FIN 571 Final Exam

FIN
571 Final Exam

1.
Which of thefollowing is considered a hybrid organizational form?

2.
Which of the following is a principal within the agency relationship?

3.
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?

4.
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?

5.
Efficiency ratio:Gateway Corp. has an
inventory turnover ratio of 5.6. What is the firm’s days’s sales in inventory?

6.
Leverage ratio:Your firm has an equity multiplier of
2.47. What is its debt-to-equity ratio?

7.
Which of the following is not a method of “benchmarking”?

8.
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.)

9.
PV of multiple cash flow: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.)

10.
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.)

11.
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.)

12.
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.)

13.
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.)

14.
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?

15.
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?

16.
What decision criteria should managers use in selecting projects when there is
not enough capital to invest in all available positive NPV projects?

17.
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?

18.
If a company’s weighted average cost of capital is less than the required
return on equity, then the firm:

19.
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?

20.
A firm’s capital structure is the mix of financial securities used to finance
its activities and can include all of the following except.

21.
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?

22.
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.

23.
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?

24.
Which of the following cannot be engaged in managing the business?

25.
Which of the following does maximizing shareholder wealth not usually account
for?

26.
The strategic plan does NOT identify

27.
Firms that achieve higher growth rates without seeking external financing

28.
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.

29.
The cash conversion cycle
30. 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?