Which of the following risk types can be diversified away by adding stocks to a
ID: 2699789 • Letter: W
Question
Which of the following risk types can be diversified away by adding stocks to a portfolio?
Inflation risk
Unique risk
Interest rate risk
Market risk
What are free cash flows (FCF) for a firm with ... EBITDA = 6,000, EBIT = 5,000, Net Income = 4,000, Taxes = 300, Depreciation = 1,000, this year's current assets = 4,000, this year's current liabilities = 1,000, last year's current assets = 5,000, last year's current liabilities = 2,000, and Dividends = 300, and Capital expenditures = 1,000.
Answer
4,400
4,700
5,700
none of the above
An investor buys a stock for $80, and one year later receives a $5 dividend and sells the stock for $79. What was the investor's return?
Answer
2%
4%
5%
8%
What is the WACC for a firm with 20% debt, 50% equity and 30% preferred equity? Assume its cost of debt is 11%, cost of equity is 20% and its cost of preferred equity is 15%. The tax rate is 35%.
Answer
12.6%
14.0%
14.9%
15.9%
Which of the following changes in working capital will result in an increase in cash flows?
Answer
Increase in accounts payable
Increase in inventories
Increase in accounts receivable
Decrease in other current liabilities
How much would you need to save every year starting next year for you to have $10,000,000 in your retirement account in 20 years. Assume all interest is reinvested and the rate on the account is 12%.
Answer
$135,665
$138,074
$138,787
$145,109
What is the present value of a 5 period annuity of $3,000 if the interest rate is 12% and the first payment is in one period?
Answer
9,112
10,814
12,112
13,200
What is worth more, $100 in one year or $121 in three years if interst rates are 15%?
Answer
$100 in one year
$121 in three years
They are equal
None of the above
A stock is expected to have a dividend of $10 in one year and $11 in two years and then grow its dividend at a constant 10%/year forever. If the discount rate is 12%, what should be the current stock price?
250
450
500
None of the above
When a sole proprietorship fails, the maximum that can be lost by the proprietor is:
the amount of her invested money.
the amount of the profit on the investment.
the amount necessary to pay her debts.
the amount of the proprietor's personal wealth.
Beta measures a stock's sensitivity to unique risk.
True
False
The discount rate that makes the npv = 0:
internal rate of return.
yield to maturity.
current yield.
coupon rate.
What is the periodic rate for a 12% APR assuming quarterly compounding?
1%
2%
3%
4%
Which of the following cash flows should be included when calculating a proposed project's future cash flows?
project expenses already paid for
financing costs
sunk costs
taxes
Question 38
If you own a share of stock in Apple and decide to sell it through your broker, the share will be sold on a primary market.
True
False
Inflation risk
Unique risk
Interest rate risk
Market risk
Explanation / Answer
Interest rate risk ;
4700 ;
(79+5-80)/80 = 0.05 = 5 % ;
WACC = 0.2*11*(1-0.35) + 0.5*20 + 0.3*15 = 15.93 % ;
Suppose you save P each year ; P*(1.12^19) + P*1.12^18 +................P = 10,000,000 ;
P = $138,787 ;
PV = 3000/1.12 + 3000/1.12^2 +.....3000/1.12^5 = 10814 ;
I have a doubt in this one ???? clarify more ;
PV ($100 in 1 year) = 100/1.15 = 86.956 ;
PV (121 in 3 years) = 121/1.15^3 = 79.559 ;
ans is $100 in one year;
Price = 10/1.12 + 11/1.12^2 + 11*1.1/(0.12-0.1)*1.12^3 = 45
the amount of her invested money.;
False ;
internal rate of return;
3% ;
financing costs;
. False
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