Reference no: EM133113558

1. Find D/E ratio for a firm with 20% cost of equity, 10% pre-tax cost of debt, and 40% corporate tax rate if the firm's WACC is equal to 14%

A:0.40
B:0.43
C:0.57
D:0.75

2. Which of the following investment criteria is best to use to choose projects from a pool of available projects when you have a fixed budget, can implement several projects simultaneously, and projects are not repeating

A: NPV Criteria
B: PI Criteria
C: EEA Criteria
D: Discounted Payback Period Criteria

3. A project requires a $10,000 initial investment and generates $3,000 annual profit for 8 years. Assume the required rate of return is 12%. Find the EEA of this project.

A: $987
B:$613
C:$399
D: $0

4. Consider a stock that is expected to pay $2 dividends next year, $3 dividends in 2 years, $4 dividends in 3 years, and, after that, the dividends are expected to grow at a constant rate of 6% per year forever. The stock's required return is 14%. Find the capital gain yield (rounded to the nearest percent) during the first year.

A: 6%
B: 8%
C: 9%
D:14%

5. Consider a stock that is expected to pay $2 dividends next year, $3 dividends in 2 years, $4 dividends in 3 years, and, after that, the dividends are expected to grow at a constant rate of 6% per year forever. The stock's required return is 14%. Find the dividend yield during the seventh year.

A: 6%
B: 8%
C 9%
D 14%