Spartan Furniture Pty Ltd is selling for $50.00 per share today. In one year, Spartan will be selling for $48.00 per share, and the dividend for the year will be $3.00. What is the cash return on Spartan shares? A. $51.00 B. $1.00 С. $2.00 6. D. $3.00 7. Corp Suite is considering two expansion options, but does not have enough capital to undertake both. Project W requires an investment of $100,000 and has an NPV of $10,000. Project D requires an investment of $80,000 and has an NPV of $8,200. If Corp Suite uses the profitability index to decide, it would A. choose D because it has a higher profitability index. B. choose W because it has a higher profitability index. C. choose D because it has a lower profitability index. D. choose W because it has a lower profitability index. A project has an initial outlay of $4,000. It has a single payoff at the end of year 4 of $7,000. What is the internal rate of return (IRR) for the project (round to the nearest percent)? А. 16% В. 13% 8. С. 21% D. 15% 9. Omega has an outstanding bond issue that has a 7.75% semi-annual coupon, a current maturity of 20 years, and sells for $967.97. The firm's income tax rate is 40%. What should Omega use as an after-tax cost of debt for cost of capital purposes? A. 2.42% B. 4.04% С. 4.85% D. 8.08% 10. You are evaluating the purchase of Cool Toys, Inc. ordinary shares that just paid a dividend of $1.80. You expect the dividend to grow at a rate of 12%, indefinitely. You estimate that a required rate of return of 17.5% will be adequate compensation for this investment. Assuming that your analysis is correct, what is the most that you would be willing to pay for the ordinary shares if you were to purchase them today? Round to the nearest $.01. A. $36.65 B. $91.23 C. $51.55 D. $74.82
Spartan Furniture Pty Ltd is selling for $50.00 per share today. In one year, Spartan will be selling for $48.00 per share, and the dividend for the year will be $3.00. What is the cash return on Spartan shares? A. $51.00 B. $1.00 С. $2.00 6. D. $3.00 7. Corp Suite is considering two expansion options, but does not have enough capital to undertake both. Project W requires an investment of $100,000 and has an NPV of $10,000. Project D requires an investment of $80,000 and has an NPV of $8,200. If Corp Suite uses the profitability index to decide, it would A. choose D because it has a higher profitability index. B. choose W because it has a higher profitability index. C. choose D because it has a lower profitability index. D. choose W because it has a lower profitability index. A project has an initial outlay of $4,000. It has a single payoff at the end of year 4 of $7,000. What is the internal rate of return (IRR) for the project (round to the nearest percent)? А. 16% В. 13% 8. С. 21% D. 15% 9. Omega has an outstanding bond issue that has a 7.75% semi-annual coupon, a current maturity of 20 years, and sells for $967.97. The firm's income tax rate is 40%. What should Omega use as an after-tax cost of debt for cost of capital purposes? A. 2.42% B. 4.04% С. 4.85% D. 8.08% 10. You are evaluating the purchase of Cool Toys, Inc. ordinary shares that just paid a dividend of $1.80. You expect the dividend to grow at a rate of 12%, indefinitely. You estimate that a required rate of return of 17.5% will be adequate compensation for this investment. Assuming that your analysis is correct, what is the most that you would be willing to pay for the ordinary shares if you were to purchase them today? Round to the nearest $.01. A. $36.65 B. $91.23 C. $51.55 D. $74.82
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Spartan Furniture Pty Ltd is selling for $50.00 per share today. In one year, Spartan will be
selling for $48.00 per share, and the dividend for the year will be $3.00. What is the cash return
on Spartan shares?
A. $51.00
B. $1.00
C. $2.00
6.
D. $3.00
7.
Corp Suite is considering two expansion options, but does not have enough capital to undertake
both. Project W requires an investment of $100,000 and has an NPV of $10,000. Project D
requires an investment of $80,000 and has an NPV of $8,200. If Corp Suite uses the profitability
index to decide, it would
A. choose D because it has a higher profitability index.
B. choose W because it has a higher profitability index.
C. choose D because it has a lower profitability index.
D. choose W because it has a lower profitability index.
A project has an initial outlay of $4,000. It has a single payoff at the end of year 4 of $7,000.
What is the internal rate of return (IRR) for the project (round to the nearest percent)?
8.
A. 16%
В. 13%
С. 21%
D. 15%
9.
Omega has an outstanding bond issue that has a 7.75% semi-annual coupon, a current maturity
of 20 years, and sells for $967.97. The firm's income tax rate is 40%. What should Omega use as
an after-tax cost of debt for cost of capital purposes?
A. 2.42%
В. 4.04%
С. 4.85%
D. 8.08%
10. You are evaluating the purchase of Cool Toys, Inc. ordinary shares that just paid a dividend of
$1.80. You expect the dividend to grow at a rate of 12%, indefinitely. You estimate that a required
rate of return of 17.5% will be adequate compensation for this investment. Assuming that your
analysis is correct, what is the most that you would be willing to pay for the ordinary shares if
you were to purchase them today? Round to the nearest $.01.
A. $36.65
B. $91.23
C. $51.55
D. $74.82
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