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1) narrbegin: efn 1
narrend
what is smiths sustainable growth rate if the company has a dividend payout ratio of
75%?
a.21.70%
b.25.00%
c.17.44%
d.13.58%
2) roxy international has earnings per share of $4.05; just paid dividend $2.03 and
expects a roi next year (and the foreseeable future) of 15% what is the expected growth
rate?
a. 1.12%
b. 7.52%
c.25.00%
d. 7.48%
3) which of the following would fall under the definition of cannibalism as it applies to
capital budgeting?
a.if a firm offered a low-fat version of a current product and sales of that new product
were expected to reduce sales of the current version
b.the eating of the flesh of an animal by another animal
c.if a competitor were to offer a similar or identical product to one your company
already offers and this would lead to reduced sales of your product
d.both (a) and (c) are true
e.none of the above is true
4) which of the following does not apply to a partnership?
a.limited life
b.limited access to capital
c.a single owner
d.unlimited personal liability
5) the stock of alpha company has an expected return of 0.10 and a standard deviation
of 0.25. the stock of gamma company has an expected return of 0.16 and a standard
deviation of 0.40. the correlation coefficient between the two stocks return is 0.2. if a
portfolio consists of 40% of alpha company and 60% of gamma company, whats the
expected return of the portfolio?
a.0.126
b.0.136
c.0.160
d.0.130
6) you purchased a stock 6 months ago for $30 and the current price is $33. the firm is
about to pay its first dividend (ever) of $3 in a few days. you will pay a 40% tax rate on
dividends and a 20% tax rate on capital gains. what must the share price fall in order for
you to be indifferent between selling the shares before or after the ex-dividend date?
a.$.75
b.$1.00
c.$2.25
d.none of the above
7) a bond issued by the federal home loan bank or the federal home loan mortgage
corporation are examples of what type of bond?
a.treasury bond
b.corporate bond
c.municipal bond
d.agency bond
8) mclaughlin enterprises has an outstanding $1,000 par value bond with a 11% coupon
that pays at the end of each year. the bond matures in nine years. bonds of similar risk
have a required return of 10%. what is the market value of the mclaughlin bond?
a.$890.00
b.$1,053.35
c.$1,000.00
d.$1,057.59
9) which law mandated the separation of investment and commercial banking?
a.gramm-leach-bliley act
b.mcfadden act
c.glass-steagall act
d.none of the above
10) louis corporation finances its operations with $80 million in stock and $30 million
in bonds. if the firm issues $20 million in additional bonds and uses the proceeds to
retire $20 million worth of equity. what will be the firms new debt to equity ratio?
(assume zero taxes and perfect capital markets)
a.0.75
b.0.60
c.0.63
d.0.83
11) the npv method focuses on:
a.sales
b.accounting returns
c.profits
d.cash flows
12) economies of scale, economies of scope, and resource complementarities are all
a.sources of operational synergy
b.the main reasons for an acquisition
c.false pretenses for an acquisition
d.none of the above
13) bavarian sausage is expected to pay a $1.57 dividend next year and investors expect
that dividend to grow by 5% each year forever. if the required return on the stock
investment is 14%, what should be the price of the stock in 5 years?
a.$18.32
b.$22.28
c.$21.22
d.$17.44
14) you are planning your retirement and you come to the conclusion that you need to
have saved $1,250,000 in 30 years. you can invest into an retirement account that
guarantees you a 5% return. how much do you have to put into your account at the end
of every month to reach your retirement goal?
a.$1567.86
b.$1,501.94
c.$3,472.22
d.$2,526.27
15) the difference between current assets and current liabilities is known as:
a.working capital
b.net working capital
c.terminal capital
d.marginal capital
