Question

Phoenio Company common stock is currently selling for $20 per share. Security analysts at Smith Blarney have assigned the following probability distribution to the price of (and rate of return on) Phoenix stock one year from now: Price Rate of Return Probability $16 –20% 0.25 20 0% 0.30 24 +20% 0.25 28 +40% 0.20 Assuming that Phoenix is not expected to pay any dividends during the coming year, determine the risk of the possible rates of expected return on Phoenix’s stock (to the nearest tenth of a percent).

Select one:

a. 19% b. 2.5% c. 21.4% d. 20.4% e. 45.6%

A project that requires an initial investment of $100,000 will generates a free cash flow of $25,000 per year over its useful life of 4 years. What is expected to be the net present value (NPV) of this undertaking assuming a weighted cost of capital of 10%? Round to he nearest dollar.

Select one:

a. a. $110.00

b. b. $256.00

c. c. - $110

d. d. -$ 5259

e. e. None of the above

Suppose the municipal bond tax-free (M) pays 4.65% and the investor is at a marginal tax rate of 32%. This being he situation, then the equivalent taxable rate corporate bond (C) would be. You have your own notes, but recall that M = C(1 - t), where t is taxes. Rounding to two decimal places in the %, the corporate bond should pay is closest to:

Select one:

a. a. 3.5%

b. b. 6.46%

c. c. 6.84%

d. d. 6.14 %

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -