on all fixed asset purchases. Currently, Max is considering some new equipment costing $112000. These assets will be fully depreciated in 3 years. The annual prot for the year (or period) from this project is estimated at $5600, 311 900 and $16 300 for the three years. Should you accept this project based on the accounting rate of return? Why or why not? A. Yes; because the AAR is less than 30%. 3. Yes; because the AAR is equal to 30%. C. Yes; because the AAR is greater than 30%. D. No; because the AAR is less than 30%. 3. You are considering an investment for which you require a rate of return of 9.6%. The investment costs $102000 and will produce cash inows of $37000 per year for three years. Should you accept this project based on its internal rate of return? Why or why not? A. Yes; because the IR is 4.35%. B. Yes; because the IR is 9.60%. C. Yes; because the IRR is 5.25%. D. No; because the IR is 4.35%. 4. The net present value ol'a project's cash inows is $3133.45 at a discount rate of 12%. and IRR is 4.5%. The protability index is l.l2 and the rm's tax rate is 34%. What is the initial cost of the project? A. $3621.46 B. $3373.95 C. $2887.00 D. $249134 5. A cost-cutting project will decrease costs by 532000 a year. The annual depreciation on the project's non-current assets will he $7900 and the tax rate is 31%. What is the amount of the change in the rm's operating cash ow treated by this project? A. $24111!) 1156212 C. $16629 D. 524529 6. Lawaki currently sells hula stain and hula shirts. Lan'alti is considering adding hula pants to his range. The hula pants sell for 527 each and he expects to sell 7500 units per year. By adding the hula pants. Lawaki feels that he will sell an additional 800 hula solo at $30 a pair and 300 fewer hula shirts at $12 each. The variable cost per unit is SN on the hula swims-1.50 on the hula shirts and $16 on the pants. The incremental annual depreciation expense related to the hula pants is Slell and the incremental annual xed costs related to the bula pants are 53-4000. The tax rate is 27%. What is the project's operating cash flow? A. $45 012.50 B. $54 6l2.50 C. $487?6.50 D. $62 212.50 7. The efficient markets hypothesis (EMH): A. acknowledges that some fairly sizeable inefficiencies will exist even in efficient markets, but only over the long-term. B. argues that markets which fluctuate noticeably from one day to the next cannot be efficient. C. suggests that an efficient market incorporates only about 90% of all public information into the market prices. D. advocates that all investments in an efficient market have a net present value of zero. 8. Based on the capital asset pricing model, a security that: A. has a beta of 1.0 should produce the risk-free rate of return. B. is over-priced will plot as a point below the security market line. C. is under-priced will plot as a point to the left of the overall market point. D. has a beta of 1.2 will plot as a point to the left of the overall market point. 9. A firm has a return on equity of 11.5% according to the dividend growth model and a return of 21.9% according to the capital asset pricing model. The market rate of return is 16.5%. What rate should the firm use as the cost of equity when computing the firm's weighted average cost of capital (WACC)? A. 12.4% because it is lower than 21.7% B. 18.7% because it is higher than 11.5% C. The arithmetic average of 1 1.5% and 21.9% D. The arithmetic average of 11.5%, 16.5% and 21.9% 10. Kau is an all-equity firm with a current cost of equity of 15.6%. The estimated earnings before interest and taxes are $236890 annually forever. Currently, the firm has no debt but is in the process of borrowing $356000 at 11.5% interest. The tax rate is 23.5%. What is the value of the unlevered firm? A. $356,000 B. $236,890 C. $1,518,525 D. $1,161,6721]. Manama has 1,400,500 shares outstanding at a price per share \"$32.40. The firm has decided to repurchase 50,000 ofthose shares in the open market. What will the price per share be after the share repurchase is completed? Ignore lanes and market imperfections. A. $33.59 B. $30.86 C. $32.40 D. $32.0.) 12. Bu]: Brothers wants to borrow 550000. The company has a policy to maintain an asset to equity ratio of 1.50 and has a residual dividend policy. The before tax earnings for the year that just ended were 5372000. The tax rate is 30%. How much dividends can But: Brothers pay from their annual earnings. A. $160400 B. $260400 C. $210,400 D. 5322.000 13. Lamu needs 5190000 for new investments next year. The company has a debt-equity ratio of 0.45 and has a residual dividend policy. The after-tax earnings for the year that just ended were 5254300. The tax rate is 24%. How much of their annual earnings will Lantu pay out in dividends? A. $64 300.00 B. $147 50000 C. $102 348.16 D. $123 265.51 014. Doss Taxis has a current share price 01' $2.26. For the past year. the company had prot for the year (or period) of $22 600'. total equity of $34 000. tasi revenue of$l4 out] and 25000 shares outstanding. What is the market-to- book ratio'.' A. 3.54 B. 2.26 C. 1.62 D. 1.46 Q15. If demand for trucks is 650 per year and ordering and holding costs are $3400 and $5960 respectively, assuming a constant rate of demand this order would last: a. 54 days b. 15 days c. 27 days d. 24 days. Q16. If Return on market is 15% and Risk free rate is 5%, which one of the following securities is undervalued? Alpha Beta Required Return A Security A 5 1.0 20.0% B. Security B 1.2 25.5% C. Security C 8 0.8 12.0% D. Security D 4 0.7 14.5% 17. Consider the following information on two securities: Expected Return Beta RB Patel 7.7% Market beta Flour Mills 6.2% .75 What is the risk-free rate if these securities both plot on the security market line? A. 0.75% B. 1.7% C. 7.7% D. 6.2%10. You own a $361000 portfolio that is invested in stock A and B. The portfolio beta is equal to the market beta. Stock A has an expected return of 22.6% and has a beta of 1.54. Stock B has a beta of 0.6T. What is the value of your investment in stock A? A. $233 312 B. $254390 C. $139 201'I D. $82 942 19. It Risk free rate is 6%. Return on market is l2% and Beta is 2, a portfolio performance of 18% is: A. a risk-adjusted market return B. 6% inferior C. 12% inferior D. 6% superior 20. Tahalelsa is proposing to undertake a scale expansion. It would cost $40 million and produce an expected cash ow of $8 million a year in perpetuity before tax. The tax rate is 34%. Tahaleka is nanced 40% by debt. The expected return on Tahaleluts's equity is 20% and the interest rate on its debt is 12%. What is the NW of the project using the weighted average cost ol' capital
