Saudi Electronic University

FIN 101

QUIZ 3

Question 1)Soha's company is taking a project that will produce $2,800,000 of revenue per year. Cash expenses will be $400,000, and depreciation expenses will be $250,000 per year. The firm is in the 40 percent marginal tax rate. If the firm's capital expenditures will be $420,000 and the additional working capital $350,000.

 

 

A.S700.000 B. $520,000

C. $680,000

D. $770,000

 

 

Question 2

You would like to own shares that have a record date on Thursday 22 March 2020. What is the last data that you can purchase the share and still receive the dividend?

 

 

1. 19 march
2. 21 march
3. 20 march
4. 22 march

 

 

Question 3

What Is cost of equity capital of a firm If the market risk premium is 8%, the risk-free rate return is 5.4% and a beta of 1.27 ?

 

 

A. 15%

b. 14.5%

c. 12.5%

d 13.5%

Question 4

A share of preferred stock has a 9 percent dividend rate, S100 stated value and a price of $62. What is the cost of this preferred stock?

 

 

A. 14.5%

B. 7%

C. 8%

D. 15%

 

 

Question 5

if the nominal return on U.S. Treasury bills is 14 percent while the rate of expected inflation is anticipated lo be 5 percent, then what should real ate of return be ?

A. 9.8%

B. 11%

C. 10.5%

D. 8.5%

 

 

Question 6

Assume a company's preferred stock is selling Currently at $125, what is the dividend paid by the firm of the required rate of rectum is 11 percent?

A. $12.5

B. $13

C. $13.75%

D. 14.25%

 

Question 7

 

What is the present value of the tax savings in perpetuity for a firm that plans to issue $5,000,000 worth of debt at a yield to maturity of 12% if the marginal corporate tax rate is 40% ?

 

A. $5.000.000

B. $2.000.000

C. $240.000

D. $600.000

Question 8

Assume a firm that pays dividend of $2.1 one year from today, the growth rate dividend is expected to be 7.4 percent forever, then what is the cost of equity capital if the price of its common shares is currently $45?

A. 11%

B. 9%

C. 12%

D. 10%

 

Question 9

 

Your firm paid a dividend $4.2 this year. The dividend is expected to grow at a constant rate of 8 percent. If the required rate of return is 16%, What is the value of your firm's stock?

 

A. $45

B. $52.5

C. $43.5

D. $56.7

 

Question 10

You own 5,000 shares split. The shares are currently selling for $75 . if the company has just announced a 4-for-1 stock split , how many shares will you own after the split ?

 

A. 20,000

B. 15,000

C. 10,000

D. 5,000