For a price of $1040, Camille will sell you a share which just paid a dividend of $100, and is expected to pay dividends every year forever, growing at a rate of 5% pa.

So the next dividend will be ##100(1+0.05)^1=$105.00##, and the year after it will be ##100(1+0.05)^2=110.25## and so on.

The required return of the stock is 15% pa.

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**?

The equations for Net Income (NI, also known as Earnings or Net Profit After Tax) and Cash Flow From Assets (CFFA, also known as Free Cash Flow to the Firm) per year are:

###NI=(Rev-COGS-FC-Depr-IntExp).(1-t_c)###

###CFFA=NI+Depr-CapEx - \varDelta NWC+IntExp###

For a firm with debt, what is the amount of the interest tax shield per year?

A share was bought for $4 and paid an dividend of $0.50 one year later (at t=1 year).

Just after the dividend was paid, the share price fell to $3.50 (at t=1 year). What were the total return, capital return and income returns given as effective annual rates? The answer choices are given in the same order:

##r_\text{total}##, ##r_\text{capital}##, ## r_\text{income}##

Discounted cash flow (DCF) valuation prices assets by finding the present value of the asset's future cash flows. The single cash flow, annuity, and perpetuity equations are very useful for this.

Which of the following equations is the 'perpetuity with growth' equation?

What is the correlation of a variable X with itself?

The corr(X, X) or ##\rho_{X,X}## equals:

**Question 573** bond pricing, zero coupon bond, term structure of interest rates, expectations hypothesis, liquidity premium theory, forward interest rate, yield curve

In the below term structure of interest rates equation, all rates are effective annual yields and the numbers in subscript represent the years that the yields are measured over:

###(1+r_{0-3})^3 = (1+r_{0-1})(1+r_{1-2})(1+r_{2-3}) ###

Which of the following statements is **NOT** correct?

**Question 693** boot strapping zero coupon yield, forward interest rate, term structure of interest rates

Information about three risk free Government bonds is given in the table below.

Federal Treasury Bond Data |
||||

Maturity |
Yield to maturity |
Coupon rate |
Face value |
Price |

(years) | (pa, compounding semi-annually) | (pa, paid semi-annually) | ($) | ($) |

0.5 | 3% | 4% | 100 | 100.4926 |

1 | 4% | 4% | 100 | 100.0000 |

1.5 | 5% | 4% | 100 | 98.5720 |

Based on the above government bonds' yields to maturity, which of the below statements about the spot zero rates and forward zero rates is **NOT** correct?

**Question 802** negative gearing, leverage, capital structure, no explanation

Which of the following statements about ‘negative gearing’ is **NOT** correct?