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Which of the following is NOT normally regarded as being a good reason to establish an ESOP? A) To increase worker productivity. B) To enable the firm to borrow at a below-market interest rate. C) To make it easier to grant stock options to employees. D) To help prevent a hostile takeover. E) To help retain valued employees.

## Question 6 (Multiple Choice Worth 5 points) Marcicela Sanchez needs to

Question 6 (Multiple Choice Worth 5 points) Marcicela Sanchez needs to have $25,000 in five years. If she can earn 8 percent on any investment, what is the amount that she will have to invest every year for the next five years: (Round to the nearest dollar.) $5,000 $4,261 $4,640 $4,445

## 5-21. Betas and risk rankings. Stock A- Beta .80 Stock B-Beta

5-21. Betas and risk rankings. Stock A- Beta .80 Stock B-Beta 1.40 Stock C-Beta -.30 A. Rank these stocks from the most risky to the least risky. Stock B-Most Risky Stock A Stock C B. If the return on the market portfolio increased by 12%, what change would you expect in the return for each of the stocks? C. If the return on the market portfolio decreased by 5%, what change would you expect in the return for each of the stocks? D. If you felt that the stock market was getting ready to experience a significant decline, which stock would you probably add to your portfolio? Why? E. If you anticipated a major stock market rally, which stock would you add to your portfolio? Why?

## You are saving for retirement. To live comfortably, you decide you

You are saving for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 30th birthday and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 5%, how much must you set aside each year to make sure that you will have $2 million in the account on your 65th birthday?

## war corporation just paid a dividend of $1.50 a share(i.e Do=1.50).the

war corporation just paid a dividend of $1.50 a share(i.e Do=1.50).the dividend is expected to grow 5 percent a year for the next 3 years, and then 10 percent a year thereafter.what is the expected dividend per share for each of the next 5 years?

## Imprudential Inc. has an unfunded pension liability of $900 million that

Imprudential Inc. has an unfunded pension liability of $900 million that must be paid in 20 years. To assess the value-of the firm├ó´┐¢´┐¢s stock analysts want to discount this liability back to the present. If the relevant discount rate is 7.5 percent, what is the present value of this liability?

## The Sweet Shoppe is planning on paying a dividend of $1.25

The Sweet Shoppe is planning on paying a dividend of $1.25 a share next year. The firm expects to increase this dividend by 10 percent per year the following two years and then decrease the dividend growth to 3 percent annually thereafter. Which one of the following is the correct computation of the dividend for year 5?

## Show Computations where applicable. 7. If Gerry makes a deposit of

Show Computations where applicable. 7. If Gerry makes a deposit of $1,500 at the end of each quarter for 5 years, how much will he have at the end of the 5 years assuming a 12% annual return and quarterly compounding? 8. Ian would like to save $1,500,000 by the time he retires in 40 years. If he believes that he can achieve a 7% rate of return, how much does he need to deposit each year to achieve his goal? Information for Q9: Consider the following details for a bond issued by Bravo Incorporated. Issue Date 7/5/2000 Maturity Date 7/5/2030 Annual Coupon Rate (semi-annual payments) 9% Face Value $1,000 9. Suppose that todayÔÇÖs date is 7/5/2010, what should the current trading price be for BravoÔÇÖs bond if investors want a 12% annual return?

## Early in 2010, Inez Marcus, the chief financial officer for Suarez

Early in 2010, Inez Marcus, the chief financial officer for Suarez Manufacturing, was given the task of assessing the impact of a proposed risky investment on the firm’s stock value. To perform the necessary analysis, Inez gathered the following information on the firms stock. During the immediate past 5 years (2005-2009), the annual dividends paid on the firm’s common stock were as follows: Year Dividend per share 2009 $ 1.90 2008 1.70 2007 1.55 2006 1.40 2005 1.30 The firm expects that without the proposed investment, the dividend in 2010 will be $ 2.09 per share and the historical annual rate of growth (rounded to the nearest whole percent) will continue in the future. Currently, the required return on the common stock is 14%. Inezs research indicates that if the proposed investment is undertaken, the 2010 dividend will rise to $ 2.15 per share and the annual rate of dividend growth will increase to 13%. She feels that in the best case, the dividend would continue to grow at this rate each year into the future and that in the worst case, the 13% annual rate of growth in dividends would continue only through 2012, and then, at the beginning of 2013, would return to the rate that was experienced between 2005 and 2009. As a result of the increased risk associated with the proposed risky investment, the required return on the common stock is expected to increase by 2% to an annual rate of 16%, regardless of which dividend growth outcome occurs. Armed with the preceding information, Inez must now assess the impact of the proposed risky investment on the market value of Suarez’s stock. To simplify her calculations, she plans to round the historical growth rate in common stock dividends to the nearest whole percent

## A project has the following projected outcomes in dollars: $250, $350,

A project has the following projected outcomes in dollars: $250, $350, and $500.┬á┬áThe probabilities of their outcomes are 25%, 50%, nad 25% respectively.┬á┬áWhat is the expected value of these outcomes?┬á┬á A) 362.50, B) 89.40, C) 94.50, D) 178.30

## Expected cash divends are $2.50, the dividend yield is 7%, flotation

Expected cash divends are $2.50, the dividend yield is 7%, flotation cost are 5%, and growth rate is 3%. Compute the cost of new common stock. A. 10.37% B. 8.89% C. 9.48 D.9.34

## Assume that the real risk-free rate, r* is four percent, and

Assume that the real risk-free rate, r* is four percent, and inflation is expected to be nine percent in year 1, 6% in year 2, and 4% thereafter. Assume also that all treasury bonds are highly liquid and free of default risk. IF 2-year and 5-year treasury bonds both yield (a nominal rate of) 12%, calculate the maturity risk premiums (MRPs) on the two bonds, ie what is MRP5 and MRP2?

## 1. Book values are different to market values because: a)Book values

1. Book values are different to market values because: a)Book values reflect the value of the asset based on generally-accepted accounting principles. b)Book values are used in the company’s balance sheet c)Book values do not reflect the amount someone is willing to pay today for an asset. d)All of the above 2. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold…………………..$1.2 million Administrative expenses…………………… $250,000 Marketing and selling expenses…………… $175,000 Depreciation…………………………………. $500,000 Interest expense……………………………. $200,000 Dividends paid………………………………. $150,000 Suppose that Sports Baseball has 30,000 shares of stock. Assume a tax rate of 30%. What is the EPS figure? a) 8.50 b) 8.75 c) 9.0 d) 9.15 3)For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold…………………………. $1.2 million Administrative expenses…………………… $250,000 Marketing and selling expenses…………… $175,000 Depreciation…………………………………. $500,000 Interest expense……………………………. $200,000 Dividends paid………………………………. $150,000 Assuming a tax rate of 30%, what is the operating cash flow for the year? a) $1,260,000 b) $962,000 c) $962,500 d) $1,265,000 e) Can not be determined with the information given

## Purchasing Power parity: In the spot market 7.8 Mexican pesos can

Purchasing Power parity: In the spot market 7.8 Mexican pesos can be exchange for 1 U.S. dollar. A compact disc costs $15 in the United States. If purchasing power parity (PPP) hold, what should be the price of the same disc in Mexico?

## A twelve-year bond pays 13% interest on a $1000 face value

A twelve-year bond pays 13% interest on a $1000 face value annually. If it currently sells for $1,285 what is the yield to maturity. A. 9.02% B. 13.66% c.14.33% D.11.94%

## Expected return is the average of the possible returns from an

Expected return is the average of the possible returns from an investment, where each return is weighted by the probability that it will occur. True False

## The advantage of a dealer over a brokered market is that

The advantage of a dealer over a brokered market is that brokers cannot guarantee that an order will be executed promptly, while dealers can because they have an inventory of securities. True False

## Short-term bonds have greater price volatility than long-term bonds. True False

Short-term bonds have greater price volatility than long-term bonds. True False

## Pharmaceutical drugs have an inelastic demand, and computers have an elastic

Pharmaceutical drugs have an inelastic demand, and computers have an elastic demand. Suppose that technological advance doubles the supply of both products (that is, the quantity supplied at each price is twice what it was). A. What happens to the equilibrium price and quantity in each market? B. Which product experiences a larger change in price? C. Which product experiences a larger change in quantity? D. What happens to total consumer spending on each product?

## Which are more difficult to evaluateÔÇöstocks or bonds? Why? Discuss the

Which are more difficult to evaluateÔÇöstocks or bonds? Why? Discuss the advantages and disadvantages of common stock financing. No word limit .

## 25. Spontaneous assets and liabilities are assets and liabilities that rise

25. Spontaneous assets and liabilities are assets and liabilities that rise and fall directly with sales (i.e. if sales rise 5%, then spontaneous assets rise 5% and spontaneous liabilities rise 5%). Based on forecasts for 2010 in tab 9: balance sheet of the Wisconsin Energy spreadsheet, which of the following is (are) being forecasted like a spontaneous asset and liability?To continue with the answer click on mycoursewriter.com/