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Question 6. 6. (TCO D) A stock has just paid a dividend and will pay
a dividend of $3.00 in a year. The dividend will stay constant for the
rest of time. The return on equity for similar stocks is 14%. What is
P0? (Points : 20)
Question 7. 7. (TCO D) A stock has just declared an annual dividend
of $2.25 to be paid one year from today. The dividend is expected to
grow at a 7% annual rate. The return on equity for similar stocks is
12%. What is P0? (Points : 20)
Question 8. 8. (TCO D) A bond has 5 years to maturity and has a
YTM of 8%. Its par value is $1,000. Its semiannual coupons are $50.
What is the bonds current market price? (Points : 10)
Question 9. 9. (TCO D) A bond currently sells for $1,030 even though
it has a par of $1,000. It was issued two years ago and had a
maturity of 10 years. The coupon rate is 7% and the interest
payments are made semiannually. What is its YTM? (Points : 10)
Question 10. 10. (TCO D) Explain thoroughly how stock portfolios
affect the risk to an investor. (Points : 30)
Question 11. 11. (TCO E) A company has 30 million shares
outstanding trading for $8 per share. It also has $90 million in
outstanding debt. If its equity cost of capital is 15%, and its debt
cost of capital is 9%, and its effective corporate tax rate is 40%,
what is its weighted average cost of capital? (Points : 30)
Question 12. 12. (TCO A) Name and describe the three functions of
managerial finance. For each, give an example other than those
used in the text and lecture. (Points : 25)
Question 13. 13. (TCO H) What is the difference between the cash
cycle and the operating cycle? Under what condition would they be
the same? (Points : 30)
Question 14. 14. (TCO F) A company has the opportunity to do any
of the projects for which the net cash flows per year are shown
below. The company has a cost of capital of 12%. Which should the
company do and why? You must use at least two capital budgeting