The answers to the following questions are provided please show the work on how to get the answer, and how to solve and set up the problems:

1:A 2:C 3:D 4:A 5:D 6:D 7:E 8:E 9:B 10:B

1) A new project will allow you to sell a new product at $60 each. Variable costs are $40 each and fixed costs would run $32,000 per year. If there is no initial investment required, how many units would you have to sell annually to break-even (aka the accounting break-even quantity; and also the cash break-even point)? Answer:A

a) 1,600

b) 2,000

c) 2,350

d) 4,250

e) 6,000

2) A new project will allow you to sell a new product at $60 each. Variable costs are $40 each and fixed costs would run $32,000 per year. If there is an initial investment required of $60,000 and the project has a four year life (no salvage), how many units would you have to sell annually to break-even including the recovery of initial investment. (aka the accounting break-even quantity)? Answer:C

a) 1,600

b) 2,000

c) 2,350

d) 4,250

e) 6,000

3) You purchased a share of common stock at $25.00. One year later, after having received a dividend of $1.00, you noted the stock price was $30.00. What is your approximate return on this stock for the year? Answer:D

a) 2.0%

b) 2.4%

c) 20.0%

d) 24.0%

e) 30.5%

4) The stock of Bingo Corp has an expected return of 10% and Luigi Corp has an expected return of 15%. If you put 40% of your money in Bingo and 60% in Luigi, what is your expected return for your portfolio? Answer:A

a) 13.0%

b) 13.9%

c) 14.2%.

d) 15.0%

e) 52.6%

5) Grand Inc. has a stock beta of 1.2 and Mega Inc. has a stock beta of 2.60. If you put 40% of your money in Grand and 60% in Mega, what will be the beta of your portfolio? Answer:D

a) 1.09

b) 1.56

c) 1.74

d) 2.04

e) 3.20

6) Bando Parts is considering a new project. They believe that the project has a beta of 1.9. The T-bill rate is 4% and the S&P 500 return (which represents market) is 11%. What is the appropriate return on the new project? Answer:D

a) 4.0%

b) 11.50%

c) 16.0%

d) 17.3%

e) 23.0%

7) Abacus Corp is currently priced at 15.00 per share. They just paid their annual dividend of $1.44. They have been experiencing growth in dividends of 2.6% and expect this to continue. What is the firms cost of equity (dividend growth model)? Answer:E

a) 4.00%

b) 7.58%

c) 9.06%

d) 10.02%

e) 12.45%

8) Sportique Inc. has a stock beta of 1.7. The 10 year treasury bond currently yields 3.9% and analysts believe the S&P 500 should yield about 12% in the future. What is the companys cost of equity using this information? Answer:E

a) 4.59%

b) 7.42%

c) 11.04%

d) 13.62%

e) 17.67%

9) Braun Products only debt is an issue of 6.9% coupon bonds; face value $1,000, with semiannual payments. The issue is currently trading at 95.54. The bonds mature in 5 years. What is the cost of debt for the company? Answer:B

a) 4.0%

b) 8.0%

c) 6.9%

d) 9.5%

e) 2.7%

10) Startup Enterprises plans on paying no dividend for 5 years. Starting in Year 6 the expectation is that dividends will begin at $2.00 share and grow each year at a rate of 4%. What is the current value of the stock if investors require a return of 10% for this type of company? ANS:B a) $ 12.60

b) $ 20.70

c) $ 33.33

d) $40.82

e) $1,104.47