1.   Your firm is interested in purchasing an asset using a loan and savings combination. The asset costs $200,000 and you plan to pay 27% of that cost with your own savings. If the loan payments are monthly for five years and the APR is 5.40%, what will be your monthly loan payments?

a.    $2,652

b.    $2,688

c.    $2,720

d.    $2,754

e.    $2,782

2.   You are a senior analyst of a mutual fund, and you are analyzing a publicly listed stock. The stock just paid a dividend of $2.40 this morning. You expect the dividends to grow at 5% per year. If the stock price is $52.50, what will be the price of this stock at the end of Year 2?

a.    $56.92

b.    $57.20

c.    $57.88

d.    $58.36

e.    $58.95

3.   You bought a 20-year annual coupon bond two years ago. The coupon rate of the bond is 4%, the (initial) YTM was 5.75%, and the face value of the bond is $1,000. Today, you sold the bond (right after the second coupon payment). Today’s YTM is 5.92%. If you reinvested your coupons at the initial YTM, what is your holding period return (HPR)?

a.    14.03%

b.    12.35%

c.    10.99%

d.   9.81%

e.    9.15%

4.    Imagine that you have an income of $70,000 this year and $95,000 next year. The market interest rate is 6% pa. There is an investment project, which requires an investment of $42,000 today and it offers $45,500 next year. Considering the information given above, what is the maximum consumption you can achieve next year?

a.    $168,500

b.    $169,250

c.    $169,880

d.    $170,180

e.    $170,720

5.    Imagine a project with an initial investment of $430,000. The project offers FCF of $0 for the first two years. In Year 3, the FCF increases to $110,000. Starting from Year 4, the FCF will grow 5% per year. If the discount rate is 9.3% pa and the project is expected to last 10 years, what is the NPV of the project?

a.    $155,672

b.    $158,097

c.    $156,405

d.    $159,158

e.    $154,910

6.   You have $100,000 to invest. You put $40,000 into stock A and the rest into stock B. The expected returns of stock A and stock B are 10.9% and 13.4%, respectively. The standard deviations of stock A and stock B are 8.5% and 11%, respectively. If the correlation between these two stocks is 0.27, what are the expected return and risk of your portfolio?

a.    E(Rp) = 12.40%, StDev(Rp) = 8.20%

b.    E(Rp) = 12.40%, StDev(Rp) = 8.66%

c.    E(Rp) = 12.40%, StDev(Rp) = 9.03%

d.    E(Rp) = 12.15%, StDev(Rp) = 7.80%

e.    E(Rp) = 12.15%, StDev(Rp) = 8.54%

7.   The CFO of Firm X is trying to determine their WACC and asked your help with this task. According to the CFO, they have 14M shares outstanding with the market price of $67. The cost of equity is 12% pa. They also have 900,000 units of zero-coupon bonds (ZCB) outstanding. The ZCB has 15 years left to maturity, currently trading at $495, and the face value of $1,000. If the  corporate tax rate is 20%, what is the WACC of Firm X?

a.    9.10%

b.   9.37%

c.    9.52%

d.   8.98%

e.    9.25%

8.    Imagine a project with the initial investment of $122M. The FCF in the first year is $25M. The FCFs will grow at 10% per year until Year 4. After that, the growth rate will be zero until Year 10. If the discount rate is 8.7% pa, please calculate the profitability index (PI) and payback period (PBP) of this project?

a.    PI = 1.652, PBP = 4.18 years

b.    PI = 1.433, PBP = 4.18 years

c.    PI = 1.652, PBP = 4.73 years

d.    PI = 1.433, PBP = 4.73 years

9.    Imagine an asset your firm needs to acquire. If you buy this asset, it will cost you $120,000 and it has an economic life of five years. If you buy this asset, you will depreciate it to zero with straight-line method. The corporate tax rate is 25%. If the after-tax cost of debt is 8%, at what annual lease payments (made at the end of year) will you be indifferent?

a.    $29,586

b.    $30,105

c.    $30,859

d.    $31,437

e.    $32,073