QUESTION 14 Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? A B Price $25 $40 Expected growth Expected return 7% 9% 10% 12% a. The two stocks could not be in equilibrium with the numbers given in the question. b. B's expected dividend is $0.75. c. A's expected dividend is $0.50. d. The two stocks should have the same expected dividend. e. A's expected dividend is $0.75 and B's expected dividend is $1.20. QUESTION 15 Taggart Inc. is considering a project that has the following cash flow data. What is the project's payback? Year 0 1 2 3 Cash flows -$925 $500 $500 $500 a. 1.85 years b. 1.42 years c. 1.96 years d. 2.29 years e. 1.79 years QUESTION 16 Harry's Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected. WACC: 13.25% Year 0 1 2 3 4 5 Cash flows -$1,000 $300 $300 $300 $300 $300 a. 49.25 b. 48.76 c. 52.18 O d. 55.10 e. 41.45 QUESTION 17 Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $4.00 per share. If the required return on this preferred stock is 6.5%, then at what price should the stock sell? a. $48.00 b. $52.92 c. $63.38 d. $61.54 e. $64.62 QUESTION 19 Dyl Inc.'s bonds currently sell for $970 and have a par value of $1,000. They pay a $65 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM)? a. 5.26% b. 6.83% c. 6.96% d. 7.92% e. 5.87% QUESTION 20 Morin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65. The market requires an interest rate of 6.7% on these bonds. What is the bond's price? a. $1,047.19 b. $987.92 c. $1,155.86 d. $1,215.14 e. $770.58