Q1) A company currently has 1.75 billion shares outstanding. The company's stock currently is currently trading on the NASDAQ at $6/share. What is the market capitalization of this company?

$7.25 billion

$14 billion

$10.5 billion

$12 billion

$4.2 billion

Q2) You are currently considering purchasing shares of a stock. You expect the stock to pay dividends of $1.20 in year one, $3.00 in year two, and $4.05 in year three. You expect to sell the stock at the end of three years for $40. You require a return of 7%. How much should you pay for this stock?

31.59

35.67

45.11

42.05

39.70

Q3) A company has two types of stock: common and preferred stock. The preferred stockholders have not been paid for the last eight quarters. The firm's CEO wants to pay dividends to common shareholders. What must the firm's CEO do for the preferred shareholders before he/she can issue a dividend to the firm's common shareholders?

The CEO must repurchase all shares of preferred stock before issuing a dividend to common stockholders.

The firm must pay the entirety of the dividends owed to preferred stockholders before issuing a dividend to common stockholders.

The firm must issue additional shares to preferred shareholders before issuing a dividend to common stockholders.

The CEO must get preferred shareholder approval before issuing a dividend to common shareholders.

The firm must allow preferred shareholders the option to convert their shares to ordinary shares.

Q4) Shares of General Motors are currently trading at $5. The firm just paid a $0.50 dividend. You expect the dividend to increase at 4% annually. You require an 11% return before you will purchase shares. Should you purchase these shares and if so, how much would you be willing to pay at most per share of this stock?

Yes you should purchase shares of this stock. You should pay no more than $7.43 per share.

Yes you should purchase shares of this stock. You should pay no more than $9.50 per share.

Yes you should purchase shares of this stock. You should pay no more than $4.23 per share.

No you should not purchase shares of this stock. At $5, the market price per share is higher than the intrinsic value per share.

Yes you should purchase shares of this stock. You should pay no more than $12.37 per share.

Q5) A stock currently has a share price of $24. It just paid a $1.00 dividend. The dividend is expected to increase at 5% per year. What is the return on this stock?

8.46%

5.66%

9.38%

11.99%

13.19%

Q6) Google had a very recent dividend of $8.00. The dividend growth rate is 25% in year 1, 20% in year 2, and 8% afterwards. The required return on this stock is 10%. What is the intrinsic value (P0)?

809.05

706.11

689.61

554.55

543.69

Q7) Which of the following statements is not true?

IRR provides an indication of the rate of return for the firm on a given project

NPV identifies the value added to the firm if it accepts the capital budgeting project

The payback method accounts for the time value of money

NPV, IRR, and the payback method all allow us to compare capital budgeting projects to each other

Q8)

Year	Cash Flow
0	-200
1	100
2	60
3	80

Your discount rate is 8%. What is the NPV of this project?

23.98

-13.68

20.64

7.54

26.81

Q9)

Year	Cash Flow
0	-2000
1	600
2	800
3	600
4	700

What is the payback period of an investment with this stream of cash flows?

Q10) You just invested in a project which offers you the above cash flows. Your discount rate is 5%. What is the NPV of this project.

Year	Cash Flow
0	-5000
1	4000
2	2000

Q11) You are attempting to determine the internal rate of return on a project. If the cash flows are:

Year	Cash Flow
0	-900
1	200
2	500
3	500
4	500
5	500

What is the IRR of this project? Put your answer in decimal format and round to the nearest ten thousandth.

Q12) One of the drawbacks of the IRR method is that:

IRR does not consider the time value of money

IRR does not account for the scale of each project

IRR can only be used when we have all positive cash flows

IRR requires us to input a discount rate in order to be used

Q13) Monte Carlo simulation allows us to _____________________________.

determine what will happen if all of the variables in our analysis were set to some "bad" setting.

examine exactly how much a change in one variable will have on the change in another variable

create three to four equally likely scenarios and calculate the NPV in each scenario with accuracy.

predict the cash flow for each period during the lifetime of a project.

account for variation in multiple variables in order to determine the the expected NPV and probability distribution of the NPV would be for a project.

Q14) The reason we do not subtract depreciation from operating revenue to calculate free cash flow is because _________________________.

In finance, we only care about cash flows, not accounting fictions.

depreciation is impossible to accurately calculate.

depreciation reflects the time value of money

depreciation does not reflect the time value of money

Q15) You have three potential capital budgeting projects to invest in. If the payback method was the only method being used to select projects, what would be the payback period of the capital budgeting project you would select?

Year	Project 1	Project 2	Project 3
0	-1500	-2500	-4000
1	650	500	1000
2	450	1000	1000
3	200	2000	1600
4	200	2000	200
5	300	100	1000