1. You are considering taking over one of your competitors. The competitor is projected to pay a dividend of $4.75 per share at the end of one year from now. The dividend is expected to grow by 2% by the end of year two and similarly every year thereafter. The appropriate risk adjusted discount rate is 10% per year. How much are you prepared to pay per share?

a.$59.38

b.$51.97

c.$61.88

d.$58.03

2.LIBOR notes are often sold in large denominations with a 90-day maturity, and their interest rate convention is based on a year with 360 days. What is the change in interest on a million-dollar face value LIBOR note with a 90-day maturity if the interest rate changes by one basis point?

a. $1,000

b.$100

c.$25

d.$250

e. it is not possible to generalize

3.If the expected return on the market is 12%, the riskless rate is 4%, the standard deviation of market returns is 25%, the standard deviation of the stock's returns is 35% and the correlation coefficient of returns between the market and the stock is 0.8, what is the expected return for this stock?

a.6.72%

b.11.50%

c.14.32%

d.None of the above.

e.12.96%

One of your companies that you are planning to sell paid a dividend today of $4.00 per share. It will pay a dividend at the end of the next year and at the end of every year thereafter, but the dividend per share is expected to grow at 4% per year. the appropriate risk adjusted discount rate is 10% per year. What is the value per share of your subsidiary?

a. $52

b.$58

c.$53.43

d.$$69.66