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FIN 410 FINAL EXAM
1. You have a portfolio with a beta of 3.1. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 15 percent in a stock with a beta of 4.5?
2. PNB Industries has 20 million shares of common stock outstanding with a market price of $18.00 per share. The company also has outstanding preferred stock with a market value of 50 million, and $500,000 bonds outstanding, each with face value $1,000 and selling at 97% of par value. The cost of equity is 15%, the cost of preferred is 12% and the cost of debt is 8.50%. If PNB’s tax rate is 40%, what is the WACC?
3. A 2 – year Treasury security currently earns 5.13%. Over the next 2 years, the real interest rate is expected to be 2.15% per year and the inflation premium is expected to be 1.75% per year. Calculate the maturity risk premium on the 2 year Treasury Security.
4. Which of the following statements is correct?
5. Netflicks, Inc. has a beta of 3.61. If the market return is expected to be 13.2 percent and the risk free rate is 7%, what is Netflick’s risk premium?
6. Which of the following is incorrect?
7. Financial analysts forecast ABC Inc. growth for the future to be 12%. ABC’s recent dividend was $1.60. What is the value of ABC stock when the required return is 15%?
8. Which of the following is not correct with respect to derivative securities?
9. A firm reported a profit margin of 8.5%, total asset turnover of 0.85 times, debt to equity ratio of 0.90 times, net income of $550,000, and dividends paid to common stockholders of $100,000. The firm has no preferred stock outstanding. What is the firms internal growth rate?
10. A firm has an ROE of 14% and a debt ratio of 40%. If the total asset turnover is 3.4, what i