1) choc-lattes corp. earned $5.00 per share in 2006, and paid a dividend of $2.00 per
share. if it earns $5.50 in 2007 and follows a constant nominal payout policy, its
dividend will be
a.$3.30
b.$3.00
c.$2.20
d.$2.00
2) the date on which all the stockholders are determined that are eligible to receive a
dividend is called the . . .
a.announcement date
b.date of record
c.payment date
d.none of the above
3) which of the following statements is true regarding trading and transactions costs?
a.as long as share issues are costless, investors are indifferent about whether to receive
returns in the form of capital gains or as cash dividends on shares
b.if issuing securities entails large costs, both corporations and stockholders should
prefer a full-retention strategy regarding dividends
c.if investors find creating homemade dividends too costly, they would not be willing to
pay a premium for stocks that habitually pay dividends
d.all of the above statements are true
e.only statements (a) and (b) are true
4) transmetro incorporated has ebit of $1 million for the current year. on the firm
balance sheet, there is $6 million of debt outstanding that carries a coupon rate of 15
percent. investors seek a return of 20 percent on the firm, and the firm has a corporate
tax rate of 40%. what is the present value of the firms tax shields?
a.$2,000,000
b.$2,200,000
c.$2,400,000
d.$2,700,000
5) the irr method focuses on:
a.sales
b.accounting returns
c.profits
d.cash flows
6) narrbegin: gamma electronics
gamma electronics
gamma electronics is considering the purchase of testing equipment that will cost
$500,000 to replace old equipment. assume the new machine will generate after-tax
savings of $250,000 per year over the next four years.
narrend
refer to gamma electronics. if the firm has a 15% cost of capital, whats the discount
payback period of the investment?
a.1.5 years
b.2.0 years
c.2.4 years
d.2.6 years
7) luois international has an ebit of $2 million, debt with a market value of $3 million
and a required return on assets of 11%. assuming a corporate tax rate of 40%, what is
firm’s value?
a.$27,272,727
b.$10,909,091
c.$ 9,090,909
d.$19,381,818
8) assuming that current currencies are currently in equilibrium and the exchange rate
for the brazilian real is r/$ = 1.753 and that the u.s. expects inflation over the next year
to be 4% while in brazil there is an expectation of 7.3%; what must the exchange rate
be in one year? (r/$)
a.1.634
b.1.881
c.1.809
d.1.823
9) narrbegin: swerling company
swerling company
swerling company is considering a project with the following cash flows.
narrend
what is the irr of the proposed swerling company project?
a.9.57%
b.8.35%
c.7.72%
d.6.91%
10) consider the cash receipts projections of roxy inc. that is developing a cash budget
for october , november and december; sales in august and september were $600,000 and
$500,000 respectively. the forecast sales are $400,000, $300,000 and $200,000 for
october, november and december respectively. 20 % of sales are cash sales and 80% are
credit sales; collects about 70% of each months sales in the next month but waiting until
the following month for the remaining 10% of sales. bad debts are negligible. the firm
is expectsing cash dividend of $10,000 in december from a subsidiary. (in thousands)
a.$410
b.$490
c.$350
d.$390
11) narrbegin: exhibit 7-5
exhibit 7-5
narrend
given exhibit 7-5, what is the expected return on the portfolio?
a.9.81%
b.9.00%
c.17.31%
d.cannot be determined with the data given
12) you checked the /$ exchange rate today and you found that one dollar cost you
0.8214. when you checked the one year /$ forward exchange rate one dollar was trading
at 0.8026. what is the forward premium (discount) for the dollar?
a.2.29%
b.-2.29%
c.3.67%
d.-3.67%