Reference no: EM132554820

Question 1: Georgia Food is exploring the possibility of bringing a new frozen pasta to the market. Which of the following items are not relevant for the project's analysis?

Select one:

A. Lost revenue from its frozen pizza sales since some customers will switch to purchase the new frozen pasta

B. Cost of advertising the new product

C. Cost of increasing shelf space at grocery stores

D. Market research funds the company has spent on testing the viability of the new product.

Question 2: A firm has a capital structure containing 40 percent debt, 10 percent preference shares and 50 percent ordinary shares. The firm's debt has a yield to maturity of 9.50 percent. Its preference share's annual dividend is $7.50 and the preference share's current market price is $50.00 per share. The firm's ordinary shares has a beta of 0.90 and the risk-free rate and the market return are currently 4.0 percent and 13.5 percent, respectively.

The firm is subject to a 40 percent marginal tax rate. What is the WACC for the firm?

A. 8.93%

B. 10.06%

C. 8.75%

D. 9.16%

Question 3: A project has an initial outlay of $400 000, annual net operating cash flows of $75 000 for eight years and a terminal value of $60 000. If the hurdle rate is 10% pa, the project's net present value (NPV) is:

Select one:

A. $400 119

B. $428 110

C. $28 110

D. $119

Question 4: The Commerce Company is evaluating a project with the following cash flows:

Year Cash Flow

0 ($10,000)

1 $2,000

2 $3,000

3 $4,000

4 $5,000

5 $6,000

What is the payback period of the proposed Commerce Company project?

Select one:

A. 1.5 years

B. 4.5 years

C. 3.2 years

D. 2.7 years

Question 5: A firm's dividend policy refers to all of the following except to its choice of

Select one:

A. whether to pay shareholders a cash dividend

B. who should receive a cash dividend.

C. how large the cash dividend should be

D. how frequently a cash dividend should be distributed.