please help

1 - Multiple Choice (45 points - 45 minutes) - Circle the right answer AND write the letter in the corresponding area. 1. Baker Company has forecast earnings growth of 5.0 percent, with required return on equity of 10.0 percent. Baker has typically retained 40 percent of earnings and expects to continue to do so. Baker's justified forward (leading) P/E based on the forecasted fundamentals is closest to: A 80 B. 12.0 C 13.0 Answer: 2. Elaine Smith has been given responsibility for developing General Pacific Companys capital budgeting policy manual. In a meeting with her team, she makes the following statements: Statement 1: "The equivalent annual annuity approach assumes continuous replacements can and will be made each time the asset's life ends." Statement 2: "In comparing mutually exclusive projects with unequal lives, you should always choose the project that has the highest NPV." Is Smith most likely correct or incorrect with regards to the statements? A. Both statements are correct. B. Only one of the statements is correct. C. Neither statement is correct. Answer: 3. Given the following information on the annual operating results for Art Frames, a producer of quality metal picture frames: Sales of $3,500,000 Variable costs at 45% of sales Fixed costs of $1,050,000 Debt interest payments on $750,000 issued at par with an annual 9.0% coupon, markety is currently 7.0% Art Frame's degree of operating leverage (DOL) and degree of financial leverage (DFL) are closest to A B. c. DOL 3.00 2.20 2.20 DEL 1.50 1.08 1.50