Question 1: If the value of a levered firm is $7million, what is the value of the same firm with all-equity financing:

a.$14million

b.$10 million

c.$5.5 million

d.$7 million

Question 2:Canada Goose expects to have the following data during the coming year. What is Canada Goose's expected ROE?

Aassets$400,00

Interest rate 4%

D/A 50%

Tax rate 25%

EBIT $38,000

a.8.50%

b.11.25%

c.3.75%

d.6.00%

Question 3: Air Canada is currently 100% equity financed. The CFO is considering a recapitalizationplan under which the firm would issue long-term debt with a yield of 13% and use the proceeds to repurchase common stock. The recapitalization would not change the company's total assets, nor would it affect the firm's basic earning power, which is currently 16%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would occur for sure if the company goes ahead with the recapitalizationplan)?

a.The company's net income would increase

b.The company's earnings per share would decline.

c.The company's cost of equity would increase.

d.The company's ROD would decline

Question 4: Staples Inc. is considering a project that has the following cash follow:

YeaCash flow

0CF0

1$2000

2.$3000

3$3000

4$1500

The project has a payback of 3.25 years, and the firm's cost of capital is 9%. What is the project's NPV?

a.$587.67

b.$635.91

c.$1480.09

d.$2231.67

Question 5: An Investor purchased 200 hares of Suncor at $40.00 and later sold his investment at $13.00. if the received $2.5 in dividends, what was his total dollar return?

a.$1300

b.$1800

c.-$1300

d.-$1800

Question 6: A mutual fundfocused on the financial servicessector has 3 different stocks in its portfolio( Royal Bank, BMO and CIBC). Royal Bank, BMO and CIBC'Sstock have betas of0.8,1,0 AND 1.2 respectively. The mutual fund invested one-third of its money equally in each stock. Each stock has standard deviation of 25% and their returns are independent of one another, i.e.,the correlation coefficients between each pair of stock is zero. If market is in equilibrium, which of the following is correct ?

a.The mutual fund'sexpected return is greater than the expected return of CIBC.

b.The mutual fund's expected return is equal to the expectedreturn on Royal Bank

c.The mutual fund'sexpected return is less than the expected return on BMO

d.The mutual fund's expected return is equal to the expected return on BMO