Can I have answer to these question please ? and please give me solution that you are going to use for the problems 9- 20

1 ) Shareholder wealth maximization means maximizing the price of the existing common stock.

A. TRUE B. FALSE

2 ) The risk/return tradeoff implies that the return on a riskless asset must be zero.

A. TRUE B. FALSE

3) Primary market transactions cannot be undertaken in over the counter markets.

A. TRUE B. FALSE

4) For a firm to have its securities listed on an exchange, it must meet certain requirements. These usually include measures of profitability, size, market value, and public ownership.

A. TRUE B. FALSE

5) Seasoned secondary offerings occur in the secondary market.

A. TRUE B. FALSE

6) If two companies have the same revenues and operating expenses, their net incomes will still be different if one compan y finances its assets with more debt and the other company with more equity.

A. TRUE B. FALSE

7) Changes in depreciation expense do not affect operating income because depreciation is a non – cash expense.

A. TRUE B. FALSE

8) A company with negative net income will also have negative operating cash flow.

A. TRUE B. FALSE

9 ) The five basic principles of finance include all of the following EXCEPT

A) Cash flow is what matters.

B) Money has a t ime value.

C) Risk requires a reward.

D) Incremental profits determine value.

10) Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it. If Joe invests and the business loses the lawsuits, the most Joe can lose is

A) $10,000 if Joe is a general partner.

B) $10,000 if Joe is a sole proprietor.

C) $10,000 if Joe is a limited partner.

D) $10,000 plus his share of the lawsuits if Joe is a limited partner.

11) The primary goal of a publicly owned corporation is to ________.

A) maximize dividends per share

B) maximize shareholder wealth

C) maximize earnings per share after taxes

D) minimize shareholder risk

12) The nominal interest rate is 9 % and the expected inflation rate is 2 %. Based on the Fisher effect, the rea l rate of interest is

A) 6.92 %.

B) 6.86%.

C) 6.80 %.

D) 7.00 %.

13) The investment banker performs what three basic functions?

A) underwriting, distributing, and regulating

B) underwriting, advising, and price – pegging

C) underwriting, distributing, and advi sing

D) underwriting, distributing, and negotiating

14) All of the following are benefits of organized stock exchanges EXCEPT

A) increased stock price volatility.

B) continuous markets.

C) fair security prices.

D) easier access to new capital for busine ss expansion.

15) Lubbock Corp. has cash of $ 100 ,000; short – term notes payable of $100,000; accounts receivables of $275,000; accounts payable of $135,000: inventories of $350,000; and accrued expenses of $75,000. What is the firm’s net working capital?

A) $390,000

B) $ 41 5,000

C) $ 4 00,000

D) $ 395 ,000

16) Odessa Corporation had retained earnings as of 12/31/10 of $1 8 million. During 2011, Odessa ‘s net income was $7 million. The retained earnings balance at the end of 2011 was equal to $20 million. Therefore

A) Odessa paid a dividend in 2010 of $5 million.

B) Odessa paid a dividend in 2010 of $2 million.

C) Odessa sold common stock during 2010 for $5 million.

D) Odessa purchased treasury stock in 2010 for $2 million.

17) Dallas Retailing Inc. has sales of $4,0 00,000; the firm’s cost of goods sold is $2,500,000; and its total operating expenses are $6 5 0,000. What is Dallas Retailing’s EBIT?

A) $850,000

B) $875,000

C) $900,000

D) $1,300,000

18) Jackson Industries reported the following items for the current year : Sales = $3,000,000; Cost of Goods Sold = $1, 9 00,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Jackson ‘s gross profit is equal to

A) $770,000.

B) $1,070,000.

C) $1,100,000.

D) $1,500,000.

19) Which of the following represents an attempt to measure the net results of the firm’s operations (revenues versus expenses) over a given time period?

A) balance sheet

B) statement of cash flows

C) income state ment

D) sources and uses of funds statement

20) Ithaca Retailing Inc. has sales of $4,000,000; the firm’s cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm’s interest expense is $250,000, and the corporate tax rate i s 5 0%. What is Ithaca Retailing’s net income?

A) $288,000

B) $3 7 0,000

C) $3 25 ,000

D) $390,000 

1 ) The upper limit on common stock dividends, which is set by the SEC, is generally equal to the sum of dividends paid on the company’s preferred stock.

A. TRUE B. FALSE

2) Preferred stock is less risky than common stock, but more risky than debt.

A. TRUE B. FALSE

3) The expected rate of return from an investment is equal to the expected cash flows divided by the initial investment.

A. TRUE B. FALSE

4) Beta cannot be negative.

A. TRUE B. FALSE

5) The Beta of a T – bill is one .

A . TRUE B. FALSE

6) The common stock of a constant – growth firm is valued in the same manner as its preferred stock.

A. TRUE B. FALSE

7) According to the CAPM, for each unit of beta, an asset’s required rate of return increases by the market’s return .

A. TRUE B. FALSE

8) The portfolio beta is simply the sum of the betas of the individual stocks in the portfolio.

A. TRUE B. FALSE

9 ) The category of securities with the highest historical r isk premium is

A) Large company stocks.

B) Small company stocks.

C) Government bonds.

D) Small company corporate bonds.

10) Stimpson Inc. preferred stock pays a $1.50 annual dividend. What is the value of the stock if your required rate of return is 10%?

A) $.15

B) $1.50

C) $15.00

D) $150.00

11) Backford Company just paid a dividend yesterday of $ 5 per share. The company’s stock is currently selling for $ 10 0 per share, and the required rate of return on Backford Company stock is 1 0 %. What is the growth rate expected for Backford Company dividends assuming constant growth?

A) 3 . 3 7%

B) 4 . 76 %

C) 5 . 6 7%

D) 7 . 65 %

12) The Western State Company’s common stock is expected to pay a $ 4 .00 dividend in the coming year. If investors require a 1 2 % return and the growth rate in dividends is expected to be 8%, what will the market price of the stock be?

A) $10

B) $100

C) $108

D) $118

13) You bought Microsoft stock at $ 10 0 per share, hold the stock for 5 years. The company paid $6, $5 , $6, $10 and $6 dividends in year 1, 2 , 3, 4 and 5 resp. How much would the stock price have to appreciate for you to meet your required rate of return of 6 3%?

A) $120

B) $130

C) $148

D) $168

14) Dynamic Industries paid a dividend of $ 5 on its common stock yesterday. The dividends of Wallace Industries are expected to grow at 10 % per year indefinitely. If the risk free rate is 4 % and investors’ risk premium on this stock is 11 %, estimate the value of Wallace Industries stock 3 years from now.

A) $136.84

B) $146.41

C) $151. 51

D) $164.31

15) You hold a portfolio with the following securities:

Security Value Beta Expected Return

Driscol Corporation 20% 3.20 36.0%

Evening Corporation 40% 1.60 20.0%

Frolic Corporation 40% 0.20 6.0%

What is the expected return for the portfolio?

A) 17.60%

B) 20.67%

C) 23.54%

D) 28.59%

16) Stock Z has an expected return of 16% with a standard deviation of 16%. If returns are normally distributed, then approxima tely two – thirds of the time the return on stock Z will be

A) Between 16% and 32%.

B) Between 0% and 16%.

C) Between – 16% and 16%.

D) Between 0% and 32%.

17) Assume that you have $200,000 invested in a stock that is returning 5%, $200,000 invested in a stoc k that is returning 10%, and $400,000 invested in a stock that is returning 20%. What is the expected return of your portfolio?

A) 10.00%

B) 13.75%

C) 15.00%

D) 17.50%

18) The risk – free rate of interest is 3% and the market risk premium is 5%. Howard Corpo ration has a beta of 2.0, and l ast year generated a return of 8 % with a standard deviation of returns of 27%. The required return on Howard Corporation stock is

A) 13 %.

B) 2 4%.

C) 35 %.

D) 4 2%.

19) If you hold a portfolio made up of the following stocks:

Investment Value Beta

Stock X $4,000 1.5

Stock Y $5,000 1.0

Stock Z $1,000 0.5

What is the beta of the portfolio?

A) 1.33

B) 1.24

C) 1.15

D) 1.00

20) An investor currently holds the following portfolio:

Amount Inves ted

8,000 shares of Stock A $16,000 Beta = 1.3

15,000 shares of Stock B $48,000 Beta = 1.8

25,000 shares of Stock C $96,000 Beta = 2.2

If the risk – free rate of return is 2% and the market risk premium is 7%, then the required return on the portfolio is

A ) 14.91%

B) 15.93%

C) 21.91%

D) 23.93%