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QUESTION 1 1. ABC Company's last dividend was $2.8. The dividend growth rate is expected to be constant at 8% for 3 years, after which dividends are expected to grow at a rate of 4% forever. The firm's required return (rs) is 14%. What is its current stock price (i.e. solve for Po)? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points QUESTION 2 1. ABC’s last dividend paid was $3.42, its required return is 22%, its growth rate is 7%. What is ABC's expected stock price in 8 years? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points QUESTION 3 1. You have observed the following returns on ABC's stocks over the last six years: 18.6%, 4.3%, 11.7%, -7.2%, 5.5%, -11% What is the geometric average returns on the stock over this six-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 4 1. How many years will it take for your money to grow from $334 to $1,438 at 7% compounded semiannually? Enter your answer rounded off to two decimal points. 1 points QUESTION 5 1. You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.53. What does the beta of the second stock have to be if you want the portfolio to have a beta of 1.05? Enter your answer rounded off to two decimal points. 1 points QUESTION 6 1. You have observed the following returns on ABC's stocks over the last five years: 22.9%, 12.8%, -4%, 18.6%, 5.4% What is the arithmetic average returns on the stock over this five-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 7 1. The ABC Company has a cost of equity of 10.5 percent, a pre-tax cost of debt of 5.9 percent, and a tax rate of 25 percent. What is the firm’s weighted average cost of capital if the weight of debt is 47 percent? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 8 1. ABC company’s market value of common stock is $200 million, preferred stock is $300 million, and debt is $500 million. Suppose that the cost of equity is 7%, the before-tax cost of debt is 5.9%, cost of preferred stock is 5.1%, and the tax rate is 31%. Compute the WACC. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 9 1. If the market value of debt is $184,070, market value of preferred stock is $178,165, and market value of common equity is 128,910, what is the weight of preferred stock? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 10 1. Suppose that today's stock price is $42.2. If the required rate on equity is 12.1% and the growth rate is 6.3%, compute the expected dividend (i.e. compute D1) Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points QUESTION 11 1. You take a loan of $36,532 to buy a car. As per the terms of the loan, you need to make monthly payments for 5 years at a 3.2% rate of interest. What is the amount of each monthly payment? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. 1 points QUESTION 12 1. One year ago, you puchased 55 shares of ABC stock for $21.1 per share. During the year, you received a dividend of $2.3 per share. Today, you sold all your shares for $27. What are the percentage return on your investment? Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 13 1. If you receive $1,177 at the end of each year for the first three years and $4,724 at the end of each year for the next three years. What is the net present value of this cash flow stream? Assume interest rate is 4.3%. Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points QUESTION 14 1. The square-root of the variance is: correlation coefficient covariance standard deviation half-variance beta 1 points QUESTION 15 1. The nominal rate is 18.2% compounded monthly. Compute the effective rate. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 16 1. A bond that sells for less than face value is called as: discount bond perpetuity par value bond debenture premium bond 1 points QUESTION 17 1. You want to create a portfolio as risky as the market. Suppose you invest your money in Stocks A, B, C, and the risk-free asset. Compute your investment in Stock C (i.e. solve for weight of Stock C)? Stock Weights Beta A 10 1.4 B 21 0.3 C ? 1.7 Rf ? ? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 18 1. The common stock of ABC Industries is valued at $70.1 a share. The company increases their dividend by 6 percent annually and expects their next dividend to be $1.6. What is the required rate of return on this stock? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 19 1. The ABC Co. has $1,000 face value stock outstanding with a market price of $1,094.2. The stock pays interest annually, matures in 10 years, and has a yield to maturity of 9.7 percent. What is the annual coupon amount? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 20 1. The risk-free rate is 4.7%, the market risk premium is 6%, and the stock’s beta is 1.67. What is the cost of common stock (Ke)? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 21 1. You have a portfolio of two risky stocks which turns out to have no diversification benefit. The reason you have no diversification is the returns: are completely unrelated to one another. are too large to offset. move perfectly with one another. move perfectly opposite of one another. are too small. 1 points QUESTION 22 1. Suppose the nominal rate is 17.4% and the inflation rate is 5.7%. Solve for the real rate. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 23 1. The beta of the risk-free asset is: 0 1 1.5 2 1 points QUESTION 24 1. A stock just paid a dividend of D0 = $2.8. The required rate of return is rs = 18%, and the constant growth rate is g = 3.8%. What is the current stock price? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points QUESTION 25 1. The principal amount of a bond that is repaid at the end of term is called the par value or the: call premium back-end value face value coupon value perpetuity value 1 points QUESTION 26 1. ABC Inc. issued eight-year, 8 percent semi-annual coupon bonds at par. Today, the bonds are priced at $888. What is the firm’s after-tax cost of debt if the tax rate is 38%? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points QUESTION 27 1. If the coupon rate is greater than the yield to maturity, the bond will: sell at par sell at a discount sell at a premium 1 points QUESTION 28 1. An investor puts $20,000 in a risk-free asset and $40,000 in the market portfolio. Compute the beta of his portfolio. 2 0.50 0.33 1 0.67

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1. ABC Company's last dividend was $2.8. The dividend growth rate is expected to be constant at 8% for 3 years, after which dividends are expected to grow at a rate of 4% forever. The firm's required return (rs) is 14%. What is its current stock price (i.e. solve for Po)?
Answer: 111.96
2. ABC’s last dividend paid was $3.42, its required return is 22%, its growth rate is 7%. What is ABC's expected stock price in 8 years?
Answer:...
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