QUESTION 1

1. Gyro Tech Corporation has a bond outstanding with a market price of $1,155.00.The bond has 2 years to maturity, pays interest semiannually, and has a yield to maturity of 9%.What is the bond's coupon rate?

A.

17.81%

B.

16.78%

C.

18.24%

D.

18.54%

E.

17.32%

F.

17.64%

QUESTION 2

1. America Inc. paid a dividend of $2.50 recently.It has maintained a dividend growth rate of 7% in the past and expects to maintain that indefinitely.How much is the stock worth if you want 12% rate of return?

A.

$45.00

B.

$53.50

C.

$55.75

D.

$47.50

E.

$42.50

F.

$50.00

QUESTION 3

1. Lowell Growth Inc. is a high growth company and expects to use all its earnings in the next five years to fund its growth.At the end of the sixth year, the company will pay a dividend of $4.50 and these dividends will grow at a constant rate of 5% per year thereafter.What is the stock worth if you require 16% rate of return?

A.

$47.48

B.

$42.95

C.

$19.48

D.

$23.98

E.

$29.48

F.

$38.47

QUESTION 4

1. New COM Inc. dividends have been growing at 6%, and this growth rate is expected to continue indefinitely.If the company just paid a dividend of $2.00 and its stock is selling at $30.00 per share, what is the required rate of return?

A.

13.1%

B.

12.7%

C.

17.1%

D.

14.8%

E.

15.3%

F.

6.7%

QUESTION 5

1. Bozo Inc. has a 10% coupon bond outstanding with 12 years to maturity.The bond makes semiannual coupon payments and is selling in the market for $966.33.It is issuing a new 12-year bond to finance a factory to make new Bozos.The new bond will also make semiannual coupon payments.What coupon rate should be set for this new bond if the company wants to sell it at par (i.e. for $1,000)?

A.

11.00%

B.

10.75%

C.

10.50%

D.

10.25%

E.

11.25%

F.

11.50%

QUESTION 6

1. Cod Oil Inc. plans to pay an annual dividend of $2.50 per share indefinitely.If you require a 12.5 percent rate of return, how much is this stock worth to you?

A.

$11.29

B.

$6.67

C.

$8.25

D.

$20

E.

$15

F.

$0.34

QUESTION 7

1. Shady Rack Inc. has a bond outstanding with 10 percent coupon, paid semiannually, and 15 years to maturity. The market price of the bond is $1,039.55. Calculate the bond's yield to maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly increases by 2% from your calculated YTM, what will be thepercent changein the market price of the bond?

A.

-14.01%

B.

-17.76%

C.

-16.39%

D.

-15.66%

E.

-14.87%

F.

-17.09%

QUESTION 8

1. Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 4-7, and $10 for the years 8-10.Thereafter, starting in year 11, the company will pay a constant dividend of $8/year forever.If you require 18 percent rate of return on investments in this risk class, how much is this stock worth to you?

A.

$37.77

B.

$34.54

C.

$55.99

D.

$41.46

E.

$50.50

F.

$45.68

QUESTION 9

1. Use the following information for this and the following question.

Chip Engineering Corporation (CEC) is designing a new type of chip.The net after-tax cash outlay on the design will be $17,000.The design will become obsolete after one year, and will be discarded at that time.CEC expects to sell chips based on this design for only one year.The cash flow generated by these new chip sales is uncertain.It has estimated the following probability distribution of after-tax cash flows from these sales for the next year:

Use the above information to answer the following questions.The tax rate is 35% and the cost of capital is 12%.

What is theexpectedvalue of the after-tax cash flows from this project?

A.

17,900

B.

18,000

C.

20,800

D.

16,000

E.

19,700

F.

22,000

QUESTION 10

1. What is thecoefficient of variationof after-tax cash flows?

A.

0.03

B.

0.38

C.

0.56

D.

0.12

E.

0.23

F.

0.63

QUESTION 11

1. Use the following information for Motion Research, Inc. (MRI) for this and the following two questions.

Sales

$200,000

Costs

$105,000

SG&A

$20,000

Depreciation

$16,000

Dividend paid

$6,000

Retained Earnings Added

$18,000

Total Assets

$85,000

Equity

$45,000

Tax Rate

35%

How much was the interest charge for MRI?

A.

$22,077

B.

$6,692

C.

$9,769

D.

$12,846

E.

$19,000

F.

$15,923

QUESTION 12

1. If the profit margin, total asset turnover, and dividend payout ratios for MRI remain unchanged, what is the internal growth rate it can achieve during the following year?

A.

26.87%

B.

30.77%

C.

37.10%

D.

34.92%

E.

32.81%

F.

28.79%

QUESTION 13

1. If MRI sales grow at theinternalgrowth rate during the following year, what will be the Total Debt Ratio at the end of the year?

A.

36.54%

B.

35.99%

C.

37.09%

D.

34.88%

E.

35.43%

F.

34.33%

QUESTION 14

1. Your uncle is 50 years old and is planning to retire at the age of 68.He found out that you are taking a finance course and has requested your help to figure out how much money he needs to put in the bank now so that he can withdraw $88,000 each year for 18 years starting at the end of the first year of retirement.Assume that he can earn 10 percent annual interest.How much should he deposit into this account. (Note: Answers are rounded)

A.

$179,350

B.

$163,050

C.

$173,240

D.

$118,010

E.

$125,390

F.

$129,810

QUESTION 15

1. VDA Inc. has current liabilities of $325,000.Its current ratio is 1.85 and the inventory turnover is 4.What is the value of VDA's cost of goods sold if the quick ratio is 1.5?

A.

$520,000

B.

$731250

C.

$487,500

D.

$650,000

E.

$568,750

F.

$455,000

QUESTION 16

1. You need $15,000 to make down payment for a house, but have only $4,000, which you can invest at 12% compounded annually.How many years will you have to wait to buy the house?

A.

14.20 years

B.

9.69 years

C.

7.72 years

D.

12.23 years

E.

16.17 years

F.

11.66 years

QUESTION 17

1. AB Lean has identified two mutually exclusive projects with the following cash flows.

Year

0

1

2

3

4

5

Cash Flow Project A

-52,000.00

25,000.00

17,000.00

14,000.00

12,000.00

9,000.00

Cash Flow Project B

-52,000.00

17,800.00

17,000.00

16,000.00

17,000.00

22,000.00

The company requires a 12.5% rate of return from projects of this risk.

What is the NPV of project A?

a.

5,972.87

b.

1,624.90

c.

5,180.35

d.

1,395.64

e.

972.57

f.

417.37

QUESTION 18

1. AB Lean has identified two mutually exclusive projects with the following cash flows.

Year

0

1

2

3

4

5

Cash Flow Project A

-52,000.00

25,000.00

17,000.00

14,000.00

12,000.00

9,000.00

Cash Flow Project B

-52,000.00

17,800.00

17,000.00

16,000.00

17,000.00

22,000.00

The company requires a 12.5% rate of return from projects of this risk.

What is the IRR of project B?

a.

13.05%

b.

13.90%

c.

14.68%

d.

20.80%

e.

12.06%

f.

12.94%

11.29%

QUESTION 20

1. The risk free rate is 5% and the return on an average stock is 8%. If Mahoney Imports has a beta of 1.2, what is the required rate of return on its equity?

9.20%

8.60%

10.40%

11.60%

11.00%

9.80%