Q1. What is the percentage total return on a stock that had an initial price of $70 per share, paid a dividend of $2.50 per share for the year, and had an ending price for the year of $74.50?
Q2. What is the expected rate of return on a portfolio where 20% is invested in Stock X, 30% in Stock Y, and 50% in Stock Z if the expected returns on the three stocks are 10%, 18%, and 13%, respectively?
Q3. You need to decide whether to purchase a particular machine which will be obsolete in 10 years no matter what you do. The machine will increase your cash flow by $180,000 per year. The machine costs $1,000,000 today, but will decrease in price by $100,000 per year until it reaches a price of $500,000 where it will remain for the remainder of the time it is useful. If your required rate of return is 12%, should you purchase the machine, and if so, when?
Q4. What is a company's payout ratio if it just declared an annual dividend of $0.50 on an earnings per share of $8?
Q5. What is a company's cost of equity if it has no debt, but can borrow at 9%, and has a WACC of 15%, and a tax rate of 35%? What would the cost of equity be if the firm converted to 25% debt?
Q6. What is a company's cost of equity if it just issued a dividend of $2.50 per share on a share valued currently at $40, and where the company is expected to maintain a 7% growth rate in that dividend indefinitely?