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PART C Question 1 2 out of 2 points Wine and Roses, Inc. offers a 7% coupon bond with semi-annual payments and a yield to maturity of 7,73%. The bonds mature in 9 years. What is the market price of a R1 000 face value bond? Selected Answer: R953,28 Correct Answer: R953,28 • Question 2 2 out of 2 points One year ago, you invested R3 000. Today it is worth R3 142,50. What rate of interest did you earn? Selected Answer: 4,75% Correct Answer: 4,75% • Question 3 2 out of 2 points Jacks Construction Co. has 80 000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8,5%. The company also has 4 million shares of ordinary shares outstanding. The share has a beta of 1,1 and sells for R40 a share. Treasury bills are yielding 4% and the market risk premium is 8%. Jacks tax rate is 35%. What is Jacks weighted average cost of capital? Selected Answer: 10,38% Correct Answer: 10,38% • Question 4 0 out of 2 points Brad's Co. has equipment with a book value of R500 that could be sold today at a 50% discount. Their inventory is valued at R400 and could be sold to a competitor for that amount. The company has R50 in cash and customers owe them R300. What is the accounting value of their liquid assets? Selected Answer: R1 000 Correct Answer: R750 • Question 5 2 out of 2 points Bill Bailey and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of R0,30 a share for two years commencing two years from today. After that time, the company plans on paying a constant R1 a share dividend indefinitely. How much are you willing to pay to buy a share if your required return is 14%? Selected Answer: R5,25 Correct Answer: R5,25 • Question 6 0 out of 2 points On your tenth birthday, you received R100 which you invested at 4,5% interest, compounded annually. That investment is now worth R3 000. How old are you today? Selected Answer: age 77 Correct Answer: age 87 • Question 7 2 out of 2 points Gillians Boutique has 850 000 shares of ordinary shares outstanding at a market price of R16 a share. The company also has 15 000 bonds outstanding that are quoted at 98% of face value. What weight should be given to the ordinary shares when Gillians computes their weighted average cost of capital? Selected Answer: 48% Correct Answer: 48% • Question 8 2 out of 2 points Shares of the Katydid Co. are currently selling for R27,73. The last dividend paid was R1,60 per share. The market rate of return is 10%. At what rate is the dividend growing? Selected Answer: 4,00% Correct Answer: 4,00% • Question 9 2 out of 2 points You hope to buy your dream house six years from now. Today your dream house costs R189 900. You expect housing prices to rise by an average of 4,5% per year over the next six years. How much will your dream house cost by the time you are ready to buy it? Selected Answer: R247 299,20 Correct Answer: R247 299,20 • Question 10 2 out of 2 points Michaels, Inc. just paid R1,40 to their shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4,5%. If you require an 8% rate of return, how much are you willing to pay to purchase one share? Selected Answer: R41,80 Correct Answer: R41,80 • Question 11 0 out of 2 points Antonette needs R20 000 as a down payment for a house five years from now. She earns 4% on her savings. Antonette can either deposit one lump sum today for this purpose or she can wait a year and deposit a lump sum. How much additional money must Antonette deposit if she waits for one year rather than making the deposit today? Selected Answer: R659,04 Correct Answer: R657,54 • Question 12 2 out of 2 points Katie's Boutique has zero-coupon bonds outstanding that mature in four years. The bonds have a face value of R1 000 and a current market price of R820. What is the company's pre-tax cost of debt? Selected Answer: 5,09% Correct Answer: 5,09% • Question 13 0 out of 2 points The bonds offered by Leos Pumps are callable in 3 years at a quoted price of 101. What is the amount of the call premium on a R1 000 par value bond? Selected Answer: R13.33 Correct Answer: R10.00 • Question 14 0 out of 2 points Weisbro and Sons shares sell for R21 a share and pays an annual dividend that increases by 5% annually. The market rate of return on this share is 9%. What is the amount of the last dividend paid by Weisbro and Sons? Selected Answer: [None Given] Correct Answer: R0,80 • Question 15 0 out of 2 points Betâ R Bilt Bikes just announced that their annual dividend for this coming year will be R2,42 a share and that all future dividends are expected to increase by 2,5% annually. What is the market rate of return if this share is currently selling for R22 a share? Selected Answer: [None Given] Correct Answer: 13,5%

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