Question
Question 1 2.5 pts The College Board reports that the average cost of tuition and room for in-state public universities is $15,442 for the 2010-2011
Question 12.5 pts
The College Board reports that the average cost of tuition and room for in-state public universities is $15,442 for the 2010-2011 school year. This annual education cost is projected to increase 6.6% annually. How much should you expect to pay for just the freshman year of college if your child begins in 12 years (2026-2027)?
Group of answer choices
$32,674.31
$32,780.47
$33,249.87
$27,672.06
Flag question: Question 2
Question 22.5 pts
You have just won the lottery and have the option of receiving $1 million today or $100,000 per year for 20 years. What is your recommendation assuming a 9% discount rate? What is your recommendation assuming a 7% discount rate?
Group of answer choices
Take the $100,000 annuity payout in either discount rate scenario
Take the $1 million payout in either discount rate scenario
Take the annuity payout if 9% is the discount rate; take the $1 million payout if the discount rate is 7%
Take the $1 million payout if 9% is the discount rate; take the annuity payout if 7% is the discount rate
Flag question: Question 3
Question 32.5 pts
Fairway Golf Corporation has a beta of 1.2. If the three-month Treasury bills currently yield 2.9 percent and the market risk premium is estimated to be 5.2 percent, what is Fairways cost of equity capital?
Group of answer choices
5.66%
8.68%
8.10%
9.14%
Flag question: Question 4
Question 42.5 pts
Your firm has two project options and projects the following for Project A: Net investment is $75,000 and the end-of-year cash flows are as follows:
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 |
+20,000 | -10,000 | -25,000 | +30,000 | +40,000 | +50,000 | +80,000 |
If his required rate of return is 12%, based on the projected cash flows, which of the following valuation techniques should he rely on?
(1) Profitability Index
(2) NPV
(3) Payback
(4) EVA
Group of answer choices
2 only
1, 2 and 3
1, 2 and 4
1 and 2
Flag question: Question 5
Question 52.5 pts
Given a security with an expected return of 12.5% and a standard deviation of 18.6%, which of the following most closely describes the range of return you would expect 95% of the time?
Group of answer choices
-24.7% to 49.7%
12.5% to 18.6%
-6.1% to 31.1%
-43.3% to 68.3%
Flag question: Question 6
Question 62.5 pts
The ABC Company, Inc. expects to pay a dividend of $1.50 at the end of the year. The dividend last period was $1.43, and the growth rate from this past year is expected to continue into the future. Given that the market rate of return is 10.2%, what is the approximate price that shares of ABC should be priced at by the market (based on the dividend discount model)?
Group of answer choices
$26.96
$28.28
$29.54
$27.11
Flag question: Question 7
Question 72.5 pts
What is the correlation coefficient if security A has a standard deviation of 15.5%, security B has a standard deviation of 26.6%, and the covariance is 1.4%?
Group of answer choices
0.06
0.29
0.42
0.34
Flag question: Question 8
Question 82.5 pts
You are considering an investment in a security with a beta of 1.4. Which of the following return on investments (ROIs) should your client earn?
Group of answer choices
ROI equal to the risk-free rate plus 140% of the overall markets risk premium.
ROI equal to the risk-free rate plus the overall markets risk premium.
ROI equal to 3-month Treasury Bill rate of return (i.e., risk-free rate).
ROI equal to the risk-free rate plus 60% of the overall markets risk premium.
Flag question: Question 9
Question 92.5 pts
Financial intermediaries serve an important role in each of the following ways except for:
Group of answer choices
introduce financial innovations that improve transfer of funds
establish consumer protection laws
reduce the amount of asymmetric information between savers and users of capital
match savers and users of capital and promote funds transfer
Flag question: Question 10
Question 102.5 pts
Which of the following quantitative statistics is most appropriate for describing the total risk of a security or project in isolation (i.e., not in a portfolio context)?
Group of answer choices
beta
standard deviation
covariance
coefficient of variation
Flag question: Question 11
Question 112.5 pts
If your parents paid $180,000 for their residence 18 years ago and it is worth $420,000 today, what is the compounded annual yield on their home investment?
Group of answer choices
5.56%
4.82%
13.33%
7.65%
Flag question: Question 12
Question 122.5 pts
Radiant Company has issued a secondary offering and receives a net price of $26.50 per share. What is the implied cost of capital from the transaction given the fact that Radiant Company will pay a dividend of $2.10 per share at the end of the period, and dividends are expected to grow at a rate of 4.50% annually?
Group of answer choices
3.43%
10.08%
8.09%
12.42%
Flag question: Question 13
Question 132.5 pts
You have just paid $175,000 for an low risk investment with an expected compound annual return of 1.8%. How much will the investment be worth in 10 years?
Group of answer choices
$212,356
$207,900
$175,000
$209,178
Flag question: Question 14
Question 142.5 pts
Which of the following red flags would you find using the DuPont formula?
(1) Increased financial leverage
(2) Deteriorating profit margin
(3) Increasing Tax liabilities
(4) Deteriorating Turnover
Group of answer choices
1 and 3 only
1, 2, 3, and 4
1 and 2 only
1, 2, and 4
Flag question: Question 15
Question 152.5 pts
You have been taught that in order to expect higher returns, you need to accept increased risk. In describing this concept, what is the correct ranking of asset securities from probable least market-price volatility, lowest expected return to probable highest market-price volatility, highest expected return:
(1) Large Cap Value stock fund,
(2) Long-term Treasury/Sovereign Bonds
(3) Preferred Stock portfolio,
(4) Emerging-market mutual fund,
(5) Money market fund.
Group of answer choices
2, 3, 5, 4, 1
5, 3, 2, 1, 4
5, 2, 3, 1, 4
3, 5, 2, 4, 1
Flag question: Question 16
Question 162.5 pts
What is the return on investment (or Return on assets) for a firm that has a debt ratio of 0.65, a net profit margin of 6.5%, sales of $740,000, and a total asset turnover of 4?
Group of answer choices
6.5%
26%
16.9%
4.6%
Flag question: Question 17
Question 172.5 pts
Which of the following ratios would best be used to assess the performance of company management in increasing shareholder wealth?
Group of answer choices
Gross Profit Margin
Dividend Yield
Plowback Ratio
Return on Equity
Flag question: Question 18
Question 182.5 pts
Branjolena Corp has been growing 12% annually over the last 5 years, and the companys dividends have reflected a 20% payout rate. However, the company is starting to mature, and its ROE is projected to drop from 15% to 12%. As a result, the company is planning to increase its payout to 30%. If the most recent EPS was $3.09, what is the projected EPS and Dividend?
Group of answer choices
$3.21; $.64
$3.50; $1.05
$3.35; $1.00
$3.46; $1.04
Flag question: Question 19
You are considering the purchase of some rental property. The cost of an apartment building is $700,000. The projected annual net cash flows at the end of years 1-4 are $50,000, $53,000, $56,000, and $60,000 respectively. At the end of year four you expect to sell the property for $740,000 after commissions. If the cost of capital is 10%, what is the NPV for this project?
Group of answer choices
-$527,690
$28,207
-$68,210
-$22,259
Flag question: Question 20
Question 202.5 pts
Which of the following is not consistent with the Certainty Equivalent Approach when dealing with project risk?
Group of answer choices
It is based on the guaranteed amount that an investor would accept as an alternative
It uses the Risk Free Rate (rf) to discount the cash flows
It uses the firms Cost of Capital (k) to discount the cash flows
The cash flows are adjusted in the numerator
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