1. Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $640,000. The lot was recently appraised at $810,000. At the time of the purchase, the company spent $50,000 to grade the lot and another $4,000 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.2 million. What amount should be used as the initial cash flow for this building project? 

A. $1,200,000
B. $1,840,000
C. $1,890,000
D. $2,010,000
E. $2,060,000

2. Le Place has sales of $439,000, depreciation of $32,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 6%. The firm has no interest expense. What is the amount of the operating cash flow? 

A. $49,384
B. $52,616
C. $54,980
D. $58,340
E. $114,340

3. What are the arithmetic and geometric average returns for a stock with annual returns of 21%, 8%, -32%, 41%, and 5%? 

A. 5.6%; 8.6%
B. 5.6%; 6.3%
C. 8.6%; 5.6%
D. 8.6%; 8.6%
E. 8.6%; 6.3%

4. A stock has returns of 3%, 18%, -24%, and 16% for the past four years. Based on this information, what is the 95% probability range for any one given year? 

A. -8.4 to 11.7%
B. -16.1 to 22.6%
C. -24.5 to 34.3%
D. -35.4 to 41.9%
E. -54.8 to 61.3%

5. Eight months ago, you purchased 400 shares of Winston, Inc. stock at a price of $54.90 a share. The company pays quarterly dividends of $.50 a share. Today, you sold all of your shares for $49.30 a share. What is your total percentage return on this investment? 

A. -10.2%
B. -9.3%
C. -8.4%
D. 12.0%
E. 13.4%

6. Which of the following statements are correct concerning the variance of the annual returns on an investment?

(I) The larger the variance, the more the actual returns tend to differ from the average return.
(II) The larger the variance, the larger the standard deviation.
(III) The larger the variance, the greater the risk of the investment.
(IV) The larger the variance, the higher the expected return. 
A. I and III only
B. II, III, and IV only
C. I, III, and IV only
D. I, II, and III only
E. I, II, III, and IV

7. You purchased 200 shares of stock at a price of $36.72 per share. Over the last year, you have received total dividend income of $322. What is the dividend yield? 

A. 3.2%
B. 4.4%
C. 6.8%
D. 9.2%
E. 11.4%

8. What is the beta of a portfolio comprised of the following securities?

A. 1.008
B. 1.014
C. 1.038
D. 1.067
E. 1.127

ANSWERS