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32. Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio's beta?

0.93
0.98
1.03
1.08
1.13

33.
A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 7%, and if investors require a(n) 11% rate of return, what is the price of the stock?

$47.50
$49.00
$50.50
$52.00
$53.50

34.
Wagner Inc estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?

Project A is of average risk and has a return of 9%.
Project B is of below-average risk and has a return of 8.5%.
Project C is of above-average risk and has a return of 11%.
None of the projects should be accepted.
All of the projects should be accepted.

35.
The regular payback method has a number of disadvantages. Which of the following items is NOT a disadvantage of this method?

Lack of an objective, market-determined benchmark for making decisions.
Ignores cash flows beyond the payback period.
Does not directly account for the time value of money.
Does not provide any indication regarding a project's liquidity.
Does not directly account for differences in risk among projects.

36.
The relative risk of a proposed project is best accounted for by

Adjusting the discount rate upward if the project is judged to have above average risk.
Adjusting the discount rate downward if the project is judged to have above average risk.
Reducing the NPV by 10% for risky projects.
Picking a risk factor equal to the average discount rate.
Ignoring it because project risk cannot be measured accurately.

37.
A firm is considering the purchase of an asset whose risk is greater than the firm's current risk, based on all methods for assessing risk. In evaluating this asset, it would be reasonable for the decision maker to

Increase the IRR of the asset to reflect its greater risk.
Increase the NPV of the asset to reflect the greater risk.
Reject the asset, since its acceptance would increase the firm's risk.
Ignore the risk differential if the project would amount to only a small fraction of the firm's total assets.
Increase the cost of capital used to evaluate the project to reflect the project's higher risk.

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32. Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio's beta?

0.93
0.98
1.03
1.08
1.13

Answer:

1.13
Weight of stock * Beta
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33.
A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 7%, and if investors require a(n) 11% rate of return, what is the price of the stock?

$47.50
$49.00
$50.50
$52.00
$53.50

Answer:

$53.50
MP0 = D1/(Ke-g)

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34.
Wagner Inc estimates that its ...

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