stock price
equity capital
capital gain
dividend growth
current value
2. The security that represents the residual ownership of a firm and has no priority in bankruptcy is called: (Points : 5)
a convertible bond
senior debt
common stock
preferred stock
retained earnings
3. If I grant another individual the right to vote on my behalf for the directors of a corporation, I am voting by: (Points : 5)
the straight method
the cumulative method
consent
proxy
preference
4. Boots Roofing just paid its annual dividend of $.90 a share. The firm recently announced that all future dividends will be increased by 3.5% annually. What is one share of this stock worth to you if you require a 12% rate of return? (Points : 5)
$10.30
$10.35
$10.59
$10.78
$10.96
.9x1.035/.085 = 10.96
5. The difference between an investment's market value and its cost is called the: (Points : 5)
present value
net present value
capital value
cash flow
net income
6. The payback period is the period of time it takes an investment to generate sufficient cash flows to: (Points : 5)
earn the required rate of return.
produce the required net income.
produce a yield equal to or greater than the market rate on similar investments.
have a cash inflow, rather than an outflow, for the year.
recover the investment's initial cost.
7. What is the net present value of a project with the following cash flows if the discount rate is 10%?
Year 0 1 2 3 4
Cash Flow-$32,000$9,000$10,000$15,200$7,800
(Points : 5)
$1,085.25
$1,193.77
$3,498.28
$4,102.86
$4,513.15
Cash flow / D.F .1 / PV
-32000 / 1 / -32000
9000 / 0.909091 / 8181.818
10000 / 0.826446 / 8264.463
15200 / 0.751315 / 11419.98
7800 / 0.683013 / 5327.505
NPV / 1193.771
8. The most valuable alternative that is forfeited if a particular investment is undertaken is called: (Points : 5)
a side effect.
erosion.
a sunk cost.
an opportunity cost.
a marginal cost.
9. The managers of Downtown Reality are considering remodeling plans for an old building the firm owns and wants to restore. The building was purchased last year for $890,000. The plan is to create an executive resort and conference center at an estimated cost of $3.6 million. The estimated present value of the future income from this centre is $5.9 million.Of course, the firm could take the cash offer of $1.1 million it just received for the building as is. Which one of the following represents the opportunity cost fo the remodeled project? (Points : 5)
$0
$890.000
$1,100,000
$3,600,000
$5,900,000
10. A 5-year project is expected to generate revenues of $92,000, variable costs of $67,000 and fixed costs of $11,000. The annual depreciation is $4,000 and the tax rate is 35%. What is the annual operating cash flow? (Points : 5)
$8,700
$9,100
$9,900
$10,500
$11,100
92000-67000-11000-4000 = 10000-3500 tax = 6500 net income +4000 depreciation = 10500