Question
Year 0 Year 1 Year 2 Year 3 Year 4 TOTAL Project A $ (200,000.00) $...
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | TOTAL |
| Project A | |||||
| $ (200,000.00) | $ 25,000.00 | $ 50,000.00 | $ 75,000.00 | $ 100,000.00 | $ 250,000.00 |
| Project B | |||||
| $ (200,000.00) | $ 50,000.00 | $ 75,000.00 | $ 50,000.00 | $ 75,000.00 | $ 250,000.00 |
| Project C | |||||
| $ (200,000.00) | $ 75,000.00 | $ 75,000.00 | $ 50,000.00 | $ 50,000.00 | $ 250,000.00 |
1. You have $200,000 to invest in the above three projects with corresponding cash flows. The discount rate is 8%. Of the three projects, which, according to NPV, should you accept?
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A. Project A and Project B |
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|
B. Project A and Project C |
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C. Project B and Project C |
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D. Accept all the projects |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Totals: |
| Project A | |||||
| $ (200,000.00) | $ 25,000.00 | $ 50,000.00 | $ 75,000.00 | $ 100,000.00 | $ 250,000.00 |
| Project B | |||||
| $ (200,000.00) | $ 50,000.00 | $ 75,000.00 | $ 50,000.00 | $ 75,000.00 | $ 250,000.00 |
| Project C | |||||
| $ (200,000.00) | $ 75,000.00 | $ 75,000.00 | $ 50,000.00 | $ 50,000.00 | $ 250,000.00 |
2. Of the three projects listed above, which project would be your best option?
|
A. Project A |
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B. Project B |
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C. Project C |
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D. None of these |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Totals: |
| Project A | |||||
| $ (200,000.00) | $ 25,000.00 | $ 50,000.00 | $ 75,000.00 | $ 100,000.00 | $ 250,000.00 |
| Project B | |||||
| $ (200,000.00) | $ 50,000.00 | $ 75,000.00 | $ 50,000.00 | $ 75,000.00 | $ 250,000.00 |
| Project C | |||||
| $ (200,000.00) | $ 75,000.00 | $ 75,000.00 | $ 50,000.00 | $ 50,000.00 | $ 250,000.00 |
3. If I decide to borrow my 200K required investment at a rate of 10%, which project would be the best option?
|
A. Project A |
||
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B. Project B |
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C. Project C |
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D. None of these |
4. Christine bought 100 shares of AT&T stock at $32 per share on January 1st, and sold it at $31 in December. The stock paid an annual dividend of $2.02 in that period. What is Christine's total return?
|
A. -3.125% |
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B. 3.29% |
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C. 3.19% |
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D. 6.3% |
5. The Dividend Discount Model is one of the best valuation tools for analyzing a stock because:
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A. It is not a good tool since it is difficult to find the dividend growth rates |
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B. It is the most popular method to value stocks of any company |
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C. It can easily value a company's stock for any company that pays dividends |
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D. It is not one of the best valuation tools since not all stocks pay dividends and few consistently grow their dividends. |
6. Interest Rates are sometimes referred to as:
|
A. Yield |
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B. Future Value |
||
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C. Compounding rate |
||
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D. None of these |
Homework Answers
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