# Fight Finance

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A project to build a toll road will take 3 years to complete, costing three payments of $50 million, paid at the start of each year (at times 0, 1, and 2). After completion, the toll road will yield a constant$10 million at the end of each year forever with no costs. So the first payment will be at t=4.

The required return of the project is 10% pa given as an effective nominal rate. All cash flows are nominal.

What is the payback period?

A share was bought for $30 (at t=0) and paid its annual dividend of$6 one year later (at t=1).

Just after the dividend was paid, the share price fell to $27 (at t=1). What were the total, capital and income returns given as effective annual rates? The choices are given in the same order: $r_\text{total}$ , $r_\text{capital}$ , $r_\text{dividend}$. A stock is expected to pay the following dividends:  Cash Flows of a Stock Time (yrs) 0 1 2 3 4 ... Dividend ($) 2 2 2 10 3 ...

After year 4, the dividend will grow in perpetuity at 4% pa. The required return on the stock is 10% pa. Both the growth rate and required return are given as effective annual rates.

What will be the price of the stock in 5 years (t = 5), just after the dividend at that time has been paid?

Examine the following graph which shows stocks' betas $(\beta)$ and expected returns $(\mu)$:

Assume that the CAPM holds and that future expectations of stocks' returns and betas are correctly measured. Which statement is NOT correct?

In the dividend discount model:

$$P_0= \frac{d_1}{r-g}$$

The pronumeral $g$ is supposed to be the:

An abandonment option is best modeled as a or option?

Apples and oranges currently cost \$1 each. Inflation is 5% pa, and apples and oranges are equally affected by this inflation rate. Note that when payments are not specified as real, as in this question, they're conventionally assumed to be nominal.

Which of the following statements is NOT correct?

A continuously compounded semi-annual return of 5% $(r_\text{cc 6mth})$ is equivalent to a continuously compounded annual return $(r_\text{cc annual})$ of:

Question 768  accounting terminology, book and market values, no explanation

Accountants and finance professionals have lots of names for the same things which can be quite confusing.

Which of the following groups of items are NOT synonyms?

Which one of the following statements is NOT correct? A 1-for-4 bonus issue: