Question : 42.ConsGrough, Inc. has increased its annual common dividend by 3% : 1325677

 

 

42.ConsGrough, Inc. has increased its annual common dividend by 3% in each of the years that the company has existed. If you believe that the company can continue to do so indefinitely, then what price would you be will to pay for ConsGrough if the required rate of return is 6% and the dividend that it paid yesterday was $5?

a.$85.83

b.$166.67

c.$171.67

d.$200.00

 

 

 

43.ConsGrough, Inc. has increased its annual common dividend by 3% in each of the years that the company has existed. If you believe that the company can continue to do so indefinitely, then what is the required rate of return if the price of ConsGrough is $171.67 and the dividend that it paid yesterday was $5?

a..029

b..03

c..06

d.none of the above

 

 

 

 

44.Predictable Corp has increased its annual dividend each year of its life by 2% (and will continue to do so indefinitely). If Predictable paid its annual dividend yesterday of $8 and the cost of capital is currently 4%, then by what amount will the stock price decrease by if the cost of capital increases to 5%?

a.$408.00

b.$272.00

c.$136.00

d.none of the above

 

 

 

 

45.You are asked by the Chief Financial Officer of your firm to predict what the firm’s stock price will be exactly 4 years from today. If your firm is expected to grow at 3% indefinitely and the cost of capital is 10% while the expected annual dividend one year from today is $10, then what should be the price of your firm’s stock 4 years from today?

a.$142.86

b.$160.79

c.$112.55

d.none of the above

 

 

 

46.Last year Sample Corp. had earnings of $3 a share based upon a common share book value of $25 per share. If Sample paid a dividend of $1.50 last year then estimate Sample’s growth rate.

a.6%

b.12%

c.50%

d.none of the above

 

 

 

 

47.Balance Corp. has a weighted average cost of capital equal to 5.5%. If the firm is financed with 25% equity and 75% debt and if the after-tax of that debt is 4%, then what is the cost of equity for the firm?

a..025

b..06

c..1

d.none of the above

 

 

 

48.Borrower Corp. has the ability to produce $4,000,000 of free cash flow next year and expects that to grow by 2% per year thereafter. If Borrower’s weighted average cost of capital is 13%, then what is the value of Borrower?

a.$40,000,000.00

b.$30,769,230.77

c.$36,363,636.36

d.none of the above

 

 

 

49.Equal, Inc. is financed with equal portions of debt and equity. The after-tax cost of debt is 6% and the cost of equity is 8%. If Equal expects next year’s free cash flow to be $25,000,000 with growth of 3% thereafter, what is the value of Equal, Inc. to the nearest dollar? Equal’s marginal tax rate is 35%.

a.$357,142,857

b.$625,000,000

c.$833,333,333

d.none of the above

 

 

 

 

50.Undetermined Corporation currently has a 10% weighted average cost of capital. It is concerned that its after-tax cost of debt will increase in the near future by 2%. If Undetermined finances its projects with 30% debt, then what will the new weighted average cost of capital for Undetermined be?

a.12.0%

b.13. %

c.10.6%

d.none of the above

 

 

 

51.Which is TRUE concerning preferred stock?

a.Preferred stock is considered debt on the company balance sheet.

b.Preferred stock holders have voting rights for the company board of directors.

c.Preferred stock payments are variable like common stock.

d.Preferred stock is viewed as less risky than a firm’s common stock.