**Please show work 60) What is the value of a preferred stock that pays a $3.50

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**Please show work

60) What is the value of a preferred stock that pays a $3.50 dividend to an investor
with a required rate of return of 9% (round your answer to the nearest
$1)?
a. $23
b. $39
c. $31.50
d. $17


61) Preferred stock differs from common stock in that
a. preferred stock dividends are fi xed.
b. common stock investors have a required return and preferred stock investors
do not.
c. preferred stock investors have a higher required return than common stock
investors.
d. preferred stock usually has a maturity date.

63) Chambers Corporation’s ROE is 18%. Their dividend payout ratio is 80%.
The last dividend, just paid, was $2.20. If dividends are expected to grow by
the company’s internal growth rate indefi nitely, what is the current value of
Chambers common stock if its required return is 20%?
a. $12.89
b. $12.56
c. $15.43
d. $13.90

66) Northwest Industries is considering a project with the following cash fl ows:
Initial Outlay = $2,800,000
After-tax operating cash fl ows for years 1-4 = $850,000 per year
Additional after-tax terminal cash fl ow at end of Year 4 = $125,000
Compute the net present value of this project if the company’s discount rate
is 14%.
a. $239,209
b. $725,000
c. -$138,561
d. -$249,335


67) Compute the payback period for a project with the following cash fl ows re
ceived uniformly within each year:
Initial Outlay = $100
Cash Flows: Year 1 = $40
Year 2 = $50


69) Your fi rm is considering an investment that will cost $750,000 today. The
investment will produce cash fl ows of $250,000 in year 1, $300,000 in
years 2 through 4, and $100,000 in year 5. The discount rate that your fi rm
uses for projects of this type is 13.25%. What is the investment’s profi tability
index?
a. 1.4
b. 1.6
c. 1.2
d. .2


Year 3 = $60
a. 2.17 years
b. 3 years
c. 4 years
d. 3.17 years

Explanation / Answer

60. b. $39 3.5/.09 = 39 61. a. preferred stock dividends are fixed. FACT 63. c. $15.43 67. 2.67 years 69. b. 1.6 please rate

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