Which financial planning assumption does not have supporting detail?
A.Sales growth is based on the inflation rate.
B.Sales growth is based on the industry average sales growth rate.
C.Net income is based on the average net profit margin for the industry.
D.Operating expenses are 70% of the current year€s sales.
You deposited $2,000 seven years ago and haven’t touched the account since. Now you
have $3,656 in the bank. What was the interest rate?
A.6%
B.7%
C.8%
D.9%
Overland paid a dividend of $3 last year and its stock is selling at $75 per share. A
constant growth rate of 5% is expected. Overland’s flotation costs for a new issue are
10% and the marginal tax rate is 40%. Calculate the cost of retained earnings.
A.8.3%
B.8.7%
C.9.2%
D.11.6%
The appropriate interest rate to use in capital budgeting is:
A.always the company’s cost of capital.
B.is the company’s cost of capital if the project’s risk is about the same as the
company’s.
C.the cost of capital plus any additional risk premium required to compensate for the
project’s higher risk.
D.b and c.
You have borrowed $180,000 to buy a new home. You plan to make monthly payments
over a 25-year period. The bank has offered you a 10% interest rate compounded
monthly. Calculate the total amount of interest you will pay the bank over the life of the
loan.
A.$301,499
B.$307,541
C.$310,545
D.$319,766
Which of the following statements is/are correct regarding the intrinsic value of a
stock?
A.The intrinsic value of a stock is the same for every well-informed investor.
B.The intrinsic value of a stock is based on forecasted cash flows.
C.The intrinsic value of a stock will change based on how long a stock is expected to be
held by the investor.
D.a. and b. above are correct.
E.b. and c. above are correct.
If a firm adopts a large proportion of above-average-risk projects that are not offset by
below-average-risk projects:
A.its cost of capital will rise.
B.its risk premium will decline.
C.the risk-free rate will increase as more risk is added.
D.None of the above
Find the future value in two years of $100 that is deposited in an account, which pays
12%, compounded monthly.
A.$160.00
B.$112.70
C.$118.80
D.$125.40
E.$126.97
The chance of incurring losses due to the intentional actions of foreign governments or
terrorist groups is:
A.international risk.
B.business risk.
C.political risk.
D.war-related risk.
Which statement related to the signaling effect of dividends is true?
A.The signaling effect can explain why an increase in the dividend is often followed by
an increase in stock price.
B.The signaling effect is a reason a firm may follow a constant or steadily increasing
dividend policy.
C.Changes in dividends can be interpreted as a signal from management about changes
in the company’s future earnings.
D.All of the above