5) A project requires an investment of $900 today. It can generate sales of $1,100 per year forever. Costs are $600 for the first year and will increase by 20 percent per year. (Assume all sales and costs occur at year-end [i.e., costs are $600 @ t = at any time without cost. Ignore taxes and calculate the NPV of the project at a 12 percent discount rate. 1].) The project can be terminated A) $65.00 B) $57.51 C) $100.00 D) It cannot be calculated as g> r.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1) The firm's purchase of real assets is also referred to as the:
A) capital structure decision.
B) CFO decision.
C) financing decision.
D) capital investment decision.
2) A Wall Street Journal quotation for a company has the following values: Div: $1.12, PE:
18.3, Close: $37.22. Calculate the approximate dividend payout ratio for the company.
A) 18 percent
B) 35 percent
C) 45 percent
D) 55 percent
3) The ultimate financial goal of a corporation is to:
A) minimize stockholder risk.
B) maximize profit.
C) maximize the value of the corporation to the stockholders.
D) increase size of the firm.
4) A four-year bond has an 8 percent coupon rate and a face value of $1,000. If the current
price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual
interest payments).
A) 8 percent
B) 10 percent
C) 12 percent
D) 6 percent
5) A project requires an investment of $900 today. It can generate sales of $1,100 per year
forever. Costs are $600 for the first year and will increase by 20 percent per year. (Assume all
sales and costs occur at year-end [i.e., costs are $600 @ t= 1].) The project can be terminated
at any time without cost. Ignore taxes and calculate the NPV of the project at a 12 percent
discount rate.
A) $65.00
B) $57.51
C) $100.00
D) It cannot be calculated as g>r.
6) World-Tour Co. has just now paid a dividend of $2.83 per share (Divo); its dividends ar
expected to grow at a constant rate of 6 percent per year forever. If the required rate of retur
on the stock is 16 percent, what is the current value of the stock, after paying the dividend?
A) $70
B) $56
C) $30
Transcribed Image Text:1) The firm's purchase of real assets is also referred to as the: A) capital structure decision. B) CFO decision. C) financing decision. D) capital investment decision. 2) A Wall Street Journal quotation for a company has the following values: Div: $1.12, PE: 18.3, Close: $37.22. Calculate the approximate dividend payout ratio for the company. A) 18 percent B) 35 percent C) 45 percent D) 55 percent 3) The ultimate financial goal of a corporation is to: A) minimize stockholder risk. B) maximize profit. C) maximize the value of the corporation to the stockholders. D) increase size of the firm. 4) A four-year bond has an 8 percent coupon rate and a face value of $1,000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments). A) 8 percent B) 10 percent C) 12 percent D) 6 percent 5) A project requires an investment of $900 today. It can generate sales of $1,100 per year forever. Costs are $600 for the first year and will increase by 20 percent per year. (Assume all sales and costs occur at year-end [i.e., costs are $600 @ t= 1].) The project can be terminated at any time without cost. Ignore taxes and calculate the NPV of the project at a 12 percent discount rate. A) $65.00 B) $57.51 C) $100.00 D) It cannot be calculated as g>r. 6) World-Tour Co. has just now paid a dividend of $2.83 per share (Divo); its dividends ar expected to grow at a constant rate of 6 percent per year forever. If the required rate of retur on the stock is 16 percent, what is the current value of the stock, after paying the dividend? A) $70 B) $56 C) $30
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