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 You purchase 100 shares of stock for $25 a share. The stock pays a $3 per share dividend at year-end. a.What is the rate of return on your investment if the end-of-year stock price is (i) $22; (ii) $25; (iii) $26?(Leave no cells blank – be certain to enter “0” wherever required. Enter your answers as a whole percent.) Stock price      Rate of return$22 %  $25 %  $26 %   b.What is your real (inflation-adjusted) rate of return if the inflation rate is 2%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amounts should be indicated by a minus sign.) Stock price     Real rate of return$22 %  $25 %  $26 %  

 
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 A share of stock with a beta of .78 now sells for $53. Investors expect the stock to pay a year-end dividend of

$5. The T-bill rate is 5%, and the market risk premium is 8%. If the stock is perceived to be fairly priced today, what must be investors’ expectation of the price of the stock at the end of the year?(Do not round intermediate calculations. Round your answer to 3 decimal places.)

 
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Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level

production, and aftertax costs would decline by $42,300, but inventory would increase by $470,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 10.0 percent.

a-1.Determine the extra cost or savings of switching over to level production. (Input the amount as a positive value.)
  (Click to select)ProfitLoss$   
a-2.Should the company go ahead and switch to level production?
  
 YesNo
b.  How low would interest rates need to fall before level production would be feasible? (Input your answer as a percent rounded to the nearest whole number.)
  Interest rate %
 
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The Reynolds Corporation buys from its suppliers on terms of 3/19, net 75. Reynolds has not been utilizing the

discounts offered and has been taking 75 days to pay its bills.

     Mr. Duke, Vice President of Reynolds Corporation, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 25 percent. The bank requires a 15 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement.

a.Calculate the cost of not taking a cash discount. (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Cost of not taking a cash discount %  
b.What is the effective rate of interest on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest %  
c.Do you agree with Duke’s proposal?
  
 NoYes
 
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