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
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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571 Final Exam
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.
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571 Final Exam Questions with Answer
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
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571 Final Exam Answers
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%
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
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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
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.
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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%
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571 Final Exam Complete Answer
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%
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.
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571 Final Exam
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
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
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571 Final Exam Answer
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
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571 Final Exam
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
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
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571 Final Exam Answer
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
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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
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.
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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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