Question

47. KO stock is trading at $55 per share the day before the ex-dividend date. KO...

47.

KO stock is trading at $55 per share the day before the ex-dividend date. KO is going to pay a $2 dividend. Where would you expect KO stock to trade on the ex-dividend date, if nothing else changes?

a.

$55
b.

$57
c.

$53
d.

$110

part b 48

Year

Cash Flow

0

-12,000

1

4000

2

5000

3

6000

4

6000

Given the cash flows in the table above, what is the projects Payback Period (assume cash flows are received evenly during the year)?

a.

1.4 years
b.

2.2 years
c.

2.5 years
d.

4 years

part c (55)

ToysToys Corporation wants to borrow $500,000 for one month. It uses its inventory as collateral for a 16% (APR compounded monthly) loan, under a warehouse arrangement where the warehouse fee is $14,000, paid at the end of the month. What is the EAR of this loan for ToysToys?

a.

4.1%
b.

15.4%
c.

17.2%
d.

62.6%
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Homework Answers

Answer #1

Q47 - Option C

Explanation: The stock price down by the same amount of dividend of $2 at ex dividend date.

Stock price = $55-$2

= $53

Q48 - Option C

Explanation: Payback period means in how much time cash flows cover the investment

= Year 1 + Year 2 + Year3/2 = $9,000 + $6,000/2 =$12,000

So, 2.5 years


Hi Student, we are allowed to do one question or 4 parts of the same question which are interlinked. However, i have completed two parts. Please post the third part seperately. Thank you

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