1) How much are you willing to pay for one share of stock if the company just paid an $.80 annualdividend, the dividends increase by 4% annually and you require an 8% rate of return?$20.00$21.63$20.40$19.23$20.802)What is the expected return on this portfolio?9.67%9.78%10.87%10.59%9.50%3) Your bank offers you a $100,000 line of credit with an interest rate of 2.5% per quarter. The loan agreement also requires that 4% of the unused portion of the credit line be deposited in a non-interest bearing account as a compensating balance. Your short-term investments are paying 1.25% per quarter. What is your effective annual interest rate if you borrow the whole $100,000 for the entire year? Assume that both the funds you borrow and the funds you invest use compound interest.10.00%10.25%10.38%10.50%10.67%4) Your firm has a net cash inflow for the quarter of -$30 (negative). The beginning cash balance is $15. Company policy is to maintain a minimum cash balance of $5 and borrow only the amount that is necessary to maintain that balance. How much does your firm need to borrow to have a zero cumulative surplus?$10$15$20$25$305) You are considering two projects with the following cash flows:Which of the following statements are true concerning these two projects?I. Both projects have the same future value at the end of year 4, given a positive rate of return.II. Both projects have the same future value given a zero rate of return.III. Both projects have the same future value at any point in time, given a positive rate of return.IV. Project A has a higher future value than project B, given a positive rate of return.II onlyIV onlyI and III onlyII and IV onlyI, II, and III only6) You own some equipment which you purchased three years ago at a cost of $135,000. The equipment is 5-year property forMACRS. You are considering selling the equipment today for $82,500. Which one of the following statements is correct if your taxrate is 34%?The book value today is $8,478.The tax due on the sale is $14,830.80.The taxable amount on the sale is $38,880.You will receive a tax refund of $13,219.20 as a result of this sale.The book value today is $64,320.7) Frank’s Formals rents apparel throughout the year. They have experienced non-payment by about 15% of their customers with an average loss of $400. Frank’s wants to stem their losses by using an instant electronic credit check on the customer. These checks will cost them $15 on each of the 1,000 customers. The opportunity cost is 2.0% for the credit period. Should they pursue the credit check?No, because the $15,000 cost is too high.No, because a $400 loss is minor.Yes, because the net gain is $30,000.Yes, because the net gain is $45,000.Yes, because the net gain is $60,000.
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