FIN 571 Final Exam
Multiple Choice
Question 51
You are provided the
following working capital information for the Ridge Company:
|
Ridge
Company
|
|
|
Account
|
$
|
|
|
|
|
Inventory
|
$12,890
|
|
Accounts
receivable
|
12,800
|
|
Accounts
payable
|
12,670
|
|
|
|
|
Net
sales
|
$124,589
|
|
Cost
of goods sold
|
99,630
|
Cash conversion cycle:
What is the cash conversion cycle for Ridge Company?
·
38.3 days
·
46.4 days
·
83.5 days
·
129.9 days
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Exam
Multiple Choice
Question 58
The cash conversion cycle
·
begins when the firm
uses its cash to purchase raw materials and ends when the firm collects cash
payments on its credit sales.
·
estimates how long it
takes on average for the firm to collect its outstanding accounts receivable
balance.
·
shows how long the
firm keeps its inventory before selling it.
·
begins when the firm
invests cash to purchase the raw materials that would be used to produce the
goods that the firm manufactures.
Multiple Choice
Question 30
Payout and retention
ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest
payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125
to shareholders. Find the firm's dividend payout ratio and retention ratio.
·
85%, 15%
·
55%, 45%
·
15%, 85%
·
45%, 55%
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Multiple Choice
Question 75
Firms that achieve
higher growth rates without seeking external financing
·
are highly leveraged.
·
none of these.
·
have less equity
and/or are able to generate high net income leading to a high ROE.
·
have a low plowback
ratio.
Multiple Choice
Question 67
The strategic plan does NOT identify
·
working capital
strategies.
·
the lines of business
a firm will compete in.
·
major areas of
investment in real assets.
·
future mergers,
alliances, and divestitures.
Multiple Choice
Question 41
Which of the following
does maximizing shareholder wealth not usually account for?
·
The timing of cash
flows.
·
Amount of Cash flows.
·
Risk.
·
Government regulation.
Multiple Choice
Question 80
Which of the following
cannot be engaged in managing the business?
·
a sole proprietor
·
a general partner
·
none of these
·
a limited partner
Multiple Choice
Question 46
External financing
needed: Jockey Company has total assets worth $4,417,665. At year-end it will
have net income of $2,771,342 and pay out 60 percent as dividends. If the firm
wants no external financing, what is the growth rate it can support?
·
30.3%
·
25.1%
·
27.3%
·
32.9%
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Multiple Choice
Question 86
Multiple Analysis:
Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its
depreciation and amortization expenses amounted to $84 million. The firm has
135 million shares outstanding and a share price of $12.80. A competing firm
that is very similar to Turnbull has an enterprise value/EBITDA multiple of
5.40.
What is the enterprise
value of Turnbull Corp.? Round to the nearest million dollars.
·
$1,787 million
·
$1,315 million
·
$453.6 million
·
$1,334 million
Multiple Choice
Question 69
M&M Proposition 1:
Dynamo Corp. produces annual cash flows of $150 and is expected to exist
forever. The company is currently financed with 75 percent equity and 25
percent debt. Your analysis tells you that the appropriate discount rates are
10 percent for the cash flows, and 7 percent for the debt. You currently own 10
percent of the stock.
If Dynamo wishes to
change its capital structure from 75 percent to 60 percent equity and use the
debt proceeds to pay a special dividend to shareholders, how much debt should
they issue?
·
$375
·
$600
·
$225
·
$321
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Multiple Choice
Question 54
A firm's capital
structure is the mix of financial securities used to finance its activities and
can include all of the following except
·
stock.
·
bonds.
·
equity options.
·
preferred stock.
Multiple Choice
Question 32
If a company's
weighted average cost of capital is less than the required return on equity,
then the firm:
·
Is perceived to be
safe
·
Has debt in its
capital structure
·
Must have preferred
stock in its capital structure
·
Is financed with more
than 50% debt
Multiple Choice
Question 85
The cost of equity:
Gangland Water Guns, Inc., is expected to pay a dividend of $2.10 one year from
today. If the firm's growth in dividends is expected to remain at a flat 3
percent forever, then what is the cost of equity capital for Gangland if the
price of its common shares is currently $17.50?
·
15.36%
·
12.00%
·
14.65%
·
15.00%
Multiple Choice Question
68
How firms estimate
their cost of capital: The WACC for a firm is 13.00 percent. You know that the
firm's cost of debt capital is 10 percent and the cost of equity capital is
20%. What proportion of the firm is financed with debt?
·
30%
·
50%
·
70%
·
33%
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Multiple Choice
Question 60
What decision criteria
should managers use in selecting projects when there is not enough capital to
invest in all available positive NPV projects?
·
The profitability
index.
·
The modified internal
rate of return.
·
The internal rate of
return.
·
The discounted
payback.
Multiple Choice
Question 88
Capital rationing.
TuleTime Comics is considering a new show that will generate annual cash flows
of $100,000 into the infinite future. If the initial outlay for such a
production is $1,500,000 and the appropriate discount rate is 6 percent for the
cash flows, then what is the profitability index for the project?
·
0.11
·
1.90
·
1.11
·
0.90
Multiple Choice
Question 79
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PV of dividends: Next
year Jenkins Traders will pay a dividend of $3.00. It expects to increase its
dividend by $0.25 in each of the following three years. If their required rate
of return is 14 percent, what is the present value of their dividends over the
next four years?
·
$13.50
·
$11.63
·
$9.72
·
$12.50
Multiple Choice
Question 57
Bond price: Regatta,
Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate.
Investors buying the bond today can expect to earn a yield to maturity of 6.875
percent. What should the company's bonds be priced at today? Assume annual
coupon payments. (Round to the nearest dollar.)
·
$1,014
·
$1,066
·
$923
·
$972
Multiple Choice
Question 62
Serox stock was
selling for $20 two years ago. The stock sold for $25 one year ago, and it is
currently selling for $28. Serox pays a $1.10 dividend per year. What was the
rate of return for owning Serox in the most recent year? (Round to the nearest
percent.)
·
16%
·
32%
·
12%
·
40%
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Multiple Choice
Question 57
Future value of an
annuity: Jayadev Athreya has started on his first job. He plans to start saving
for retirement early. He will invest $5,000 at the end of each year for the
next 45 years in a fund that will earn a return of 10 percent. How much will
Jayadev have at the end of 45 years? (Round to the nearest dollar.)
·
$1,745,600
·
$3,594,524
·
$5,233,442
·
$2,667,904
Multiple Choice
Question 72
PV of multiple cash
flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000,
$164,000, $84,000, and $242,000—over the next five years. If the company's
opportunity cost is 15 percent, what is the present value of these cash flows?
(Round to the nearest dollar.)
·
$480,906
·
$414,322
·
$477,235
·
$429,560
Multiple Choice Question
64
PV of multiple cash
flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and
will repay the loan with interest over the next five years. Their scheduled
payments, starting at the end of the year are as follows—$450,000, $560,000,
$750,000, $875,000, and $1,000,000. What is the present value of these
payments? (Round to the nearest dollar.)
·
$2,431,224
·
$2,815,885
·
$2,735,200
·
$2,615,432
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Multiple Choice
Question 62
Present value: Jack
Robbins is saving for a new car. He needs to have $ 21,000 for the car in three
years. How much will he have to invest today in an account paying 8 percent
annually to achieve his target? (Round to nearest dollar.)
·
$22,680
·
$26,454
·
$19,444
·
$16,670
Multiple Choice
Question 67
Which of the following
is not a method of “benchmarking”?
·
Conduct an industry
group analysis.
·
Evaluating a single
firm’s performance over time.(112)
·
Utilize the DuPont
system to analyze a firm’s performance.
·
Identify a group of
firms that compete with the company being analyzed.
Multiple Choice
Question 84
Leverage ratio: Your
firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
·
1.74
·
0.60
·
1.47(95)
·
0
Multiple Choice
Question 70
Efficiency ratio:
Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's
sales in inventory?
·
65.2 days
·
64.3 days
·
61.7 days
·
57.9 days
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Multiple Choice
Question 63
Which of the following
presents a summary of the changes in a firm’s balance sheet from the beginning
of an accounting period to the end of that accounting period?
·
The statement of
retained earnings.
·
The statement of
working capital.
·
The statement of cash
flows.(66)
·
The statement of net
worth.
Multiple Choice
Question 78
Teakap, Inc., has
current assets of $ 1,456,312 and total assets of $4,812,369 for the year
ending September 30, 2006. It also has current liabilities of $1,041,012,
common equity of $1,500,000, and retained earnings of $1,468,347. How much
long-term debt does the firm have?
·
$2,123,612
·
$803,010
·
$1,844,022
·
$2,303,010
Multiple Choice
Question 57
Which of the following
is a principal within the agency relationship?
·
the CEO of the firm
·
a shareholder
·
the board of directors
·
a company
engineer
Multiple Choice
Question 59
Which of the following
is considered a hybrid organizational form?
·
limited liability
partnership
·
partnership
·
corporation
·
sole proprietorship
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