# ABC Company offers a perpetuity which pays annual payments of $9,478. This contract sells for $276,415 today. What is the interest rate?

**ProTutor11**

**//**kindly check the attachment for questions//

**Question 1 **

- ABC Company offers a perpetuity which pays annual payments of $9,478. This contract sells for $276,415 today. What is the interest rate?

*Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.*

**Question 2 **

- Consider a taxable bond with a yield of 11.9% and a tax-exempt municipal bond with a yield of 5.9%. At what tax rate would you be indifferent between the two bonds?

*Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.*

**Question 3 **

- What is the effective rate of 15.28% compounded quarterly?

*Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.*

**Question 4 **

- The present value of a 11-year annuity is $200,958. If the interest rate is 10% and payments are made at the end of each period, what is the amount of each payment?

Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.

**Question 5 **

- A project has the following cash flows. What is the internal rate of return?

Year 0 1 2 3

Cash flow -$121,000 68,150 $42,200 $39,100

| 12.71% | |

| 14.39% | |

| 14.82% | |

| 13.85% | |

| 13.47% |

**Question 6 **

- If the coupon rate is greater than the yield to maturity, the bond will:

| sell at par | |

| sell at a discount | |

| sell at a premium |

**Question 7 **

- The common stock of ABC Industries is valued at $41.1 a share. The company increases their dividend by 4.5 percent annually and expects their next dividend to be $1.53. What is the required rate of return on this stock?

**Question 8 **

- A stock just paid a dividend of D
_{0}= $1.2. The required rate of return is r_{s}= 19.9%, and the constant growth rate is g = 3.8%. What is the current stock price?

*Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.*

**Question 9 **

- Standard deviation measures:

| unsystematic risk | |

| total risk | |

| systematic risk | |

| economic risk | |

| diversifiable risk |

**Question 10 **

1. You have a portfolio of two risky stocks which turns out to have no diversification benefit. The reason you have no diversification is the returns:

| are too small. | |

| move perfectly with one another. | |

| are too large to offset. | |

| are completely unrelated to one another. | |

| move perfectly opposite of one another. |

**Question 11 **

- If the market value of debt is $128,853, market value of preferred stock is $125,479, and market value of common equity is 161,266, what is the weight of preferred stock?

**Question 12 **

- A bond that sells for less than face value is called as:

| debenture | |

| discount bond | |

| perpetuity | |

| premium bond | |

| par value bond |

**Question 13 **

1. The ABC Company has a cost of equity of 12.6 percent, a pre-tax cost of debt of 5.3 percent, and a tax rate of 38 percent. What is the firm’s weighted average cost of capital if the weight of debt is 67 percent?

*Note: Enter your answer in precentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.*

**Question 14 **

- ABC Company's last dividend was $3.1. The dividend growth rate is expected to be constant at 8% for 3 years, after which dividends are expected to grow at a rate of 3% forever. The firm's required return (r
_{s}) is 15%. What is its current stock price (i.e. solve for Po)?

*Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.*

**Question 15 **

- ABC company’s market value of common stock is $200 million, preferred stock is $300 million, and debt is $500 million. Suppose that the cost of equity is 7%, the before-tax cost of debt is 4.8%, cost of preferred stock is 5%, and the tax rate is 25%.

Compute the WACC.

**Question 16 **

- The principal amount of a bond that is repaid at the end of term is called the par value or the:

| coupon value | |

| call premium | |

| perpetuity value | |

| back-end value | |

| face value |

**Question 17 **

- You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.49. What does the beta of the second stock have to be if you want the portfolio to have a beta of 0.66?

Enter your answer rounded off to two decimal points.

**Question 18 **

- Based on the following data, calculate the returns for June 2014

Year | Month | Div | Price |

2012 | May | $0.50 | $15.14 |

2012 | June | $0.60 | $18 |

2012 | July | $0.70 | $22.12 |

Enter your answer in percentages rounded off to two decimal points.

**Question 19 **

- ABC, Inc. has 4 percent bonds outstanding that mature in 25 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $900 each. What is the firm's after-tax cost of debt if the tax rate is 25%?

Enter your answer as a percentage rounded off to two decimal points.

**Question 20 **

- An investor puts $25,000 in a risk-free asset and $50,000 in the market portfolio. Compute the beta of his portfolio.

| 2 | |

| 0.67 | |

| 0.33 | |

| 1 | |

| 0.50 |

- 10 years ago

**A+ Answers - Most Economical & Accurate - Expert solution**

Purchase the answer to view it

- solution-4010.docx