What is the profitability index

Assignment Help Finance Basics

Reference no: EM13748922

Question 1: ABC is reviewing a project that will cost $1,431.The project will produce cash flows $210 at the end of each year for the first two years and $772 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 4%.

a. 1.56

b. 0.95

c. 1.22

d. 2.56

Question 2: Suppose an investment offers to double your money in 39 years. What annual rate of return are you being offered if interest is compounded semi-annually?

a. 1.79%

b. 1.56%

c. 0.98%

d. 0.89%

Question 3: How many years will it take to quadruple (i.e. 4 times) your money at 9% compounded quarterly?

a. 7.2424

b. 15.5759

c. 5.6478

d. 3.3168

Question 4: A bond is currently selling for $1,087. If the yield to maturity is 10%, the coupon rate will be:

a. less than 10%.

b. equal than 10%.

c. more than 10%.

d. None above

Question 5: Suppose the real rate is 9.83% and the inflation rate is 4.65%. Solve for the nominal rate.

a. 11.32%

b. 12.87%

c. 14.93%

d. 21.74%

Question 6: An investment is acceptable if the profitability index (PI) of the investment is:

a. less than the net present value (NPV).

b. less than one.

c. greater than one.

d. greater than the internal rate of return (IRR).

e. greater than a pre-specified rate of return.

Question 7: A 8.9 percent $1,000 bond matures in 17 years, pays interest semiannually, and has a yield to maturity of 16.02 percent. What is the current market price of the bond?

a. $587.92

b. $456.23

c. $143.24

d. $693.22

Question 8: Uptown Insurance offers an annuity due with semi-annual payments for 19 years at 4.9 percent interest. The annuity costs $176,239 today. What is the amount of each annuity payment?

a. $7,008.06

b. $5,670.26

c. $8,300.23

d. $4,607.98

Question 9: ABC's last dividend paid was $4.4, its required return is 13%, its growth rate is 6%, and its growth rate is expected to be constant in the future. What is ABC's expected stock price in 19 years?

a. $104.37

b. $201.59

c. $98.15

d. $120.31

Question 10: Given the following cash flows, calculate the payback period:

Year CF

0 -921

1 368

2 253

3 291

4 784

a. 3.0115

b. 3

c. 2.0125

d. 4.5209

Question 11: A stock just paid a dividend of D0 = $3.4. The required rate of return is rs = 15.8%, and the constant growth rate is g = 3%. What is the current stock price?

a. $35.76

b. $24.469

c. $3.45

d. $27.359

Question 12: Suppose that today's stock price is $49.8. If the required rate on equity is 18.6% and the growth rate is 7.9%, compute the expected dividend (i.e. compute D1)

a. $7.2447

b. $10.6483

c. $5.3286

d. $2.5643

Question 13: The common stock of ABC Industries is valued at $49 a share. The company increases their dividend by 3.1 percent annually and expects their next dividend to be $1.84. What is the required rate of return on this stock?

a. 2.82%

b. 3.61%

c. 4.87%

d. 6.86%

Question 14: The ABC Co. has $1,000 face value stock outstanding with a market price of $937.6. The stock pays interest annually, matures in 9 years, and has a yield to maturity of 10.7 percent. What is the current yield?

a. 5.11%

b. 10.22%

c. 7.34%

d. 14.94%

Question 15: The principal amount of a bond that is repaid at the end of term is called the par value or the:

a. call premium

b. perpetuity value

c. face value

d. back-end value

e. coupon value

Question 16: What is the effective rate of 18% compounded monthly?

a. 26.97%

b. 13.56%

c. 17.46%

d. 19.56%

Question 17: A project has the following cash flows. What is the internal rate of return?

Year 0 1 2 3

Cash flow -$121,000 68,150 $42,200 $39,100

a. 12.71%

b. 14.39%

c. 13.47%

d. 13.85%

e. 14.82%

Question 18: A cost that has already been incurred and cannot be recouped is called as a(n):

a. sunk cost

b. financial cost

c. opportunity cost

d. side cost

e. relevant cost

Question 19: ABC Corp. just paid a dividend of $2.4 per share at the end of the year. The stock has a required rate of return is 18%. The dividend is expected to grow at 6.9%. What is dividend at time = 8? (solve for D8?)

a. $7.667

b. $3.175

c. $6.451

d. $4.093

Question 20: What is the net present value of the following cash flows? Assume an interest rate of 3.5%

Year CF

0 -$11,895

1 $7,722

2 $5,687

3 $5,120

a. $5,492.69

b. $17,387.92

c. $6,247.34

d. $8,235.81

Question 21: A bond that sells for less than face value is called as:

a. discount bond

b. premium bond

c. par value bond

d. debenture

Reference no: EM13748922

Questions Cloud

Manufacturing overhead budget and ending inventory budget : Which of the following budgets includes an estimate of the production cost per unit (a) Direct Materials budget (b) Manufacturing Overhead budget (c) Ending inventory budget (d) Schedule of cash payment

The maximum allowable contribution : Ellen has indicated that she would like to leave a legacy for her grandchildren. She would like to pay for college expenses at a private university for her grandchildren.

What is the historical background of the nursery rhyme : What is the historical background of the nursery rhyme? What changes, if any, have been made from the original rhyme to what we know today?

Make to account for these transactions and events : On January 2, a company purchased 15,000 shares of Wal-Mart common stock at $89.50 per share plus a $3,000 commission. This represents 30% of Wal-Mart's outstanding stock. On August 6, Wal-Mart declared and paid cash dividends of $2.50 per share and ..

What is the profitability index : Question 1: ABC is reviewing a project that will cost $1,431.The project will produce cash flows $210 at the end of each year for the first two years and $772 at the end of each year for the next two years. What is the profitability index? Assume ..

Returns the memory address of the first element : Assume that there's a function double* getMemoryForDouble (int n) that returns the memory address of the first element of a contiguous block of memory available for storing n doubles.

Journal entries to record the incurrence of production costs : Dewitt Educational Products started and finished job number RM67 during June. The job required $4,600 of direct material and 30 hours of direct labor at $16 per hour. The predetermined overhead rate is $4 per direct-labor hour.

Explain the importance of the nile river : Explain the importance of the Nile River. Discuss the social system of Sparta. How did the spirit of compromise enable the Roman Republic to rise and prosper.

Case study- cyber security in business organizations : Case Study: Cyber Security in Business Organizations, Protecting organizational assets and information within the company has become a top priority for many organizational leaders

User Account

All Pages