Virgo Airlines will pay a $4 dividend next year on its common stock. Virgo Airlines dividend is expected to grow at 2% forever. The required rate of return on this investment is expected to be 4%. At what price should Virgo Airlines stock sell?

Select one:

a.$200

b.$204

c.$100

d.$3.85

The price at which the bond is traded in the stock exchange is called the _________________________.

Select one:

a.Market value

b.Face value

c.Maturity value

d.Redemption value

Which of the following statements on bonds BEST describes its purpose/function?

Select one:

a.Most bonds give bondholders a voice in the affairs of the corporation

b.Most bonds are money market securities

The estimated benefits from a project are expressed as cash flows instead of income flows because:

Select one:

a.It is simpler to calculate cash flows than income flows.

b.This is required by the Securities and Exchange Commission.

c.It is cash, not accounting income that is central to the firm's capital budgeting decision.

d.This is required by the Internal Revenue Service.

c.Most bonds are interest-bearing obligations of governments or corporations

d.Most bonds are floating-rate securities

If the Net Present Value of a project is negative then:

Select one:

a.The IRR is less than the cost of capital

b.The IRR is equal to the cost of capital

c.There is no way to estimate the IRR

d.The IRR is larger than the cost of capital

You are considering the purchase of a small business, Revive Consulting Limited. This company currently earns after-tax cash flow of $350,000 per year. On the basis of a review of similar risk investment opportunities, you must earn a 11% rate of return on the proposed purchase. What price should you pay for Revive Consulting Limited if the after-tax cash flows are expected to grow at an annual rate of 5% for the first two years, followed by a constant annual rate of 8% from year 3 onwards?

Select one:

a.$11,918,918.92

b.$10,801,610.96

c.$12,169,466.76

d.$14,535,765.89

Investors who require an increased compensation for increased risk have the following risk tolerance/preference:

Select one:

a.Risk Averse

b.Risk Neutral

c.Risk Afraid

d.Risk Seeking

You are considering investing after-tax cash benefits of US$6000 in a mature firm in the food and beverage industry.The firm's most recent common stock dividend was US$5.00 per share.Because of the firm's maturity and stable sales and earnings, firm's management feels that dividends will remain at the current level for the foreseeable future.If the required return on similar type shares is 7% what will be the value of five hundred (500) of the company's shares?

Select one:

a.$85,714.29

b.$71.43

c.$76.43

d.$35,715

You are considering investing after-tax cash benefits of US$6000 in a mature firm in the food and beverage industry.The firm's most recent common stock dividend was US$5.00 per share.Because of the firm's maturity and stable sales and earnings, firm's management feels that dividends will remain at the current level for the foreseeable future.If the required return on similar type shares is 7% what will be the value of five hundred (500) of the company's shares?

Select one:

a.$85,714.29

b.$71.43

c.$76.43

d.$35,715

Which of the following represents the correct formula for valuing a share with a growing dividend?

Select one:

a.

P0 = D1 x (1 + g) / (r - g)

b.P0 = D0 x (1 + g) / (r + g)

c.

P0 = D0 x (1 + g) / (r - g)

d.

P0 = D0 x (1 + g) / (r + g)

What is the price you should pay for a $1,000 face-value bond that has an 15% coupon rate when your required rate of return is 8%?

Select one:

a.More than its face value

b.Less than its face value

c.Equal to its face value

d.$1950

_______________________________ is a very simple measure used to assess risk. It calculates the difference between the most optimistic and most pessimistic returns for a particular financial asset.

Select one:

a.Covariance

b.Standard Deviation

c.Range

d.Correlation Coefficient

Whenever the __________________________ is less than zero the project should NOT be accepted

Select one:

a.Net present value

b.Modified internal rate of return

c.Internal rate of return

d.Profitability index

Which of the following items IS NOT INCLUDED in the Calculation for Initial Investment?

Select one:

a.Proceeds from Sale of Old Asset

b.Tax on Sale of Old Asset

c.Earnings Before Interest and Taxes

d.Cost of New Asset