# FIN 3010- Healthy Foods just paid its annual dividend of $1.45 a share.

Question 1Healthy Foods just paid its annual dividend of $1.45 a share. The firm recently announced that all futuredividends will be increased by 2.8 percent annually. What is one share of this stock worth to you if yourequire a 14 percent rate of return?$12.56$12.95$13.31$13.68$14.07 Question 2The common stock of Tasty Treats is valued at $10.80 a share. The company increases its dividend by 8percent annually and expects its next dividend to be $0.20 per share. What is the total rate of return onthis stock?8.64 percent9.12 percent9.40 percent9.85 percent10.64 percent Question 3The common stock of Green Garden Flowers is selling for $24 a share. The company pays a constantannual dividend and has a total return of 3.8 percent. What is the amount of the dividend?$0.38 $0.76$0.91$1.38$1.54 Question 4Pluto, Inc., has an issue of preferred stock outstanding that pays a $4.50 dividend every year, inperpetuity. If this issue currently sells for $82.30 per share, what is the required return?5.47 percent6.89 percent7.70 percent8.23 percent8.98 percent Question 5Plastics, Inc. will pay an annual dividend of $1.85 next year. The company just announced that futuredividends will be increasing by 2.25 percent annually. How much are you willing to pay for one share ofthis stock if you require a 16 percent return?$13.45$13.61$13.76$14.02 $14.45 Question 6Western Beef stock is valued at $62.10 a share. The company pays a constant annual dividend of $4.40per share. What is the total return on this stock?6.62 percent6.81 percent7.09 percent7.49 percent7.82 percent Question 7Investors receive a total return of 13.7 percent on the common stock of Dexter International. The stock isselling for $41.68 a share. What is the dividend growth rate if the company plans to pay an annualdividend of $2.10 a share next year?7.42 percent8.66 percent10.75 percent11.60 percent13.70 percent Question 8 Blackwell Ink is losing significant market share and thus its managers have decided to decrease the firm’sannual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by5 percent annually. What is a share of this stock worth today at a required return of 15 percent?$4.07$4.28$4.49$4.72$4.95 Question 9Better Plastics is a mature manufacturing firm. The company just paid a $4 annual dividend, butmanagement expects to reduce the payout by 3 percent per year, indefinitely. If you require a 12 percentreturn on this stock, what will you pay for a share today?$23.09$25.87$27.14$28.56$30.02 Question 10Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 ashare at a required return of 14 percent. What is the amount of the last dividend this company paid? $3.50$3.55$3.60$3.65$3.70 Question 11If Treasury bills are currently paying 4.2 percent and the inflation rate is 2.6 percent, what is theapproximate real rate of interest? The exact real rate?1.60 percent; 1.56 percent1.60 percent; 1.64 percent6.80 percent; 6.67 percent6.80 percent; 6.87 percent6.80 percent; 6.92 percent Question 12The 7 percent annual coupon bonds of TPO, Inc. are selling for $1,021. The bonds have a face value of$1,000 and mature in 6.5 years. What is the yield to maturity?6.42 percent6.59 percent6.63 percent 6.68 percent6.70 percent Question 13The 8 percent, $1,000 face value bonds of Glenmore Foods are currently selling at $1,027. These bondshave 16 years left until maturity. What is the current yield?7.71 percent7.79 percent8.00 percent8.23 percent8.28 percent Question 14Smiley Industrial Goods has bonds on the market making annual payments, with 13 years to maturity,and selling for $1,095. At this price, the bonds yield 6.4 percent. What must the coupon rate be on thesebonds?6.67 percent6.84 percent7.23 percent7.50 percent7.83 percent Question 15 A 6 percent bond has a yield to maturity of 6.5 percent. The bond matures in 7 years, has a face value of$1,000, and pays semiannual interest payments. What is the amount of each coupon payment?$30.00$32.50$60.00$62.50$65.00 Question 16A bond has a 7 percent coupon rate, a face value of $1,000, semiannual payments, and sells at par. Thecurrent yield is _____ percent and the effective annual yield is _____ percent.6.76; 6.876.76; 6.967.00; 7.007.00; 7.127.23; 7.23 Question 17A bond has a par value of $1,000, a current yield of 7.606 percent, and semi-annual interest payments.The bond quote is 98.6. What is the amount of each coupon payment?$32.50$37.50 $38.03$72.31$75.00 Question 18If your nominal rate of return is 14.38 percent and your real rate of return is 3.97 percent, what is theinflation rate?8.47 percent10.01 percent10.54 percent18.35 percent18.92 percent Question 19A 5.5 percent $1,000 bond matures in 7 years, pays interest semiannually, and has a yield to maturity of6.23 percent. What is the current market price of the bond?$945.08$947.21$959.09$959.60$962.40 Question 20Which one of the following refers to the relationship between nominal returns, real returns, andinflation?Call premiumFisher effectConversion ratioBid-ask spreadClean-dirty spread Question 21A project has expected cash inflows, starting with year 1, of $2,200, $2,900, $3,500 and finally in yearfour, $4,000. The profitability index is 1.14 and the discount rate is 12 percent. What is the initial cost ofthe project?$7,899.16$8,098.24$8,166.19$9,211.06$9,250.00 Question 22A firm is reviewing a project that has an initial cost of $71,000. The project will produce annual cashinflows, starting with year 1, of $8,000, $13,400, $18,600, $33,100 and finally in year five, $37,900. Whatis the profitability index if the discount rate is 11 percent?0.92 0.981.021.071.12 Question 23Services United is considering a new project that requires an initial cash investment of $75,000. Theproject will generate cash inflows of $26,500, $32,700, $18,500, and $10,000 over each of the next fouryears, respectively. How long will it take to recover the initial investment?2.74 years2.85 years2.99 years3.27 years3.68 years Question 24Miller Brothers is considering a project that will produce cash inflows of $61,500, $72,800, $84,600, and$68,000 a year for the next four years, respectively. What is the internal rate of return if the initial cost ofthe project is $225,000?9.39 percent10.22 percent11.47 percent 11.62 percent12.24 percent Question 25The Black Horse is currently considering a project that will produce cash inflows of $12,000 a year forthree years followed by $6,500 in year four. The cost of the project is $38,000. What is the profitabilityindex if the discount rate is 7 percent?0.960.991.041.091.12 Question 26Which one of the following defines the internal rate of return for a project?Discount rate that creates a zero cash flow from assetsDiscount rate which results in a zero net present value for the projectDiscount rate which results in a net present value equal to the project’s initial costRate of return required by the project’s investorsThe project’s current market rate of return Question 27 What is the net present value of a project that has an initial cost of $40,000 and produces cash inflows of$8,000 a year for 11 years if the discount rate is 15 percent?$798.48$1,240.23$1,869.69$2,111.41$2,470.01 Question 28Professional Properties is considering remodeling the office building it leases to Heartland Insurance. Theremodeling costs are estimated at $3.4 million. If the building is remodeled, Heartland Insurance hasagreed to pay an additional $820,000 a year in rent for the next 5 years. The discount rate is 15 percent.What is the benefit of the remodeling project to Professional Properties?-$651,233-$489,072$5,214$128,399$311,417 Question 29Curtis is considering a project with cash inflows of $918, $867, $528, and $310 over the next four years,respectively. The relevant discount rate is 11 percent. What is the net present value of this project if itthe start up cost is $2,100?$20.98 $46.48$52.14$74.22$80.81 Question 30The profitability index reflects the value created per dollar:invested.of sales.of net income.of taxable income.of shareholders’ equity.