1. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r = 10.5%, and the expected constant growth rate is g = 7.2%. What is the stock’s current price?

1. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r = 10.5%, and the expected constant growth rate is g = 7.2%. What is the stock’s current price?

$25.68

$22.73

$27.50

$17.95

$22.05
1 points
Question 17
1. If D = $2.25, g (which is constant) = 3.5%, and P = $60, what is the stock’s expected dividend yield for the coming year?

3.80%

4.08%

4.58%

4.50%

3.88%
1 points
Question 18
1. Bay Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D = $1.25). The stock sells for $21.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?

5.34%

4.69%

5.44%

5.86%

5.01%
1 points
Question 19
1. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $8.00 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell?

$123.08

$99.69

$121.85

$148.92

$100.92
1 points
Question 20
1. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company’s beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company’s current stock price?

$24.86

$30.35

$28.90

$32.95

$28.61
1 points
Question 21
1. Nachman Industries just paid a dividend of D0 = $1.25. Analysts expect the company’s dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value?

$34.84

$35.69

$51.41

$37.81

$42.49
1 points
Question 22
1. A company’s perpetual preferred stock currently sells for $125.00 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm’s cost of preferred stock?

5.12%

5.46%

7.28%

6.74%

7.61%
1 points
Question 23
1. You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 16.75%. The firm will not be issuing any new stock. What is its WACC?

10.84%

11.73%

13.72%

11.06%

13.61%
1 points
Question 24
1. Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that if a project’s projected NPV is negative, it should be rejected.
WACC: 8.50%
Year 0 1 2 3
Cash flows -$1,000 $500 $500 $500
2.

$337.95

$277.01

$324.10

$335.18

$243.77
1 points
Question 25
1. Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information. (1) The firm’s noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,250.00. (2) The company’s tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock’s beta is 1.20. (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock. What is its WACC?

8.27%

9.46%

8.44%

8.19%

7.94%
1 points
Question 26
1. Warr Company is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC or negative, in both cases it will be rejected.
Year 0 1 2 3 4
Cash flows -$1,150 $400 $400 $400 $400
2.

14.66%

15.09%

15.83%

12.90%

12.31%
1 points
Question 27
1. Taggart Inc. is considering a project that has the following cash flow data. What is the project’s payback?
Year 0 1 2 3
Cash flows -$800 $500 $500 $500

1.26years

1.63years

1.22years

1.70years

1.60 years
1 points
Question 28
1. Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project’s MIRR? Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.
WACC: 10.75%
Year 0 1 2 3
Cash flows -$1,000 $450 $450 $450
2.

10.86%

14.48%

15.49%

15.20%

12.45%
1 points
Question 29
1. Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project’s discounted payback?
WACC: 10.00%
Year 0 1 2 3
Cash flows -$650 $500 $500 $500
2.

1.80years

1.47 years

1.69years

1.22years

1.52years
1 points
Question 30
1. Francis Inc.’s stock has a required rate of return of 10.25%, and it sells for $35.00 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D ?

$1.49

$1.12

$1.26

$1.71

$1.41