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FIN 571 Final Exam 1

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FIN 571 Final Exam

1. Which of the following 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—

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?

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.

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.

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?

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,

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.

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.

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.

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.

29. The cash conversion cycle

30. You are provided the following working capital information for the Ridge Company:

FIN 571 Final Exam 1. Which of the following 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 balanc
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