FIN620_Midterm Exam

docx

School

University of Maryland Global Campus (UMGC) *

*We aren’t endorsed by this school

Course

620

Subject

Finance

Date

Apr 3, 2024

Type

docx

Pages

6

Uploaded by MajorMoleMaster406

Report
Midterm Exam Question 1 1/ 1 point Menger Corporation has a 37% probability of a return of -0.68%, a 28% probability of a rate of return of 7.47%, and the remaining probability of a -0.42% rate of return. What is the expected rate of return of Menger Corporation? Round the answer to two decimals. Please write % sign in the units box. Answer: 169 v % v D View question 1 feedback Question 2 1/ 1 point Consider a company subject to a corporate tax rate of 30%. If the company has a debt ratio of 0.3, and an unleveraged beta of 1.33, what is the company's leveraged beta? Round the answer to two decimals. Answer: 1.73 & > View question 2 feedback Question 3 1/ 1 point A company has an un-leveraged value of 1,000,000 and debt 100,000. If the company is subject to a corporate tax rate of 40%, and investors in the company are subject to a tax rate of 25% on equity income and 25% on debt income, what is the company's value?
Answer: 1,040,000.00 v D View question 3 feedback Question 4 1/ 1 point Shoop Bank has an average WACC of 8.39% and adjusts for risk by adding 2.37% to its average WACC. If Shoop considers a business loan above average risk, what is Shoop's risk adjusted WACC for a business loan? Round the answer to two decimals in percentage form. Please write % sign in the "unites" box. Answer: 1076 v % D View question 4 feedback Question 5 2/ 2 points Hayek Corporation has a 0.5 probability of a return of -1.48%, a 0.2 probability of a rate of return of 7.42%, and the remaining probability of a -3.31% rate of return. What is standard deviation of the expected rate of return of Hayek Corporation? Round the answer to two decimals in percentage form. Please write % sing in the units box. Answer: 392/ % D View question 5 feedback Question 6 2/ 2 points If the Present Value of all estimated futures costs of a 10 year new investment project is 164, and the future value of all expected profits is 239, what is the projects MIRR? Round the answer to two decimals in percentage form. Write % sign in the units box. Answer: 384 v % v
D> View question 6 feedback Question 7 1/ 1 point Consider a company financed with 0.4 equity, 0.1 preferred stock, and the remaining debt subject to a corporate tax rate 45% If the required rate of return on the debt is 7.78%, on the preferred stock is 9.17% and on the common stock is 12.70%, what is the weighted average cost of capital for this company? Round the answer to two decimals in percentage form. Please write % sign in the units box. Answer: 8l4 v % v D View question 7 feedback Question 8 1/ 1 point A firm invests in a project that will produce a steady yearly savings of $7,751,557 starting one year from now. The investment needed for the project is $104,063,043. What is the IRR of the project? Round the answer to two decimals in percentage form. Write % sign in the units box. Answer: 745 % D View question 8 feedback Question 9 2/ 2 points A firm has 10,000,000 shares outstanding with a price per share of $24.20 (previous to a share repurchase). The firm repurchases 2,000,000 shares with a price per share of $27.00. A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. (As the repurchase price is greater than the market price, equity holders may sell shares to the firm only in proportion to their holding.) https:/www.investopedia.com/terms/s/sharerepurchase.asp
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
What will the share price be after the share repurchase is completed? Assume that Modigliani-Miller and its assumptions are true. Round the answer to two decimals. Answer: 23.50 v Question 10 1/ 1 point The rate of return on the U.S. government treasury bill is 1.24% and the expected rate of return on the Wilshire 5000 is 6.89% . What is the required rate of return for a stock with a Beta 0.92? Cound the answer to two decimals in percentage form. Please write % sing in the units box. Answer: 644 v % v D View question 10 feedback Question 11 1/ 1 point A firm is raising funds by selling a package of equity, debt and preferred stock. The details of the package are: 1) Equity sold for $30 million. Expected perpetual dividends to buyers is $2.30 million per year. 2) Preferred stock sold for $15 million. Expected perpetual dividends to buyers is $0.8 million per year. 3) Debt sold, perpetual risk-free (guaranteed) coupon payments to be $6 million a year and is discounted at a rate of 4.50% per year. Assume no taxes and other Modigliani-Miller assumptions also hold. What is the WACC for the firm? Round the answer to two decimals. Please write % sign in the units box. Answer: 510 v % Question 12 1/ 1 point
What is the Net Present Value (NPV) of the following set of cash flows if the cost of capital is 7.30%? Co= -$286 CO1 = $448 C02 =$338 CO03 = $85 Round the answer to two decimal in percentage form. Answer: 493.90 v D View question 12 feedback Question 13 1/ 1 point A stock is trading for $39.25, and just paid a dividend of $0.7 which is expected to grow at 5% per year. If Goldman Sachs charges 2% of the price as a flotation cost, what is the required rate of return on a new stock issue? Round the answer to two decimals in percentage form. Please write % sign in the units box. Answer: 691 v % v D> View question 13 feedback Question 14 2/ 2 points A firm has 10,000,000 shares outstanding with a price per share of $27.50 (previous to "Rights Issue"). It does a "Rights Issue" where it offers 2,000,000 shares to existing shareholders at a price of $16.50. A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. https:/www.investopedia.com/investing/understanding-rights-issues/
The "Rights Issue" is fully subscribed, that is existing shareholders purchase all the shares offered. What will the share price be after the dividend has been paid? Round the answer to two decimals. Assume that Modigliani-Miller and its assumptions are true. Answer: 25.67 v > View question 14 feedback Question 15 1/ 1 point Sarapo Inc. bonds are trading at their par value of $1,000 and pay interest 2 times a year. If each interest payment is $6.14 what is Sarapo's before-tax component cost of debt? Round the answer to two decimals in percentage form. Please write % sign in the "unites" box. Answer: 123/ % v D View question 15 feedback Question 16 1/ 1 point A stock with a beta of 2.3 has an expected rate of return of 14.37%. The risk-free rate in the market is 3.43%. What is the market premium? Assume CAPM is true. Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box) Answer: 476 v % & Attempt Score:20 / 20 - 100 % Overall Grade (highest attempt):20 / 20 - 100 %
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help