Please

help answer all questions correctly with explanations.

27. If shareholders are granted a preemptive right they will a. be given the choice of receiving dividends either in cash or in additional shares of stock b. be paid dividends prior to the preferred shareholders during the preemptive period c. be entitled to two votes per share of stock. d. have priority in the purchase of any newly issued shares 28. What market yield is implied by a share of common stock currently selling for $44 whose dividend just paid this year was $2.00 and is expected to grow at an annual rate of 10% forever? a. 6% b. 9% C. 14.5% d. 15% Questions 29-32 are based on the following information. Annuity and Annuity Due. You would like to make an investment to fund a business project for the next three years. You need to know the future value of receipts and present value of payments for this investment to decide whether it is more prudent to consider an annuity or an annuity due. 29. What is the future value of a stream of receipts of $500 each to be received at the end of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31 30. What is the present value of a stream of $500 payments each to be made at the end of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31 31. What is the future value of a stream of receipts of $500 each to be received at the beginning of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31

32. What is the present value of a stream of a future stream of $500 payments each to be made at the beginning of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31 Questions 29-32 end.

27. If shareholders are granted a preemptive right they will a. be given the choice of receiving dividends either in cash or in additional shares of stock b. be paid dividends prior to the preferred shareholders during the preemptive period c. be entitled to two votes per share of stock. d. have priority in the purchase of any newly issued shares 28. What market yield is implied by a share of common stock currently selling for $44 whose dividend just paid this year was $2.00 and is expected to grow at an annual rate of 10% forever? a. 6% b. 9% C. 14.5% d. 15% Questions 29-32 are based on the following information. Annuity and Annuity Due. You would like to make an investment to fund a business project for the next three years. You need to know the future value of receipts and present value of payments for this investment to decide whether it is more prudent to consider an annuity or an annuity due. 29. What is the future value of a stream of receipts of $500 each to be received at the end of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31 30. What is the present value of a stream of $500 payments each to be made at the end of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31 31. What is the future value of a stream of receipts of $500 each to be received at the beginning of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31

32. What is the present value of a stream of a future stream of $500 payments each to be made at the beginning of the next three years, if the discount rate is 6%, compounded annually? a. $1336.51 b. $1591.80 c. $1416.70 d. $1687.31 Questions 29-32 end.

## Answer

**Question – 27**

The Correct answer choice is

**(d). have priority in the purchase of any newly issued**

shares

If shareholders are granted a

preemptive right, then they will have priority in the purchase of

any newly issued shares.

**Question - 28**

Market Yield on Common Share = [D0(1 +

g) / P0] + g

Where, Dividend in Next Year (D1) =

$2.20 per share [$2.00 x (1 + 0.10)]

Current selling price of the share

(P0) = $44.00 per share

Dividend Growth Rate (g) = 10%

Therefore, the Market Yield on

Common Share = [D0(1 + g) / P0] + g

= ($2.20 / $44.00) + 0.10

= 0.05 + 0.10

= 0.15

= 15%

**Question – 29**

Future Value of an Ordinary Annuity =

P x [{(1+ r)^{n} - 1} / r ]

Annual Payment (P) = $500

Annual Interest Rate (r) = 6% per

year

Number of years (n) = 3 Years

Future Value of an Ordinary Annuity

= P x [{(1+ r)n - 1} / r ]

= $500 x [(1.191016 – 1) / 0.06]

= $500 x [0.191016 / 0.06]

= $500 x 3.1836

= $1,591.80

**Question – 30**

Present Value of an

Ordinary Annuity is calculated by using the following

formula

Annual Payment (P) = $500

Annual Interest Rate (r) = 6% per

year

Number of years (n) = 3 Years

Present Value of an Ordinary Annuity = P x [{1 - (1 / (1 + r) n}

/ r]

= $500 x [{1 - (1 / (1 + 0.06)^{3}} / 0.06]

= $500 x [{1 - (1 / 1.191016)} / 0.06]

= $500 x [(1 - 0.839619) / 0.06]

= $500 x (0.160381 / 0.06]

= $500 x 2.673011

= $1,336.51

**Question – 31**

Future Value of an Annuity Due = (1 +

r) x P x [{(1+ r)^{n} - 1} / r ]

Annual Payment (P) = $500

Annual Interest Rate (r) = 6% per

year

Number of years (n) = 3 Years

Future Value of an Annuity Due = (1

+ r) x P x [{(1+ r)n - 1} / r ]

= (1 + 0.06) x $500 x [{(1 +

0.06)^{3} – 1} / 0.06]

= 1.06 x $500 x [(1.191016 – 1) /

0.06]

= 1.06 x $500 x [0.191016 /

0.06]

= 1.06 x $500 x 3.1836

= $1,687.31

**Question - 32**

Present Value of an

Annuity Due is calculated by using the following formula

Annual Payment (P) = $500

Annual Interest Rate (r) = 6% per

year

Number of years (n) = 3 Years

Present Value of an Annuity Due = (1 + r) x P x [{1 - (1 / (1 +

r) n} / r]

= (1 + 0.06) x $500 x [{1 - (1 / (1 + 0.06)^{3}} /

0.06]

= 1.06 x $500 x [{1 - (1 / 1.191016)} / 0.06]

= 1.06 x $500 x [(1 - 0.839619) / 0.06]

= 1.06 x $500 x (0.160381 / 0.06]

= 1.06 x $500 x 2.673011

= $1,416.70