CFA Level I Chartered Financial Analyst: CFA-LEVEL-1

In a large metropolitan area, past records revealed that 30 percent of all the high school graduates go to college. From 20 graduates selected at random, what is the probability that exactly 8 will go to college?

A. 0.114

B. 0.400

C. 0.231

D. 0.887

E. None of these answers

Which of the following statements is most correct?

A. The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.

B. As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.

C. The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price.

D. All of these statements are false.

E. The optimal capital structure simultaneously minimizes the cost of debt, the cost of equity, and the WACC.

Using the infinite period Dividend Discount Model, what is the value of a stock with the following

characteristics?

Current dividend $6

Long term dividend growth rate 8%

Required rate of return 12%

A. $96.00

B. $75.00

C. $14.25

D. $48.00

E. $162.00

F. $72.00