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Stephens Development Company paid a dividend of$1.12 over the last 12 months. the dividend is expected to grow at a rate of 20% over the next 3 years(supernormal growth). It will then grow at a normal constant rate of 7% for the forseeable future. The required rate of return is 12% (this will also serve as the discount rate). compute the current value of the stock?

Papa Sita started a lawnscaping service on January 1, 1999. Every 3 months, he deposits $500 in his bank account, which earns 4% annually but is compounded quarterly. On December 31, 2002, he uses the entire balance in his bank account to invest in a contract that pays 9% annually. How much will he have on December 31, 2005?

What are the major uses of the gross profit method? Can it be used for year end financial statements?

What approaches may be used in applying the lower of cost or market procedure? Which is normally used and why?

What accounting principle is represented by the LCM method? How does that principle effect net income?

Why are inventories valued at the lower of cost or market? What are the arguments against the use of the LCM method of valuing inventories?

1. How long does it take a present value amount to triple if the expected return is 9%?
a. 8.00 periods
b. 8.04 periods
c. 12.00 periods
d. 12.75 periods
e. insufficient information to compute

2. What is the PV of a 5 year annuity due (payments at beginning of period, aka annuity in advance) of $550 if the required return is 6.5%
a. 2286
b. 2434
c. 2750
d. 2582
e. insufficient information to compute

3. You have just taken out a 30 year, $120,000 mortgage on your new home. This mortgage is to be repaid in 360 equal monthly installments. If the stated (nominal) annual interest rate is 14.75 percent, what is the amount of the INTEREST portion of the FIRST monthly installment?
a. $1,475
b. $1,472
c. $1,493
d. $17,700
e. insufficient information to compute

4. What is the EAR for a 9.5% APR with continuous compounding?
a. 7.48%
b. 9.5%
c. 9.97%
d. 10.99%
e. insufficient information to compute

5. Williams Inc. is expected to pay a $3 dividend next year and that dividend is expected to grow at 4% every year thereafter. If the discount rate is 10%, what would be the present value of the expected dividend stream (aka the expected price of the firm s stock)?
a. 50.00
b. 30.00
c. 0.50
d. 75.00
e. 55.00

6. Your salary next year is expected to be $40,000. Assume you expect your salary to grow at a steady rate of 4% per year for another 25 years. If the appropriate cost of capital (aka discount rate) is 9%, what is the PV today of your future salary cashflow stream? [For simplicity, assume the salary amounts are at the end of each of the next 25 years.] Answer to nearest $1000.
a. 246,000
b. 247,000
c. 391,000
d. 553,000
e. 800,000

7. Chrysler is offering a choice of either 48 month 2.0% APR financing, OR $2000 cash back if you pay cash on a car purchase. The stated price is $25,000. If you can obtain bank financing at 5.75% APR (monthly compounding), what would be the implied monthly loan payments if use your bank for financing and thus drop the price by the $2000 cash rebate? Assume 48 month term for the bank loan also.
a. 815
b. 2168
c. 616
d. 538
e. insufficient information to compute

8. You are offered the opportunity to buy a note for $10,000. The note is certain to pay $2000 at the end of each of the next 10 years. If you buy the note, what rate of interest will you receive on this investment (to nearest %)
a. 15%
b. 100%
c. 20%
d. 16%
e. insufficient information to compute

9. Next year you will begin receiving $155 dollars per year in perpetuity from your grandparent s family trust fund (first payment is exactly 1 year from today). You consider these payments essentially risk free and have decided to discount them at a constant risk free rate of 6.5%. What is the present value today of these future cash flows? (Hint: draw a time line to illustrate exactly the cash flows for this problem.)
a. 1353
b. 2385
c. 1270
d. 146

10. In 10 years you will begin receiving $155 dollars per year in perpetuity from your grandparent s family trust fund (first payment is exactly 10 years from today). You consider these payments essentially risk free and have decided to discount them at a constant risk free rate of 6.5%. What is the present value today of these future cash flows? (Hint: draw a time line to illustrate exactly the cash flows for this problem.)
a. 1353
b. 2385
c. 1270
d. 146

You have been hired as a consultant to present a one hour seminar before a group of investment and corporate professionals. The main part of your job is to explain how behavioral phenomena may help the attendees to become more effective decision makers.

Furthermore, your presentation is even more focused; as your talk will be exclusively based on your learnings from Kahneman & Tversky s Prospect theory: An analysis of decision under risk . In other words, just use that article as the sole focus for your presentation and response.

Furthermore and in addition to what you wrote in above based on Prospect theory, add your own insights related to the main question as asked in above. In other words, share your own views as how the attendees can become more effective decision makers in their line of business.