1. Miller Mfg. is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4 percent. The expected variable cost per unit is $6.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $26,000. The tax rate is 34 percent. The sale price is estimated at $14.00 a unit, give or take 5 percent.

What is the earnings before interest and taxes under the base case scenario?

$53,070

$61,000

$44,000

$35,000

$70,000

2. Miller Mfg. is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $30,000. The tax rate is 34 percent. The sale price is estimated at $14.00 a unit, give or take 3 percent.

What is the net income under the worst case scenario?

$3,312.94

$7,062.58

$5,019.60

$6,726.26

$6,995.31

3. Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $31,000. The tax rate is 34 percent. The sale price is estimated at $14.00 a unit, give or take 4 percent.

What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000?

$52,000.00

$10,860.00

$21,000.00

$44,860.00

$13,860.00

4. Wexford Industrial Supply is considering a new project with estimated depreciation of $30,000, fixed costs of $35,000, and total sales of $70,040. The variable costs per unit are estimated at $4.20. What is the accounting break-even level of production?

8,343 units

31,200 units

8,112 units

30,857 units

1,200 units

5. Oil Well Supply offers a 8 percent coupon bond with semiannual payments and a yield to maturity of 8.73 percent. The bonds mature in 9 years. What is the market price per bond if the face value is $1,000?

$1,446.81

$934.28

$1,447.42

$955.13

$955.75

6. Grand Adventure Properties offers a 8 percent coupon bond with annual payments. The yield to maturity is 6.85 percent and the maturity date is 7 years from today. What is the market price of this bond if the face value is $1,000?

$1,069.92

$1,062.30

$954.60

$793.63

$1,016.90

7. Redesigned Computers has 8 percent coupon bonds outstanding with a current market price of $900.32. The yield to maturity is 9.34 percent and the face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures?

14 years

12 years

13 years

21 years

15 years

8. A bond that pays interest annually yielded 7.50 percent last year. The inflation rate for the same period was 5.80 percent. What was the actual real rate of return on this bond for last year?

1.76 percent

5.88 percent

1.70 percent

1.61 percent

5.80 percent

9. The outstanding bonds of Winter Time Products provide a real rate of return of 3.50 percent. The current rate of inflation is 2.20 percent. What is the nominal rate of return on these bonds?

5.80 percent

5.75 percent

5.70 percent

5.72 percent

5.78 percent

10. A zero coupon bond with a face value of $1,000 is issued with an initial price of $551.26. The bond matures in 20 years. What is the implicit interest, in dollars, for the first year of the bond’s life?

$13.13

$10.45

$16.66

$22.44

$32.66

11. Miller Brothers Hardware paid an annual dividend of $1.55 per share last month. Today, the company announced that future dividends will be increasing by 2.80 percent annually. If you require a 8.2 percent rate of return, how much are you willing to pay to purchase one share of this stock today?

$29.51

$31.06

$27.96

$55.36

$56.91

12. The common stock of Auto Deliveries sells for $25.96 a share. The stock is expected to pay $2.10 per share next month when the annual dividend is distributed. Auto Deliveries has established a pattern of increasing its dividends by 4.2 percent annually and expects to continue doing so. What is the market rate of return on this stock?

8.09 percent

10.19 percent

12.29 percent

14.39 percent

16.49 percent

13. Roy’s Welding Supplies common stock sells for $21 a share and pays an annual dividend that increases by 5 percent annually. The market rate of return on this stock is 8 percent. What is the amount of the last dividend paid

$0.58

$0.65

$0.63

$0.81

$0.60

14. Winter Time Adventures is going to pay an annual dividend of $3.03 a share on its common stock next week. This year, the company paid a dividend of $2.90 a share. The company adheres to a constant rate of growth dividend policy. What will one share of this common stock be worth 11 years from now if the applicable discount rate is 9.0 percent?

$104.00

$11.52

$108.66

$135.34

$100.46

15. Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $1.40 per share. What is the current value of one share of this stock if the required rate of return is 9.75 percent?

$49.52

$53.40

$52.91

$44.90

$60.06

16. Langley Enterprises pays a constant dividend of $1.50 a share. The company announced today that it will continue to do this for another 2 years after which time it will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 8 percent?

$3.00

$2.67

$3.98

$4.29

$2.38

17. Last week, Hansen Delivery paid its annual dividend of $1.30 per share. The company has been reducing the dividends by 11 percent each year. How much are you willing to pay to purchase stock in this company if your required rate of return is 16 percent?

$7.23

$10.52

$35.10

$19.37

$4.29

18. The value of a 20 year zero-coupon bond when the market required rate of return is 9% (semiannual) is ____.

$171.93

$178.43

$318.38

$414.64

None of the above

19. A General Co. bond has an 8% coupon and pays interest annually. The face value is $1,000 and the current market price is $1,020.50. The bond matures in 20 years. What is the yield to maturity?

8.12%

7.82%

8.00%

8.04%

7.79%

20. Wine and Roses, Inc. offers a 7% coupon bond with semiannual payments and a yield to maturity of 7.73%. The bonds mature in 9 years. What is the market price of a $1,000 face value bond?

$1,401.26

$1,108.16

$963.88

$953.28

$1,401.86

21. Angelina’s made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.16 a share. Secondly, the company announced that all future dividends will increase by 4% annually. What is the maximum amount you should pay to purchase a share of Angelina’s stock if your goal is to earn a 10% rate of return?

$36.00

$22.46

$34.62

$27.44

$21.60

22. Majestic Homes’ stock traditionally provides an 8% rate of return. The company just paid a $2 a year dividend which is expected to increase by 5% per year. If you are planning on buying 1,000 shares of this stock next year, how much should you expect to pay per share if the market rate of return for this type of security is 9% at the time of your purchase?

$48.60

$52.50

$70.00

$57.89

$55.13

23. Leslie’s Unique Clothing Stores offers a common stock that pays an annual dividend of $2.00 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a 12% return on your equity investments?

$18.88

$20.00

$13.33

$10.00

$16.67

24. The current yield on Alpha’s common stock is 4.8%. The company just paid a $2.10 dividend. The rumor is that the dividend will be $2.205 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on Alpha’s stock?

45.94%

16.07%

43.75%

10.04%

21.88%

25. Martha’s Vineyardrecently paid a $3.60 annual dividend on its common stock. This dividend increases at an average rate of 3.5% per year. The stock is currently selling for $62.10 a share. What is the market rate of return?

5.5%

9.5%

3.5%

2.5%

6.0%