11. A tech firm recently paid a dividend of $1.00 per share. The dividend is expected to increase at a 25 percent rate (g=25%) for the next 3 years. Afterwards, the grow rate of the dividend becomes zero (g=0) due to competition. If a 10 percent required rate of return is appropriate for this stock, what is its present value? A. $21.48 B. $18.57 C. $13.02 D. $13.67 E. None of the above

12. As the cost of capital is increased, the NPV of a specific project will: A. increase. B. decrease. C. remain constant. D. decrease to zero, then remain constant E. cannot be determined

13. As the director of capital budgeting for ABC Corporation, you are evaluating two mutually exclusive projects with the following net cash flows: Year Project A Project B 0 -$100,000 -$100,000 1 50,000 10,000 2 40,000 30,000 3 30,000 40,000 4 10,000 60,000 If ABC's cost of capital is 15 percent, which project would you choose? A. Neither project. 4 B. Project A, since it has the higher IRR. C. Project B, since it has the higher IRR. D. Project A, since it has the higher NPV. E. Project B, since it has the higher NPV.

14. As the director of capital budgeting for Boeing Company, you are evaluating two mutually exclusive projects with the following net cash flows: Year Cash Flow X Cash Flow Y 0 -$100 -$100 1 50 10 2 40 30 3 30 40 4 10 60 What is the crossover rate, if any A. 7.17% B. -33.04% C. 33.04% D. Cannot be determined E. None of the above

15. Block enterprises is manufacturing firm. The company just paid a $14 dividend, but management expects to reduce the payout by 8% each year indefinitely. How much are you willing to pay today per share to buy this stock if you require a 15% rate of return? Hint: g is negative. A. $56.00 B. $15.00 C. $35.92 D. $51.07 E. $41.00

16. Circuit City Stores (CC) recently paid a $.16 dividend. The dividend is expected to grow at a 23 percent rate. At the current stock price of $7.96, what is the return shareholders are expecting? Set your decimal places to 4 places and assume the stock is in equilibrium. A. 2.01% B. 23.00% C. 24.02% D. 25.47% E. None of the above 5

17. Compute the IRR for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10%. Time: 0 1 2 3 4 5 Cash Flow: -1300 400 400 400 400 400 A. 16.32%; accept B. 16.32%; reject C. 13.44%; accept D. 13.26%; reject E. None of the above

18. Compute the NPV for Project X and accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent. Year 0 1 2 3 4 5 Cash Flow -$1000 -$75 $100 $100 $0 $2000 A. $-639.96 B. $360.04 C. $392.44 D. $486.29 E. $530.06

19. Compute the expected return given these three economic states, their likelihoods, and the potential returns. Please set your decimal places to 6 places. Economic State Probability Return Fast Growth 0.2 30% Slow Growth 0.5 6% Recession 0.3 -2% A. 8.4% B. 9.6% C. 17.0% D. 19.0% E. None of the above

20. Financial analysts forecast GE growth for the future to be 10 percent. Their recent dividend was $0.83. What is the value of their stock when the required rate of return is 12 percent? A. $0.4150 6 B. $0.4565 C. $41.50 D. $45.65 E. None of the above

21. For corporations, maximizing the value of owner's equity can also be stated as A. maximizing retained earnings B. maximizing earnings per share C. maximizing net income D. maximizing the stock price E. maximizing market share