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BUS 331 Final Mock

finance

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47 views2 pages

BUS 331 Final Mock

finance

Uploaded by

berfinozge
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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BUS 331 Final Mock Exam

1. The cash flows of a project are given below:


Year Cash Flows
0 -2000.0
1 800.0
2 840.0
3 790.0
The required return is 3.7 percent. What is the payback period for this project? 2

a. 2.46
b. 2.11
c. 1.97
d. 3.04
e. 2.9

2. The table below lists the projects that your company is considering to invest:
Project Payback Period (Years) NPV (USD) IRR (%)
A 3.4 55000 9.29
B 3.7 32000 10.25
C 2.4 30000 9.80
D 4.3 21000 10.68
E 4.3 13000 10.28

The required return is 8.5 percent. Which project should be accepted if they are mutually exclusive? 4

a. A
b. B
c. C
d. D
e. E

3. Over a certain period, large-company stocks had an average return of 12.6 percent, the average risk-free rate
was 5.9 percent, and small-company stocks averaged 20.1 percent. What was the risk premium on small-
company stocks for this period? 7

a. 14.2
b. 6.7
c. 7.5
d. 20.1
e. 26.0

4. Consider two risky stocks. Stock A has an expected return of 11 percent and a standard deviation of 13. Stock B
has an expected return of 13 percent and a standard deviation of 14 percent. The correlation coefficient between
the two stocks is 0.3. What is the expected return of a portfolio where 50 percent of the capital is invested in
stock A and 50 percent is invested in stock B? 10

a. 12.0
b. 9.5
c. 9.2
d. 9.4
e. 9.7

5. A stock currently sells for $36.9. The dividend yield is 5.7 percent and the dividend growth rate is 13.8 percent.
What is the amount of the dividend that was just paid? 18

a. 1.85
b. 1.45
c. 1.44
d. 2.36
e. 2.38

6. Phantom Co. just paid total dividends of $118500 and reported additions to retained earnings of $296250. The
company has 60800 shares of stock outstanding and a benchmark PE of 12 times. What stock price would you
consider appropriate? 20

a. 81.86
b. 95.67
c. 93.17
d. 93.56
e. 62.06

7. If a project has a payback period of 5 years and a cost of capital of 10%, then the discounted payback will:
a. decrease if the cost of capital increases.
b. decrease if the payback period increases due to revised cash flows.
c. be less than 5 years.
d. exceed 5 years.
e. None of the above

8. If a stock's beta is 0.8 during a period when the market portfolio was down by 10%, then, a priori, we could
expect this individual stock to:
a. gain, but less than 10%.
b. lose, but less than 10%.
c. lose more than 10%.
d. gain more than 10%.
e. have no gain or loss

9. When projects are mutually exclusive, you should choose the project with the:
a. larger initial size.
b. highest NPV.
c. highest IRR.
d. longer life.
e. Longest payback period

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