Question 1 0 / 0.

75 points

Moore Money Inc. just paid a dividend of $2. The required return on the stock is 15%. If it has the following expected dividend growth rates
what should the stock sell for?

Year Growth
1&2 15%
3 12%
4+ 6%

$22.45

$26.17
$27.79

$28.89
$29.68

Question 2 0 / 0.75 points

A 6% preferred stock pays _____ a year in dividends per share. The par value of the preferred stock is $100.

$3
$6

$12
$30

$60

Question 3 0 / 0.75 points

KB Adventures will pay an annual dividend of $3.15 a share on their common stock next week. Last year, the company paid a dividend of $3.00
a share. The company adheres to a constant rate of growth dividend policy. What will one share of this common stock be worth ten years from
now if the applicable discount rate is 12.5%?

$42.00

$56.78

$65.16
$68.41

$71.83

Question 4 0 / 0.75 points

Martin's Yachts has paid annual dividends of $1.40, $1.75, and $2.00 a share over the past three years, respectively. The company now
predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given
the lack of future growth, you will only buy this stock if you can earn at least a 15% rate of return. What is the maximum amount you are
willing to pay to buy one share of this stock today?

$10.00

$13.33
$16.67

$18.88

$20.00

1/5
Question 5 0 / 0.75 points

Bradley Broadcasting expects to pay dividends of $1.10, $1.21, and $1.331 in one, two, and three years, respectively. After that, dividends are
expected to grow at a constant rate of 4% forever. Stocks of similar risk yield 10%.

How much is Bradley's stock price expected to increase during the first year?

1.05%

4.59%
5.15%

6.24%

6.51%

Question 6 0 / 0.75 points

A 50- year project has a cost of $500,000 and has annual cash flows of $100,000 in years 1-25, and $200,000 in years 26-50. The company's
required rate is 8%. Given this information, calculate the profitability index of the project.

1.76
2.06

2.16

2.46

2.76

Question 7 0 / 0.75 points

The discount rate that makes the net present value of investment exactly equal to zero is the:

Payback period.

Internal rate of return.

Average accounting return.

Profitability index.
Discounted payback period.

Question 8 0 / 0.75 points

The profitability index is closely related to:

Payback.

Discounted payback.

The average accounting return.

Net present value.

Mutually exclusive projects.

Question 9 0 / 0.75 points

The payback method assumes that the cash flows:

Are an annuity stream.

Occur evenly throughout the year.

Occur at the end of the year.

Are discounted at the IRR rate.

Are calculated with the consideration of the time value of money.

Question 10 0 / 0.75 points

You are evaluating two mutually exclusive projects, A and B. Project A costs $350 and has cash flows of $250 in each of the next two years.
Project B costs $300 and generates cash flows of $300 and $100 for the next two years, respectively. What is the crossover rate for these
projects?

26.38%

27.47%

2/5
 30.28%

61.80%

83.48%

Question 11 0 / 0.75 points

A cost that has already been paid, or the liability to pay has already been incurred, is a(n):

Salvage value expense.

Net working capital expense.

Sunk cost.

Opportunity cost.
Erosion cost.

Question 12 0 / 0.75 points

Project cash flows will increase when:

Capital spending for the project increases.

The inventory requirements for a project increase.

The depreciation associated with a project decreases.

The projected sales resulting from the project increase.

The incremental change in accounts payable decreases.

Question 13 0 / 0.75 points

A machine costs $60 and requires $35 in maintenance for each year of its three year life. After three years, this machine will be replaced. If the
machine belongs in a 30% CCA class and has no salvage value, what is the EAC? Assume a tax rate of 34% and a discount rate of 14%.

-$39.48

-$43.32

-$48.33

-$59.13
-$97.84

Question 14 0 / 0.75 points

Ben's Border Café is considering a project which will produce sales of $16,000 and increase cash expenses by $10,001. If the project is
implemented, taxes will increase from $23,000 to $24,500 and depreciation will increase from $4,000 to $5,501. What is the amount of the
operating cash flow using the top-down approach?

$4,000

$4,500
$6,000

$7,500

$8,500

Question 15 0 / 0.75 points

Tori just purchased some equipment that belongs in a 35% CCA class. The equipment cost $167,400. What will be the book value of the
equipment at the end of year three

$58,349

$61,203

$72,670

$94,730

$119,189

Question 16 0 / 0.75 points

3/5
 A project has the following estimated data: price = $200 per unit; variable costs = $150 per unit; fixed costs = $400,000; required return = 9%;
initial investment = $1,500,000; $200,000 salvage value; life = 15 years. What is the financial break-even quantity?

9,586 units.

10,086 units.

10,586 units.

11,086 units.

11,586 units.

Question 17 0 / 0.75 points

Your firm is considering a project with a five-year life and an initial cost of $260,000. The discount rate for the project is 14 percent. The firm
expects to sell 3,600 units a year. The cash flow per unit is $30. The firm will have the option to abandon this project after three years at which
time they expect they could sell the project for $150,000. You are interested in knowing how the project will perform if the sales forecast for
years four and five of the project are revised such that there is a 60/40 chance that the sales will be either 2,800 or 4,400 units a year,
respectively. What is the net present value of this project given your sales forecasts?

$96,141

$114,715

$132,708

$141,414

$155,556

Question 18 0 / 0.75 points

The change in revenue that occurs when one more unit of output is sold is called the _____ revenue.

Marginal.

Average.

Total.

Fixed.

Variable.

Question 19 0 / 0.75 points

What is the base case cash break-even point given the following information? Total fixed costs = $35,000; variable cost = $10 per unit; price =
$25; depreciation = $10,000.

667

1,917

2,237

2,334

3,000

Question 20 0 / 0.75 points

Webster United is considering adding a new product to their lineup. The company expects to sell 15,000 units, give or take 3 percent, of this
item. The expected variable cost per unit is $12 and the expected total fixed cost is $21,000. The fixed and variable cost estimates are
considered accurate within a plus or minus 5 percent range. The depreciation expense is $22,000. The tax rate is 35 percent. The sale price is
estimated at $15 a unit, give or take 2 percent.

What is the earnings before interest and taxes under the base case scenario?

$1,860

$2,000

$2,400

$2,640

$2,850

4/5