You are analyzing a project and have developed the following estimates. The
depreciation is $14,800 a year and the tax rate is 35 percent. What is the base case
operating cash flow?
A. $18,770
B. $18,972
C. $21,433
D. $21,690
E. $22,410
Fiddlers Music Stores stock has a risk premium of 9.6 percent while the inflation rate is
4.1 percent and the risk-free rate is 3.9 percent. What is the expected return on this
stock?
A. 12.3 percent
B. 12.7 percent
C. 13.5 percent
D. 13.7 percent
E. 16.5 percent
Given the following information, what is the variance of the returns on this stock?
A. 0.021387
B. 0.021449
C. 0.021506
D. 0.021538
E. 0.0215641
Julie is borrowing $12,800 to purchase a car. The loan terms are 36 months at 7.5
percent interest. How much interest will she pay on this loan if she pays the loan as
agreed? Round your answer to the nearest whole dollar.
A. $1,338
B. $1,414
C. $1,459
D. $1,506
E. $1,534
Precision Engineering invested $110,000 at 6.5 percent interest, compounded annually
for 4 years. How much interest on interest did the company earn over this period of
time?
A. $2,481.25
B. $2,911.30
C. $3,014.14
D. $3,250.00
E. $3,333.33
Green Woods sells specialty equipment for mountain climbers. Its sales for last year
included $238,000 of tents and $411,000 of climbing gear. For next year, management
has decided to sell specialty sleeping bags also. As a result of this change, sales
projections for next year are $264,000 of tents, $426,000 of climbing gear, and $51,000
of sleeping bags. How much of next years sales are derived from the side effects of
adding the new product to its sales offerings?
A. $0
B. $20,500
C. $41,000
D. $51,000
E. $82,000
A firm earns $0.18 in profit for every $1 of equity in the firm. The company borrows
$0.60 for every $1 of equity. What is the firms return on assets?
A. 8.85 percent
B. 11.25 percent
C. 25.15 percent
D. 26.07 percent
E. 28.33 percent
Spiral Staircase is offering preferred stock which is commonly referred to as 10-10
stock. This stock will pay an annual dividend of $10 a share starting 10 years from now.
What is this stock worth to you today if you desire a 15 percent rate of return?
A. $16.70
B. $18.95
C. $19.63
D. $20.52
E. $20.94
Which one of the following firms is most apt to have the shortest inventory period?
A. General merchandise retail store
B. Hardware store
C. Furniture store
D. Locomotive manufacturer
E. Delicatessen
Healthy Snacks, Inc. has a target capital structure of 55 percent common stock, 5
percent preferred stock, and 40 percent debt. Its cost of equity is 14.3 percent, the cost
of preferred stock is 8.9 percent, and the pretax cost of debt is 8.1 percent. What is the
companys WACC if the applicable tax rate is 35 percent?
A. 9.29 percent
B. 9.61 percent
C. 10.34 percent
D. 10.43 percent
E. 10.83 percent