Which of the following statements is correct?

Two of the answer choices are correct.

If the constant growth rate of a stock is more than the required rate of return, the constant growth dividend discount model must be used to value the stock.

If the growth rate of a stock is nonconstant, we assume the growth rate is constant in computinga stock's value.

The constant growth dividend discount model may be used to value a stock if the stock's dividends are expected to grow forever at a constant rate which is less than the required rate of return on the stock.

None of the answer choices is correct.

Question 15 pts Stock owned by the organizers of the firm who have sole voting rights is convertible equity. common equity. retained earnings. founders' shares. preferred stock. Flag this Question Question 25 pts Which of the following statements is correct? Two of the answer choices are correct. If the constant growth rate of a stock is more than the required rate of return, the constant growth dividend discount model must be used to value the stock. If the growth rate of a stock is nonconstant, we assume the growth rate is constant in computinga stock's value. The constant growth dividend discount model may be used to value a stock if the stock's dividends are expected to grow forever at a constant rate which is less than the required rate of return on the stock. None of the answer choices is correct. Flag this Question Question 35 pts The net income that firm earns can either be paid out to shareholders as ____ or can be reinvested in the company as ____. interest; additional paid-in capital interest; retained earnings dividends; retained earnings shares; capital stock. capital gains; additional paid-in capital Flag this Question Question 45 pts With regard to earnings and assets, owners of preferred stock have priority over none of those listed. bond holders. debt holders. all of those listed. common stockholders. Flag this Question Question 55 pts If the expected rate of return on a stock exceeds the required rate, The company is probably not trying to maximize price per share. Dividends are not being declared. The stock should be sold. The stock is experiencing supernormal growth. The stock is a good buy. Flag this Question Question 65 pts Shareholders exert control of the management of the firm by None of the answers shown. running the daily operations of the firm. buying shares in an initial public offering (IPO) at a discounted price. electing board members who can replace management. directly replacing management with themselves. Flag this Question Question 75 pts The price at which a stock sells in the market is the market price (market value). theoretical value. intrinsic value. dividend yield. capital gains yield. Flag this Question Question 85 pts Suppose you are willing to pay $30 today for a share of stock which you expect to sell at the end of one year for $32. If you require an annual rate of return of 12 percent, what must be the amount of the annual dividend which you expect to receive at the end of Year 1? $3.00 $2.25 $1.95 $1.60 $1.00 Flag this Question Question 95 pts NYC Company has decided to make a major investment. The investment will require a substantial early cash outflow, and inflows will be relatively late. As a result, it is expected that the impact on the firm's earnings for the first 2 years will cause a negative growth of 5 percent annually. Further, it is anticipated that the firm will then experience 2 years of zero growth, after which it will begin a positive annual sustainable growth of 6 percent. If the firm's required return is 10 percent and its last dividend, D0, was $2 per share, what should be the current price per share? $32.66 $38.47 $42.49 $47.83 $53.64 Flag this Question Question 105 pts Blow Glass Corporation has 100,000 shares of stock outstanding, each with a par value of $2.50 per share. Blow Glass also has another 400,000 shares of stock that are shelf registered. Blow Glass has retained earnings of $9,000,000 and additional paidin capital of $1,000,000. What is Blow Glass's book value per share? $92.50 $100.00 $27.50 $90.00 $102.50 Flag this Question Question 115 pts The last dividend paid by Klein Company was $1.00. Klein's growth rate is expected to be a constant 5 percent for 2 years, after which dividends are expected to grow at a rate of 10 percent forever. Klein's required rate of return on equity (rs) is 12 percent. What is the current price of Klein's common stock? $42.25 $33.33 $58.75 $50.16 $21.00 Flag this Question Question 125 pts If a stock is completely riskless, its beta would be negative. above 1.0. positive. equal to zero. below 1.0. Flag this Question Question 135 pts Which of the following statements is TRUE? A change in a security's beta coefficient affects the require rate of return for the security but will not affect the price of the security. As the risk aversion of average investors increase, the market risk premium will generally decrease. None of the statements is true. A change in expected inflation may affect both the required rate of return on a security and the price of the security. The market risk premium is not affected by the degree of aversion that the average investors have to risk. Flag this Question Question 145 pts When using the capital asset pricking model (CAPM) to determine a stock's appropriate risk premium, compare the stock's price with several comparable stock and compute an average. multiply the market risk premium by the stock's beta. None of the answers shown. average the inflation premium for the past five years. multiply the stock's price by the inflation premium. Flag this Question Question 155 pts Longstead Corporation has a 2.0 beta. The riskfree rate is 10 percent. The required rate of return on an average stock is 15 percent. Now the expected rate of inflation built into the riskfree rate declines by 3 percentage points. The real riskfree rate remains constant. The required rate of return on the market declines to 11 percent, and the beta remains constant. When all of these changes are made, what is the required rate of return on Longstead's stock? 16% 18% 15% None of those shown 23% Flag this Question Question 165 pts Benefits of the NPV method include which of the following? All of these shown are benefits of the NPV method. The NPV method allows the identification and acceptance of projects having a positive NPV. The NPV method allows the identification and elimination of projects having a negative NPV. The NPV method considers the time value of money. The NPV method allows the comparison of mutually exclusive projects. Flag this Question Question 175 pts Net present value is preferred to internal rate of return for capital budgeting decisions because the internal rate of return does not allow you to determine if the project is acceptable. NPV contains information about a projects "safety margin" which is not inherent in IRR. the net present value allows you to compare mutually exclusive projects. the internal rate of return for a project is different for each firm. the net present value is the only method that allows you to determine which independent project is acceptable. Flag this Question Question 185 pts If the calculated NPV is negative, then which of the following must be true? The discount rate used is too high. The project should be accepted. The discount rate used is too low. The project should not be accepted. The discount rate used is equal to the internal rate of return. Flag this Question Question 195 pts When Richard evaluated a capital budgeting projecta new machine needed to manufacture inventoryusing his firm's required rate of return, he discovered that the project's net present value (NPV) is negative. Based on this information, which of the following must be correct? The project's internal rate of return is also negative. The project's traditional payback period must be greater than the maximum payback period that the firm has established. None of the answers shown. The project should not be accepted. As long as the new machine's initial investment outlay is fairly low, the firm should purchase it if is used to replace an older machine that is required to produce inventory. Flag this Question Question 205 pts Which of the following is TRUE? Choosing a project with a positive NPV may not improve the position of the stockholders because the firm's value may not increase. Choosing a project whose IRR exceeds the firm's required rate of return (cost of funds) always maximizes stockholders' wealth but may not actually increase stockholders' wealth. The IRR method of capital budgeting is generally preferred over the NPV method because IRR always leads to investment decisions that maximize wealth. The NPV method of capital budgeting is generally preferred over the IRR method because the NPV method leads to investment decisions that accomplish the goal of maximizing shareholders' wealth whereas IRR could lead to investment decisions that increase wealth but do not maximize wealth. A project with a lower IRR would NEVER be preferable to one with a higher IRR. Flag this Question Question 215 pts Financial Calculator Section The following question(s) may require the use of a financial calculator. Given the following net cash flows, determine the aproximate IRR of the project, rounded to the nearest percengage: Time 0 1 2 3 Net cash flow $1,520 1,000 1,500 500 28% 36% 32% 20% 24% Flag this Question Question 225 pts The Bronx Corporation is considering an investment that will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's required rate of return is 10 percent. Assume cash flows occur evenly during the year, 1/365th each day. What is the payback period for this investment? 6.12 years 4.35 years 4.86 years 5.23 years 4.00 years Flag this Question Question 235 pts Financial Calculator Section The following question(s) may require the use of a financial calculator. You are the capital budgeting director for Stoffer Company and must evaluate the feasibility of a new project. The project has a net cost of $5 million in Year 0 (today), and it will provide net cash inflows of $1 million at the end of Year 1, $1.5 million at the end of Year 2, and $2 million at the end of Years 3 through 5. Within what range is the project's IRR? 16-17% 15-16% 18-19% 14-15% 17-18% Flag this Question Question 245 pts A company uses a specific financing source, such as bonds, to finance a particular project. The cost of capital the company would use for capital budgeting purposes would be the cost of issuing preferred stock. only the cost of common equity. none of those shown. the weighted average cost capital (WACC). only the cost of capital for the specific financing source (i.e., bonds). Flag this Question Question 255 pts Sims Manufacturing Company finances its projects with 40 percent debt, 5 percent preferred stock, and 55 percent common equity. The company's marginal tax rate is 40 percent. Sims Manufacturing Company's before tax cost of debt is 10 percent, and its after tax cost of debit is 6 percent. It's cost of preferred stock is 12 percent, and its cost of common equity is 15 percent. What is the weighted average cost of capital (WACC) for Sims Manufacturing Company? none of those shown 11.25% 12.85% 10.45% 10.67% Flag this Question Question 265 pts Operating breakeven analysis is used to determine the point at which sales will cover only administrative and selling expenses. none of those shown. all costs plus a profit. operating fixed costs. operating costs. Flag this Question Question 275 pts The operating breakeven point can be stated in terms of none of those shown. only total sales dollars but not total units of product. the profit margin. only total units of product but not total sales dollars. total units of product or total sales dollars. Flag this Question Question 285 pts Breakeven analysis can be used to study the effects of a general expansion in the level of the company's operations. analyze the consequences of the investment in new fixed equipment when modernizing or expanding. evaluating the benefits or consequences of investing in a new product line or a new project. determine how large the sales of a new product must be for the company to be profitable. All of the answers shown. Flag this Question Question 295 pts If a company is operating at its operating breakeven point, profit must be greater than zero. total fixed costs must be less than total variable costs. None of those shown. total revenues must be greater than total cost. total revenues are equal to total cost. Flag this Question Question 305 pts Seth, Inc. isplanning to sell 50,000 flashlights. Variable costs are $2.50 per flashlight, and operating fixed costs total $100,000. At what price must each flashlight be sold to achieve an operating profit (EBIT) of $90,000? $4.20 $4.50 $6.30 None of those shown $3.80 Flag this Question Question 315 pts Enterprise Company produces clocks that sell for $20 each. Variable costs per unit are $16, and fixed operating costs total $24,000. What is the operating breakeven point in sales units? Not enough information to compute the answer 1,500 units 6,000 units 667 units 1,200 units Flag this Question Question 325 pts Enterprise Company produces and sells clocks. Variable costs per unit are $16, and fixed operating costs total $24,000. The clocks sell for $20 each. At the operating breakeven point, what is the amount of total variable costs in dollars? Not enough information to compute the answer $24,000 $10,672 $96,000 $19,200