FIN 3100 Midterm (20 points in total): Winter 2026
Version B
Name:
Student ID:
Grades:
*Students are allowed two pages of notes and a calculator as an aid*
, Multiple Choices (20 questions, 1 points per question)
PLEASE USE SCANTRON
1. The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus
to have earnings of $500 million this year. Rufus plans to pay out 40% of its earnings in
dividends and they expect to use another 20% of their earnings to repurchase shares. If
Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of
3% per year, then the value of a share of Rufus' stock is closest to:
A. $20.00
B. $33.50
C. $16.88
D. $13.35
2. What of the following ratio measures a firm’s leverage?
A. Net Profit Margin, calculated as Net Income over Sales
B. Debt-Equity ratio, calculated as Total Debt over Total Equity
C. Current ratio, calculated as Current Assets over Current Liabilities
D. Return on Assets, calculated as Net Income over Book Value of Equity
3. An exchange traded fund (ETF) is a security that represents a portfolio of individual stocks.
Consider an ETF for which each share represents a portfolio of two shares of International
Business Machines (IBM), three shares of Merck (MRK), and three shares of Citigroup Inc. (C).
Suppose the current market price per share of each stock are shown below: The price per share of
the ETF in a normal market is closest to:
Stock Price per share
IBM $79.50
MRK $20.00
C $48.50
A. $504.00
B. $168.00
C. $364.50
D. $424.50
4. Which of the following is NOT an advantage of a sole proprietorship?
A. Single taxation
B. No separation of ownership and control
C. Limited liability
D. Ease of setup
Version B
Name:
Student ID:
Grades:
*Students are allowed two pages of notes and a calculator as an aid*
, Multiple Choices (20 questions, 1 points per question)
PLEASE USE SCANTRON
1. The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus
to have earnings of $500 million this year. Rufus plans to pay out 40% of its earnings in
dividends and they expect to use another 20% of their earnings to repurchase shares. If
Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of
3% per year, then the value of a share of Rufus' stock is closest to:
A. $20.00
B. $33.50
C. $16.88
D. $13.35
2. What of the following ratio measures a firm’s leverage?
A. Net Profit Margin, calculated as Net Income over Sales
B. Debt-Equity ratio, calculated as Total Debt over Total Equity
C. Current ratio, calculated as Current Assets over Current Liabilities
D. Return on Assets, calculated as Net Income over Book Value of Equity
3. An exchange traded fund (ETF) is a security that represents a portfolio of individual stocks.
Consider an ETF for which each share represents a portfolio of two shares of International
Business Machines (IBM), three shares of Merck (MRK), and three shares of Citigroup Inc. (C).
Suppose the current market price per share of each stock are shown below: The price per share of
the ETF in a normal market is closest to:
Stock Price per share
IBM $79.50
MRK $20.00
C $48.50
A. $504.00
B. $168.00
C. $364.50
D. $424.50
4. Which of the following is NOT an advantage of a sole proprietorship?
A. Single taxation
B. No separation of ownership and control
C. Limited liability
D. Ease of setup
