# 1.The Ramirez company last dividend was $1.75

1.The Ramirez company last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for two years after which dividends are expected to grow 6% forever. It is required return (rs)is 12%. Which is the best estimate of the current stock price?a. 41.58b.42.64c. 43.71d. 44.8045.922.Consider the information for the following four firms.FirmCashDebtEquityrDrE??cEenie01501505%10%40%Meenie02507506%12%35%Minie251753256%11%35%Moe503501507.50%15%30%Which is the weighted average cost of capital for Meenie closest to?A) 10.5%B) 7.4%C) 10.0%D) 8.8%3. Zervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an improved inventory management system could lower the average inventory by $4,000, (b) that improvements in the credit department could reduce receivables by $2,000, and (c) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?OriginalRevisedAnnual sales: unchanged Cost of goods sold: unchanged Average inventory: lowered by $4,000 Average receivables: lowered by $2,000 Average payables: increased by $2,000 Days in year$110,000 $80,000 $20,000 $16,000 $10,000 365$110,000 $80,000 $16,000 $14,000 $12,000 365a. 34.0b. 37.4c. 41.2d. 45.3e. 49.8 (Points : 30)4. Your firm is planning to invest in a new power generation system. Galt Industries is an all-equity firm that specializes in this business. Suppose Galts equity beta is 0.75, the risk-free rate is 3%, and the market risk premium is 6%. If your firms project is all equity financed, then which is your estimate of your cost of capital closest to?A) 5.25%B) 6.00%C) 6.75%D) 7.50%(Points : 30)(TCO D) 5.Which is the standard deviation of the returns on Stock A from 2000 to 2009 closest to?Year EndStock A Realized Return(R R)(R R)2200046.3%29.85%0.0891023200126.7%10.25%0.0105063200286.9%70.45%0.4963203200323.1%6.65%0.004422320040.2%-16.25%0.02640632005-3.2%-19.65%0.03861232006-27.0%-43.45%0.1887903200727.9%11.45%0.01311032008-5.1%-21.55%0.04644032009-11.3%-27.75%0.0770063A) 33.2%B) 16.4%C) 31.5%D) 11.0%6. You expect CCM Corporation to generate the following free cash flows over the next 5 years.Year12345FCF ($ millions)2528323740Following Year 5, you estimate that CCMs free cash flows will grow at 5% per year and that CCMs weighted average cost of capital is 13%.Which is the enterprise value of CCM Corporation closest to?A) $396 millionB) $290 millionC) $382 millionD) $350 million(Points : 35)7. TCO C) Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its nonfree trade credit? (Assume a 365-day year.) a. 20.11%b. 21.17%c. 22.28%d. 23.45%e. 24.63%(Points : 30)