Question

A three-year bond has 8.0% coupon rate and face value of $1000. If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semi-annual coupon interest payments.
        $857.96
        $949.24
        $1057.54
        $1000.00


Casino Inc. is expected to pay a dividend of $6 per share at the end of year one and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today?
        $30
        $50
        $100
        $54


Dividend growth rate for a stable firm can be estimated as ______.
        Plow back rate / the return on equity (ROE)
        Plow back rate * the return on equity (ROE)
        Plow back rate + the return on equity (ROE)
        Plow back rate - the return on equity (ROE)


Great Motor Company is currently paying a dividend of $1.50 per year. The dividends are expected to grow at a rate of 20% for the next three years and then a constant rate of 6 % thereafter. What is the expected dividend per share in year 5?
        $2.91
        $2.59
        $2.00
        $1.50


Company X has a P/E ratio of 10 and a stock price of $50 per share. Calculate earnings per share of the company.
        $6 per share
        $10 per share
        $0.20 per share
        $5 per share


The following measures are used by firms when making capital budgeting decisions except ______.
        payback period
        internal rate of return
        P/E ratio
        net present value


Which of the following investment rules may not use all possible cash flows in its calculations?
        NPV
        payback period
        IRR
        all of the above


Given the following cash flows for project A: C0 = -2000, C1 = +600 , C2 = +1400 and C3 = +5000, calculate the payback period.
        three years
        two years
        one year
        none of the above


Driscoll Company is considering investing in a new project. The project will need an initial investment of $2,400,000 and will generate $1,200,000 (after-tax) cash flows for three years. Calculate the NPV for the project if the cost of capital is 15%.
        $169,935
        $1,200,000
        $339,870
        $125,846


Preferably, cash flows for a project are estimated as ______.
        cash flows after taxes
        cash flows before taxes
        accounting profits before taxes
        accounting profits after taxes