The Mini-Max Company has the following cost information on its new prospective project. Calculate the accounting break-even point. 

Initial investment: $700

Fixed costs: $200 per year

Variable costs: $3 per unit

Depreciation: $140 per year

Price: $8 per unit

Discount rate: 12%

Project life: 5 years

Tax rate: 34% 

35. A.325 units per year   B. 68 units per year   C. 103 units per year   D. 113 units per year

E. None of these.

36. Donaldsen International is an all-equity firm with a total market value of $120,000. The firm has 10,000 shares of stock outstanding. Management is considering issuing $50,000 of debt at an interest rate of 6.5 percent and using the proceeds on a stock repurchase. It is felt that the company will have earnings before interest and taxes (EBIT) of $22,000 if the economy is normal, $12,000 if it is in recession, and $30,000 if the economy booms. Ignore taxes. What will the earnings per share (EPS) be if the debt is issued and the economy booms?

A. $3.18  B. $3.67 C. $4.59 D. $5.04 E. $5.27

37. The Miller Co. has paid increasing dividends of $.54, $.58, $.62, $.67, and $.72 a share over the past five years, respectively. The firm estimates that future increases in their dividends will be comparable to the arithmetic average growth rate over these past five years. The stock is currently selling for $38.60 a share. The risk-free rate is 4 percent and the market risk premium is 8 percent. What is your best estimate of Miller’s cost of equity if their beta is 1.22?

A. 9.46 % B.11.61 % C.12.12 % D.12.97 % E.14.06%

38. The stock of Midget Kars is expected to produce the following returns given the various states of the economy. What is the expected return on this stock?

                      Probability

State of     of State of     Rate of

Economy     Economy     Return

Recession       .20    -.18

Normal       .70     .09

Boom       .10    .14

A. 4.1% B. 4.9 % C. 7.2 % D. 10.7 %   E.11.3 %

39. Martha’s Checkers is planning on paying a $1.00 a share dividend next year, a $1.50 per share dividend the following year, and a final liquidating dividend of $5.00 per share three years from now. The required return is 9 percent. How much will your homemade dividend be in three years if you opt to forgo any dividend until then?

A. $7.50 B. $7.67 C. $7.82 D. $7.89 E. $7.94

40. Janice placed an order with her broker to purchase 200 shares of each of 3 IPOs which are being released this month. Each IPO has an offer price of $18 a share. The number of shares allocated to Janice, along with the closing stock price at the end of the first day of trading, are as follows:

Stock Shares Allocated Closing Market Price, Day 1

   A              100   $19

   B       10   $42

   C      200   $13

What was Janice’s total profit or loss on these 3 stocks at the end of their first day of trading?

A.-$1,140 B.-$660 C.-$320 D.$760 E.$1,340