# Quiz 1 & 2

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Question : (TCO C) Pate & Co. has a capital budget of \$3,000,000. The company wants to maintain a target capital structure that is 15 percent debt and 85 percent equity. The company forecasts that its net income this year will be \$3,500,000. If the company follows a residual dividend policy, what will be its total dividend payment?
(a) \$205,000
(b) \$500,000
(c) \$950,000
(d) \$2,550,000
(e) \$3,050,000
Text: pp. 570-572 - Residual Dividends, Chapter 14
The amount of new investment which must be financed with equity is:
\$3,000,000 x 85% = \$2,550,000.
Since the firm has \$3,500,000 of net income, \$950,000 = \$3,500,000 - \$2,550,000 will be left for dividends.
2. Question : (TCO F) The following data
The face value of the bond is \$1000, and the semi-annual coupon payments are \$30. The annual coupon rate on the bonds is \$60 per bond (or 6%). The futures contract has 100 bonds.
(a) 6.32%
(b) 6.65%
(c) 7.00%
(d) 7.35%
(e) 7.72%
Chapter 23, pp. 917-923
Quote: 89-09 0.89 0.09
N: 40
PV = (0.89 + .09/32) × \$1,000 = -\$892.8125
FV = \$1,000
PMT = \$30
I/YR = 3.50%
Annual rate: I/YR × 2 = 7.00%

Quiz 1 & 2 Fi516
These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. | Date Taken: | 9/25/2011 |
Time Spent: | 1 h , 14 min , 19 secs |
Points Received: | 90 / 100 (90%) |
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Question Type: | # Of Questions: | # Correct: |
Short | 6 | N/A |
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