QUESTION NO 1

California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $35,000. What is California Retailings EBIT (operating Income)?

QUESTION NO 2

Goods Co has 120,000 common shares outstanding. it has Net Income of $6,000,000 and dividends of $2,000,000.

1. What are the earnings per share (EPS)?
2. What are the dividends per share?

Question NO 3

Polly Corporation issued 30-year bonds with a yield of 4.50%. the 30-year Treasury rate is 2.50%. Since there is no difference in Maturity between the Polly bonds and the Treasury Bonds, there is no maturity risk premium. If you know there is a Liquidity Risk premium of .10% for BF Monmouths bond, what is the Default Risk Premium?

QUESTION NO 4

If the 3-month Treasury Bill (i.e., the nominal risk-free rate of interest) is yielding 3.4% and inflation is 1.4%, what is the Real Risk-free Rate of interest?