Finance Exam 3

The length of time a firm must wait to recoup the money it has invested in a project is called the:

payback period

McCanless Company recently purchased an asset for $2,650,000 that will be used in a 3-year project. The asset is in the 4-year MACRS class. The depreciation percentage each year is 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. What is the amount of depreciation in Year 2?

$1177,925

A firm has a current EPS of $1.63 and a benchmark PE of 11.7. Earnings are expected to grow 2.6 percent annually. What is the target stock price in one year?

$19.57

Symon's Suppers Company has announced that it will pay a dividend of $4.53 per share one year from today. Additionally, the company expects to increase its dividend by 3.5 percent annually. The required return on the company's stock is 121 percent. What is the current share price?

$52.67

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

Common

Which of the following is NOT a characteristic of modern stock exchanges?

Lots of human involvement on the floors of the exchanges

If a firm accepts Project X It will not be feasible to also accept Project Z because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be:

Mutually Exclusive

You own stock in company ABC and have decided to seil your shares. You place a limit sell order with a limit price of $68 when ABC is trading for $65. What will happen to your order when it arrives at the exchange?

Your order will not exocute and will be placed in the limit order book based on oricetime oriority

The internal rate of return is defined as the:

discount rate which causes the net present value of a project to equal zero

Which one of the following will decrease the net present value of a project?

increasing the project's initial cost at time 0

The stand-alone principle advocates that project analysis should be based solely on which one of the following costs?

incremental

The difference between a company's future cash flows If it accepts a project and the company's future cash flows if it does not accept the project is referred to as the project's:

incremental cash flows.

The annual dividend yield is computed by dividing annual dividend by the current stock price.

next year

Pro forma financial statements can best be described as financial statements:

that state projected values for future time periods.