FIN 370 FINAL EXAMS

FIN 370 FINAL EXAMS1. Capital Structure Theory in general assumes that:
2. Which of the following financial ratios is the
best measure of the operating effectiveness of a firm’s management?
3. The Securities Investor Protection Corporation
protects individuals from
4. A company collects 60% of its sales during the
month of the sale, 30% one month after the sale, and 10% two months after the
sale. The company expects sales of $10,000 in August, $20,000 in September,
$30,000 in October, and $40,000 in November. How much money is expected to be
collected in October?
5. Project Sigma requires an investment of $1
million and has a NPV of $10. Project Delta requires an investment of $500,000
and has a NPV of $150,000. The projects involve unrelated new product lines.
What is your evaluation of these two projects?

6. Which of the following is not part of the
underwriting process?
7. When the impact of taxes is considered, as the
firm takes on more debt
8. Metals Corp. has $2,575,000 of debt, $550,000 of
preferred stock, and $18,125,000 of common equity. Metals Corp.’s after-tax
cost of debt is 5.25%, preferred stock has a cost of 6.35%, and newly issued
common stock has a cost of 14.05%. What is Metals Corp.’s weighted average cost
of capital?
9. Given an accounts receivable turnover of 8 and
annual credit sales of $362,000, the average collection period (360-day year)
is
10. Accounting break-even analysis solves for the
level of sales that will result in:
11. Buying and selling in more than one market to
make a riskless profit is called:
12. Which of the following best describes why cash
flows are utilized rather than accounting profits when evaluating capital
projects?
13. Which of the following could offset the higher
risk exposure a company would face if its current ratio and net working capital
were relatively low?
14. Which of the following best describes why cash
flows are utilized rather than accounting profits when evaluating capital
projects?
15. Compute the payback period for a project with
the following cash flows, if the company’s discount rate is 12%.
Initial outlay = $450
Cash flows:
Year 1 = $325
Year 2 = $65
Year 3 = $100

16. The Oviedo Thespians are planning to present
performances of their Florida Revue on 2 consecutive nights in January. It will
cost them $5,000 per night for theater rental, event insurance and professional
musicians. The theater will also take 10% of gross ticket sales. How many
tickets must they sell at $10.00 per ticket to raise $1,000 for their
organization?
17. Which of the following is true regarding
Investment Banks?
18. If managers are making decisions to maximize
shareholder wealth, then they are primarily concerned with making decisions
that should:
19. Which of the following is true about bonds?
20. Which of the following is most likely to occur
if a firm over-invests in net working capital?
21. Which of the following goals is in the best
long-term interest of stockholders?
22. Apple Two Enterprises expects to generate sales
of $5,950,000 for fiscal 2014; sales were $3,450,000 in fiscal 2013. Assume the
following figures for the fiscal year ending 2013: cash $70,000; accounts
receivable $250,000; inventory $400,000; net fixed assets $520,000; accounts
payable $235,000; and accruals $155,000. Use the percent-of-sales method to
forecast cash for the fiscal year ending 2014.
23. Which of the following statements best represents
what finance is about?
24. If you have $20,000 in an account earning 8%
annually, what constant amount could you withdraw each year and have nothing
remaining at the end of five years?
25. Long-term financial plans typically encompass:
26. When calculating the weighted average cost of
capital, which of the following has to be adjusted for taxes?
27. We compute the profitability index of a
capital-budgeting proposal by Initial outlay = $1,748.80
28. You just purchased a parcel of land for $10,000.
If you expect a 12% annual rate of return on your investment, how much will you
sell the land for in 10 years?
29. Aspects of demand risk controllable by the firm
include:
30. Delta Inc. is considering the purchase of a new
machine which is expected to increase sales by $10,000 in addition to
increasing non-depreciation expenses by $3,000 annually. Due to the sales increase,
Delta expects its working capital to increase $1,000 during the life of the
project. Delta will depreciate the machine using the straight-line method over
the project’s five year life to a salvage value of zero. The machine’s purchase
price is $20,000. The firm has a marginal tax rate of 34 percent, and its
required rate of return is 12 percent. The machine’s initial cash outflow is: