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Author Archives: Anonymous

A preferred stock that pays a constant dividend of $3.00 for…

A preferred stock that pays a constant dividend of $3.00 forever currently sells for $16.50. What is the required rate of return?

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Etling Inc. is expected to pay a $2 dividend in one year and…

Etling Inc. is expected to pay a $2 dividend in one year and a $3 dividend in two years. The dividends are expected to grow at a 5% growth rate after that forever. If the required return is 14%, what is the price of the stock?

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You presently own stock that you purchased one year ago. You…

You presently own stock that you purchased one year ago. Your nominal return on the stock for the past year was 20%. You calculate your real return on investment was 11.50%. According to the “Fisher Effect” formula, the rate of inflation must have been _____.

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A bond which only pays the coupon payment when the firm has…

A bond which only pays the coupon payment when the firm has sufficient income is called a(n) _________ bond.

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The stand-alone principle states that a project’s analysis s…

The stand-alone principle states that a project’s analysis should be based solely on which one of the following costs?

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Calculate the NPV of the following project cash flow using a…

Calculate the NPV of the following project cash flow using a discount rate of 5%: Yr 0 = –$1,000; Yr 1 = –$80; Yr 2 = +$100; Yr 3 = +$400; Yr 4 = +$500; Yr 5 = +$600

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You presently own stock that you purchased one year ago. You…

You presently own stock that you purchased one year ago. Your nominal return on the stock for the past year was 15%. You calculate your real return on investment as 11.50%. According to the “Fisher Effect” formula, the rate of inflation must have been _____.

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Dizzy Corp. bonds bearing an annual coupon rate of 12%, pay…

Dizzy Corp. bonds bearing an annual coupon rate of 12%, pay coupons semi-annually, have 3 years remaining to maturity, a $1,000 face value, and are currently priced at $1,150 per bond. What is the yield to maturity as an annual stated rate (APR)?

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A project costs $55,000, will be depreciated straight-line t…

A project costs $55,000, will be depreciated straight-line to zero over its 4 year life, and will require a net working capital investment of $5,000 up-front. The firm has a tax rate of 35% and a required return of 15%. The project generates an annual operating cash flow (OCF) of $22,000. What is the project’s NPV?

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Supreme, Inc. has 6 percent coupon bonds on the market that…

Supreme, Inc. has 6 percent coupon bonds on the market that have 12 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 7 percent, the current bond price is:          

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