Question 1

1.
The standard deviation measures:

		diversifiable risk
		systematic risk
		economic risk
		unsystematic risk
		total risk

1 points

Question 2

1.
The beta of a market portfolio is:

		1.5
		1
		infinite
		2
		0

1 points

Question 3

1.
The
risk-free rate is 4.5%, the market risk premium is 8.5%, and the stock’s beta
is 1.08. 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 4

1.
ABC Inc. is considering an investment of $1,022 million with
after-tax cash inflows of $287 million per year for six years and an additional
after-tax salvage value of 13 million in Year 6. The required rate of return is
8%. What is the investment’s Profitability Index (PI)?

Enter your answer rounded off to two decimal points.

1 points

Question 5

1.
What is the Profitability Index (PI) of this project if the
required rate is 18%?

Year CF
0 -$2,889
1
$1,252
2
$1,110
3
$1,445
4
$506
5
$925

Enter your answer rounded off to two decimal points. For
example, if your answer is 12.345 then enter as 12.35 in the answer box.

1 points

Question 6

1.
You have a $57,992
portfolio that consists of $15,128 invested in Stock A, $14,012 invested in
Stock B, $1,100 invested in Stock C, and the remainder in Stock D. The
portfolio has a return of 18.3 percent. The return for Stock A is 10.2 percent,
for Stock B is 31.8 percent, and for Stock C is 13.2 percent. What is the
return for Stock D?

Enter your answer as a percentage rounded off to two decimal
points. Do not enter % in the answer box. For example, if your answer is
12.345% then enter as 12.35 in the answer box.z

1 points

Question 7

1.
What is the project’s
initial investment outlay based on the following information: The machinery
could be purchased for $29,501. Shipping and installation costs would cost
another $9,450. The project would require an initial investment in net working
capital of $5,158. The company’s tax rate is 30%.

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 8

1.
What is the NPV of this project if the required rate is 11%?

Year CF
0 -$1,796
1
$675
2
$1,766
3
$1,318

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 9

1.
A 12-year project is
expected to generate annual sales of $252,422, variable costs of $44,161, and
fixed costs of $42,730. The annual depreciation is $12,288 and the tax rate is
27 percent. What is the annual operating cash flow?

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 10

1.
Five years ago, ABC Company invested $44,462 million in a
machinery. The investment in net working capital was $4,992 which would be
recovered at the end of the project. Today, ABC Company is selling the
machinery for $17,095 million. The book value of the machinery is $23,369 million.
The tax rate is 35 percent. The operating cash flows in Year 5 are 6,729. What
are the project’s Year 5 cash flows?

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.
A
project has an initial requirement of $87,290 for equipment. The equipment will
be depreciated to a zero book value over the 5-year life of the project. The
investment in net working capital will be $17,645. All of the net working
capital will be recouped at the end of the 5 years. The equipment will have an
estimated salvage value of $18,253. The annual operating cash flow is
$41,591. The cost of capital is 8 percent. What is the project’s net present
value if the tax rate is 38 percent?

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 12

1.
Suppose the nominal rate is 13.08% and the inflation rate is
5.24%. Solve for the real rate. Use the Fisher Effect formula.

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.
One year ago, you puchased 119 shares of ABC stock for $43.07
per share. During the year, you received a dividend of $6.04 per share.
Today, you sold all your shares for $57.87. 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 14

1.
Based on the following information, what is the portfolio beta?

Stock	Value	Beta
A	$47,570	1.14
B	$25,106	1.88
C	$30,608	0.72
D	$30,787	3.38

2.

Enter your answer rounded off to two decimal points. For
example, if your answer is 12.345 then enter as 12.35 in the answer box.

3.

1 points

Question 15

1.
You have invested $79,521 portfolio in three securities. The
three securities comprise of the risk-free asset, Stock A, and Stock B. The
beta of stock A is 2.2 while the beta of stock B is 0.5. 30% of the portfolio
is invested in the risk-free security. What is the dollar amount invested in
stock B if the beta of the portfolio is 1.1?

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 16

1.
Over the past six years, a
stock had annual returns of 10 percent, 5 percent, 7 percent, 8 percent, 2
percent, and -11 percent, respectively. What is the standard deviation of these
returns?

Enter your answer as a
percentage rounded off to two decimal points. Do not enter % in the answer box.
For example, if your answer is 12.345% then enter as 12.35 in the answer box.

1 points

Question 17

1.
ABC Company purchased a new
machinery 4 years ago for $55,029. Today, it is selling this equipment for
$18,048. What is the after-tax cash flow from this sale if the tax rate is 20
percent?

The MACRS allowance
percentages are as follows, commencing with year one: 20.00, 32.00, 19.20,
11.52, 11.52, and 5.76 percent.

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 18

1.
ABC Company is considering
a new project. The project is expected to generate annual sales of $77,797,
variable costs of $17,848, and fixed costs of $12,138. The depreciation expense
each year is $17,111 and the tax rate is 30 percent. What is the annual
operating cash flow?

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 19

1.
ABC Company is considering an investment that will cost the
company $574 at time=0. The after-tax cash flows are expected to be $81 each
year for 8 years. What is the payback period?

Enter your answer rounded off to two decimal points.

1 points

Question 20

1.
An investor puts $20,000
in a risk-free asset and $40,000 in the market portfolio. Compute the beta of
his portfolio.

		1
		0.33
		2
		0.67
		0.50

1 points

Question 21

1.
If a security’s intrinsic value is higher than its market value,
the security appears to be _________________________.

		overvalued
		fairly valued
		undervalued

1 points

Question 22

1.
What is the internal rate of return (IRR) of this project given
the following cash flows?

Year
CF
0
-$2,200
1
$ 900
2
$ 800
3
$ 600
4
$ 700
5
$1,090

Enter your answer rounded off to two decimal points. Do not
enter % in the answer box. For example, if your answer is 12.345% then enter as
12.35 in the answer box.

1 points

Question 23

1.
ABC Company purchased a
3-year MACRS property for $84,597 3 years ago. What is the current book value
of this equipment?
The MACRS allowance percentages are as follows, starting with year one: 33.33,
44.45, 14.81, and 7.41 percent.

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 24

1.
Based on the following cash flows, calculate the payback period.

Year
CF
0
-$1,358
1
$369
2
$220
3
$92
4
$356
5
$530

Enter your answer rounded off to two decimal points.

1 points

Question 25

1.
ABC Company has $1,000 face value bonds outstanding. These bonds
pay interest semiannually, mature in 7 years, and have a 8 percent coupon. The
current price of the bond is $900. What is the yield to maturity?

Enter yur answer in
percentages rounded off to two decimal points. Do not enter % in the answer
box.

1 points

Question 26

1.
ABC, Inc. has bonds outstanding that mature in 25 years. The
annual coupon rate is 4%. The bonds pay interest annually and have a face value
of $1,000. Currently, the bonds are selling for $900. What is the yield to
maturity?

Enter your answer as a percentage rounded off to TWO decimal
points.

1 points

Question 27

1.
A project requires
$82,832 of equipment that is classified as a 7-year property. What is the
depreciation expense in Year 3 given the following MACRS depreciation
allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92,
8.93, and 4.46 percent?

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

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