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NEW QUESTION: 1

A. Option A
B. Option B
C. Option C
D. Option D
Answer: D

NEW QUESTION: 2
Seasons, Inc. has just decided to issue 1 million shares of new equity. The firm has had a steady dividend growth of 3% and is expected to continue along this path, having just paid a $3.23 per share dividend. The flotation costs for the new equity amount to 2.2% of the total capital raised and the firm receives $31.4 million before flotation costs, calculate the cost of external equity.
A. 13.83%
B. 13.23%
C. 13.52%
D. 14.19%
Answer: A
Explanation:
Explanation/Reference:
Explanation:
IF F is the percentage flotation cost and P is the amount of new equity raised per new share, then Ke = D1/
[P(1-F)] + g, where Ke is the cost of external equity. Here, g = 3%, D1 = 3.23*(1+3%) = $3.32, P = $31.4 and F = 2.2%. Therefore, Ke = 3.32/(31.4*(1-0.022)) + 3% = 13.83%.

NEW QUESTION: 3
A project has an initial outlay of $1,000. The projected cash inflows are:

What is the investment's payback period?
A. 4.0 years.
B. 3.5 years.
C. 3.0 years.
D. 3.4 years.
Answer: B
Explanation:
Choice "b" is correct. The payback period is computed as the number of years required to fully recover the
original investment with out respect to the time value of money. With uneven cash flows, the payback
period is computed by development of a cumulative payback balance converted to years as follows:

Choice "a" is incorrect. Although the payback occurs in the fourth year, only half the year is required. The
payback period is 3.5, not 4.0 years.
Choice "c" is incorrect. Although the payback occurs in the fourth year, half the year is required.
The payback period is 3.5, not 3.4 years.
Choice "d" is incorrect. The payback occurs in the fourth year. The payback period is 3.5, not 3.0 years.
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