Bsop588 Final

1815 Words Aug 15th, 2014 8 Pages
FI515 midterms 1. | Question : | (TCO A) Which of the following statements is correct? | | | | | One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. | | | Question 2. | Question : | (TCO G) Which of the following statements is correct? | | | | | In the statement of cash flows, a decrease in accounts payable is reported as a use of cash. | | | Question 3. | Question : | (TCO G) Beranek Corp. has $410,000 of assets, and it uses no debt—it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt to assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its …show more content…
Also, assume that the risk-free rate and expected inflation have not changed. Which of the following is most likely to occur? | | | Student Answer: | | The required rate of return for an average stock will increase by an amount equal to the increase in the market risk premium. | | | | Points Received: | 10 of 10 | | |

1. | Question : | (TCO D) A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4% and if investors' required rate of return is 11.4%, which is the stock price? | | | | | $17.57 | | Instructor Explanation: | See Chapter 9.Last dividend (D0) $1.00Long-run growth rate 5.4%Required return 11.4%D1 = D0(1 + g) = $1.054P0 = D1/(rs - g) $17.57 | | | | |

Question 2. | Question : | (TCO D) If D1 = $1.50, g (which is constant) = 6.5%, and P0 = $56, which is the stock’s expected capital gains yield for the coming year? | | | Student Answer: | | 6.50% | | | | Points Received: | 10 of 10 | | Comments: | | | |

Question 3. | Question : | (TCO D) Carter's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $45.00, which is its nominal (not effective) annual rate of return? | | | | | 8.89% | | Instructor Explanation: | See Chapter 7.Pref. quarterly

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