Sub: Finance Topic: Strategic Financing Decisions
Multiple choice questions on cost of capital and capital structure.
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1. You form a portfolio by investing equally in A (beta=0.8), B (beta=1.2), the risk-free
asset, and the market portfolio. What is your portfolio beta?
2. The Pancratz Company bonds are currently selling for $1,041.30. These bonds mature in
seven years, pay semi-annual interest and have a yield-to-maturity of 6.75%. What is the
3. Tami Industries issued dividends totalling $0.60 last year. For the next two years, they
expect dividends to increase by 50% annually and then remain constant thereafter. How
much is one share of Tami Industries stock