The document contains 10 multiple choice questions from a quiz on finance principles. The questions cover topics such as cost of capital calculation, capital budgeting techniques like net present value, internal rate of return and profitability index. Cost of capital is required to evaluate investment projects and make capital budgeting decisions.
Reconstruction of Companies problem with answer is discussed in this PPt.
#ReconstructionofComapnies
#Dr MamataRathi
#InternalReconstruction
#Externalreconstruction
#ReconstructionNotes
#ReconstructionBcomSY
#Accounting
#Corporate Accounting
Reconstruction of Companies problem with answer is discussed in this PPt.
#ReconstructionofComapnies
#Dr MamataRathi
#InternalReconstruction
#Externalreconstruction
#ReconstructionNotes
#ReconstructionBcomSY
#Accounting
#Corporate Accounting
Reconstruction of Companies problem with answer is discussed in this PPt.
#ReconstructionofComapnies
#Dr MamataRathi
#InternalReconstruction
#Externalreconstruction
#ReconstructionNotes
#ReconstructionBcomSY
#Accounting
#Corporate Accounting
Reconstruction of Companies problem with answer is discussed in this PPt.
#ReconstructionofComapnies
#Dr MamataRathi
#InternalReconstruction
#Externalreconstruction
#ReconstructionNotes
#ReconstructionBcomSY
#Accounting
#Corporate Accounting
a
Part 5 Corporate Valuation and Governance
Easy Problems 1-3
(,,'Lt
AfN ESeEisr-I
laz-2)
AFN Equation
la24)
AFN Equation
Intermediate
Problems 4-6
$2-41
Sales Increase
(12-s)
'Long-Term Financing
Needed
Broussard Skateboard's sales are expected to increase by l5o/o from $8 million in
2013 to $9.2 million in 2014. Its assets totaled $5 million at the end 0f 2013.
Broussard is already at firll capacity, so its assets must grow at the same rate as
projected sales. At the end o{ 2013, current liabilities were $1.4 million, consisting
of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of
accruals. The after-tax profit margin is forecasted to be 5o/o, and the forecasted
payout ratio is 40%o. Use the AFN equation to forecast Broussard's additional funds
needed for the coming year.
Refer to Problem 12-1. \Yhat would be the additional funds needed if the company's year-
end 2013 assets had been $7 million? Assume that all other numbers, including sales, are
the same as in Problem 12-1 and that the company is operating at fi.rll capacity. Why is
this AFN different from the one you found iu Problem 12-1? Is the company s "capital
intensity" ratio the same or different?
Refer to Problem 12-1. Returrr to the assumption that the company had $5 million in
assets at the end of 2013, but now assume that the company pay$ no dividends. Under
these assumptions, what would be the additional funds needed for the coming year? Why
is this AFN difilerent from the one you found in Problem 12-i?
Maggie's Muffins, Inc., generated $5,000,000 in sales during 2013, and its year-end total
assets were $2,500,000. Also, at year-end 2013, current liabilities were $1,000,000,
consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200"000 of
accruals. Looking ahead to 2014, the company estimates that its assets must increase at the
same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its
profit margin will be 7%, and. its payout ratio will be 80%. How large a sales increase can
the company achieve without having to raise funds externally-that is, lvhat is its self-
supporting growth rate?
At year-end 2013, Wallace Landscaping's total assets were $2.17 million and its
accounts payable were $560,000. Sales, which in 2013 were $3.5 million, are expected
to increase by 35o/o in 2014. Total assets and accounts payable are proportional to
sales, and that relationship will be maintained. Wallace fypically uses no culrent
iiabilities other than accounts payable. Common stock amounted to $625,000 in 2013,
and retained earnings were $395,000. Wallace has arranged to sell $195,000 of new
common stock in 2014 to meet some of its financing needs. The remainder of its
financing needs wiil be met by issuing new long-term debt at the end pf 2A14.
(Because &e debt is added at the end of the year, there will be no additional interest
expense due to the new debt.) Its net profit margin on sales is .
1. Susmel Inc. is considering a project that has the following cas.docxjackiewalcutt
1. Susmel Inc. is considering a project that has the following cash flow data. What is the project's payback?
Year
0
1
2
3
Cash Flows
-$500
$150
$200
$300
a.
2.03 years
b.
2.25 years
c.
2.50 years
d.
2.75 years
e.
3.03 years
2. As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?
Sales Revenues
$13,000
Depreciation
$4,000
Other operating costs
$6,000
Tax rate
35.0%
a.
$5,950
b.
$6,099
c.
$6,251
d.
$6,407
e.
$6,568
3. Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1?
a.
$2.20
b.
$2.44
c.
$2.69
d.
$2.96
e.
$3.25
4. If a typical company correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely
a.
become riskier over time, but its intrinsic value will be maximized
b.
become less risky over time, and this will maximize its intrinsic value
c.
accept too many low-risk projects and too few high-risk projects
d.
become more risky and also have an increasing WACC. Its intrinsic value will not be maximized
e.
continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital
5. Qualcomm Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The required rate of return on the stock, rs, is 11.50%. What is the stock's expected price 5 years from now?
a.
$40.17
b.
$41.20
c.
$42.26
d.
$43.34
e.
$44.46
6. Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?
a.
$14.52
b.
$14.89
c.
$15.26
d.
$15.64
e.
$16.03
7. Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
WACC: 10.00%
Year
0
1
2
3
4
Cash Flows
-$950
$525
$485
$445
$405
a.
1.61 years
b.
1.79 years
c.
1.99 years
d.
2.22 years
e.
2.44 years
8. Bilulu Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV, how much value will be forgone Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost.
WACC: 8.75%
Year
0
1
2
3
4
CFS
-$1,100
$375
$375
$375
$375
CFL
-$2,200
$725
$725
$725
$725
a.
$32.12
b.
$35.33
c.
$38.87
d.
$40.15
e.
$42.16
9. Assume that Ki ...
Fin 419 Effective Communication-snaptutorial.comjhonklinz19
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FIN 419 Week 1 Individual Assignment Limited Liability Corporation and Partnership Paper (2 Papers)
FIN 419 Week 1 DQ 1
FIN 419 Week 1 DQ 2
FIN 419 Week 1 DQ 3
FIN 419 Week 1 DQ 4
1.Which of the following is considered a hybrid organizational for.docxhyacinthshackley2629
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. 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?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
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.)
$22,680
$26,454
$16,670
$19,444
9. 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.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
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.)
$480,906
$414,322
$477,235
$429,560
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.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
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.)
40%
12%
16%
32%
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.)
$1,066
$923
$972
$1,014
14. PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the ne.
STR 581 Capstone Final Examination Part 2 - Studentehelpstudent ehelp
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Mini Case112018Chapter 2 Mini CaseSituationJenny Cochran, a grad.docxpauline234567
Mini Case11/20/18Chapter 2 Mini CaseSituationJenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components.
During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data.Computron's Balance Sheets (Millions of Dollars)20182019AssetsCash and equivalents$ 60$ 50Short-term investments10010Accounts receivable400520Inventories620820Total current assets$ 1,180$ 1,400Gross fixed assets$ 3,900$ 4,820Less: Accumulated depreciation1,0001,320Net fixed assets$ 2,900$ 3,500Total assets$ 4,080$ 4,900Liabilities and equityAccounts payable$ 300$ 400Notes payable50250Accruals200240Total current liabilities$ 550$ 890Long-term bonds8001,100Total liabilities$ 1,350$ 1,990Common stock1,0001,000Retained earnings1,7301,910Total equity$ 2,730$ 2,910Total liabilities and equity$ 4,080$ 4,900Computron's Income Statement (Millions of Dollars)20182019Net sales$ 5,500$ 6,000Cost of goods sold (Excluding depr. & amort.)4,3004,800Depreciation and amortizationa290320Other operating expenses350420Total operating costs$ 4,940$ 5,540Earnings before interest and taxes (EBIT)$ 560$ 460Less interest 68108Pre-tax earnings$ 492$ 352Taxes (25%)12388Net Income $ 369$ 264Notes:a Computron has no amortization charges.Other Data20182019Stock price$50.00$30.00Shares outstanding (millions)100100Common dividends (millions)$90$84Tax rate25%25%Weighted average cost of capital (WACC)10.00%10.00%Computron's Statement of Cash Flows (Millions of Dollars)
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
2019Operating Activities Net Income before preferred dividends$ 264Noncash adjustments Depreciation and amortization320Due to changes in working capital Change in accounts receivable(120) Change in inventories(200) Change in accounts payable100 Change in accruals40Net cash provided by operating activities$ 404Investing activities Cash used to acquire fixed assets$ (920)
Bart Kreps: Make sure to add back annual Depreciation to Net PP&E.
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
Change in short-term investments90Net cash provided by investing activities$ (830)Financing Activities Change in notes payable$ 200 Change in long-term debt300 Payment of cash dividends(84)Net cash provided by financing activities$ 416Net change in cash.
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
1.Which of the following is considered a hybrid organizational for.docxelliotkimberlee
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. 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?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
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.)
$22,680
$26,454
$16,670
$19,444
9. 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.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
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.)
$480,906
$414,322
$477,235
$429,560
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.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
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.)
40%
12%
16%
32%
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.)
$1,066
$923
$972
$1,014
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 pe.
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash $45 Accounts payables $45
Receivables 66 Notes payables 45
Inventory 159 Other current liabilities 21
Marketable securities 33 Total current liabilities $111
Total current assets $303
FIN623_Assessment Tool Page 1 of 6 Goldey-Beacom College.docxmydrynan
FIN623_Assessment Tool
Page 1 of 6
Goldey-Beacom College
Assessment Survey
Corporate Finance (FIN623)
Time: 50 minutes
Choose the alternative the best answers the question.
Du Pont equation
1. The Wilson Corporation has the following relationships:
Sales/Total assets 2.0
Return on assets (ROA) 4%
Return on equity (ROE) 6%
What is Wilson’s profit margin and debt ratio?
a. 2% and 0.33
b. 4% and 0.33
c. 4% and 0.67
d. 2% and 0.67
e. 4% and 0.50
P/E ratio and stock price
2. Cleveland Corporation has 100,000 shares of common stock outstanding. The company’s net
income is $750,000 and its P/E is 8. What is the company’s stock price?
a. $20.00
b. $30.00
c. $40.00
d. $50.00
e. $60.00
ROA
3. The Meryl Corporation's common stock is currently selling at $100 per share, which represents a
P/E ratio of 10. If the firm has 100 shares of common stock outstanding, a return on equity of 20
percent, and a debt ratio of 60 percent, what is its return on total assets (ROA)?
a. 8.0%
b. 10.0%
c. 12.0%
d. 16.7%
e. 20.0%
Equity multiplier
4. A firm which has an equity multiplier of 4.0 will have a debt ratio of
a. 4.00
b. 3.00
c. 1.00
d. 0.75
e. 0.25
FIN623_Assessment Tool
Page 2 of 6
Liquidity ratios
5. Oliver Incorporated has a current ratio = 1.6, and a quick ratio equal to 1.2. The company has $2
million in sales and its current liabilities are $1 million. What is the company’s inventory turnover
ratio?
a. 5.0
b. 5.2
c. 5.5
d. 6.0
e. 6.3
Profit margin
6. The Merriam Company has determined that its return on equity is 15 percent. Management is
interested in the various components that went into this calculation. You are given the following
information: total debt/total assets = 0.35 and total assets turnover = 2.8. What is the profit
margin?
a. 3.48%
b. 5.42%
c. 6.96%
d. 2.45%
e. 12.82%
PV of an annuity
7. What is the present value of a 5-year ordinary annuity with annual payments of $200, evaluated at
a 15 percent interest rate?
a. $ 670.43
b. $ 842.91
c. $1,169.56
d. $1,348.48
e. $1,522.64
Interest rate of an annuity
8. South Penn Trucking is financing a new truck with a loan of $10,000 to be repaid in 5 annual end-
of-year installments of $2,504.56. What annual interest rate is the company paying?
a. 7%
b. 8%
c. 9%
d. 10%
e. 11%
Number of periods for an annuity
9. Your subscription to Jogger's World Monthly is about to run out and you have the choice of
renewing it by sending in the $10 a year regular rate or of getting a lifetime subscription to the
magazine by paying $100. Your cost of capital is 7 percent. How many years would you have to
live to make the lifetime subscription the better buy? Payments for the regular subscription are
made at the beginning of each year. (Round up if necessary to obtain a whole number of years.)
a. 15 years ...
More Related Content
Similar to BUS 401 Week 3 Quiz 3 (Principles of Finance - entirecourse.com)
a
Part 5 Corporate Valuation and Governance
Easy Problems 1-3
(,,'Lt
AfN ESeEisr-I
laz-2)
AFN Equation
la24)
AFN Equation
Intermediate
Problems 4-6
$2-41
Sales Increase
(12-s)
'Long-Term Financing
Needed
Broussard Skateboard's sales are expected to increase by l5o/o from $8 million in
2013 to $9.2 million in 2014. Its assets totaled $5 million at the end 0f 2013.
Broussard is already at firll capacity, so its assets must grow at the same rate as
projected sales. At the end o{ 2013, current liabilities were $1.4 million, consisting
of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of
accruals. The after-tax profit margin is forecasted to be 5o/o, and the forecasted
payout ratio is 40%o. Use the AFN equation to forecast Broussard's additional funds
needed for the coming year.
Refer to Problem 12-1. \Yhat would be the additional funds needed if the company's year-
end 2013 assets had been $7 million? Assume that all other numbers, including sales, are
the same as in Problem 12-1 and that the company is operating at fi.rll capacity. Why is
this AFN different from the one you found iu Problem 12-1? Is the company s "capital
intensity" ratio the same or different?
Refer to Problem 12-1. Returrr to the assumption that the company had $5 million in
assets at the end of 2013, but now assume that the company pay$ no dividends. Under
these assumptions, what would be the additional funds needed for the coming year? Why
is this AFN difilerent from the one you found in Problem 12-i?
Maggie's Muffins, Inc., generated $5,000,000 in sales during 2013, and its year-end total
assets were $2,500,000. Also, at year-end 2013, current liabilities were $1,000,000,
consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200"000 of
accruals. Looking ahead to 2014, the company estimates that its assets must increase at the
same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its
profit margin will be 7%, and. its payout ratio will be 80%. How large a sales increase can
the company achieve without having to raise funds externally-that is, lvhat is its self-
supporting growth rate?
At year-end 2013, Wallace Landscaping's total assets were $2.17 million and its
accounts payable were $560,000. Sales, which in 2013 were $3.5 million, are expected
to increase by 35o/o in 2014. Total assets and accounts payable are proportional to
sales, and that relationship will be maintained. Wallace fypically uses no culrent
iiabilities other than accounts payable. Common stock amounted to $625,000 in 2013,
and retained earnings were $395,000. Wallace has arranged to sell $195,000 of new
common stock in 2014 to meet some of its financing needs. The remainder of its
financing needs wiil be met by issuing new long-term debt at the end pf 2A14.
(Because &e debt is added at the end of the year, there will be no additional interest
expense due to the new debt.) Its net profit margin on sales is .
1. Susmel Inc. is considering a project that has the following cas.docxjackiewalcutt
1. Susmel Inc. is considering a project that has the following cash flow data. What is the project's payback?
Year
0
1
2
3
Cash Flows
-$500
$150
$200
$300
a.
2.03 years
b.
2.25 years
c.
2.50 years
d.
2.75 years
e.
3.03 years
2. As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?
Sales Revenues
$13,000
Depreciation
$4,000
Other operating costs
$6,000
Tax rate
35.0%
a.
$5,950
b.
$6,099
c.
$6,251
d.
$6,407
e.
$6,568
3. Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1?
a.
$2.20
b.
$2.44
c.
$2.69
d.
$2.96
e.
$3.25
4. If a typical company correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely
a.
become riskier over time, but its intrinsic value will be maximized
b.
become less risky over time, and this will maximize its intrinsic value
c.
accept too many low-risk projects and too few high-risk projects
d.
become more risky and also have an increasing WACC. Its intrinsic value will not be maximized
e.
continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital
5. Qualcomm Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The required rate of return on the stock, rs, is 11.50%. What is the stock's expected price 5 years from now?
a.
$40.17
b.
$41.20
c.
$42.26
d.
$43.34
e.
$44.46
6. Schnusenberg Corporation just paid a dividend of D0 = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?
a.
$14.52
b.
$14.89
c.
$15.26
d.
$15.64
e.
$16.03
7. Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
WACC: 10.00%
Year
0
1
2
3
4
Cash Flows
-$950
$525
$485
$445
$405
a.
1.61 years
b.
1.79 years
c.
1.99 years
d.
2.22 years
e.
2.44 years
8. Bilulu Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV, how much value will be forgone Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost.
WACC: 8.75%
Year
0
1
2
3
4
CFS
-$1,100
$375
$375
$375
$375
CFL
-$2,200
$725
$725
$725
$725
a.
$32.12
b.
$35.33
c.
$38.87
d.
$40.15
e.
$42.16
9. Assume that Ki ...
Fin 419 Effective Communication-snaptutorial.comjhonklinz19
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FIN 419 Week 1 Individual Assignment Limited Liability Corporation and Partnership Paper (2 Papers)
FIN 419 Week 1 DQ 1
FIN 419 Week 1 DQ 2
FIN 419 Week 1 DQ 3
FIN 419 Week 1 DQ 4
1.Which of the following is considered a hybrid organizational for.docxhyacinthshackley2629
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. 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?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
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.)
$22,680
$26,454
$16,670
$19,444
9. 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.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
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.)
$480,906
$414,322
$477,235
$429,560
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.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
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.)
40%
12%
16%
32%
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.)
$1,066
$923
$972
$1,014
14. PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the ne.
STR 581 Capstone Final Examination Part 2 - Studentehelpstudent ehelp
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Mini Case112018Chapter 2 Mini CaseSituationJenny Cochran, a grad.docxpauline234567
Mini Case11/20/18Chapter 2 Mini CaseSituationJenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components.
During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data.Computron's Balance Sheets (Millions of Dollars)20182019AssetsCash and equivalents$ 60$ 50Short-term investments10010Accounts receivable400520Inventories620820Total current assets$ 1,180$ 1,400Gross fixed assets$ 3,900$ 4,820Less: Accumulated depreciation1,0001,320Net fixed assets$ 2,900$ 3,500Total assets$ 4,080$ 4,900Liabilities and equityAccounts payable$ 300$ 400Notes payable50250Accruals200240Total current liabilities$ 550$ 890Long-term bonds8001,100Total liabilities$ 1,350$ 1,990Common stock1,0001,000Retained earnings1,7301,910Total equity$ 2,730$ 2,910Total liabilities and equity$ 4,080$ 4,900Computron's Income Statement (Millions of Dollars)20182019Net sales$ 5,500$ 6,000Cost of goods sold (Excluding depr. & amort.)4,3004,800Depreciation and amortizationa290320Other operating expenses350420Total operating costs$ 4,940$ 5,540Earnings before interest and taxes (EBIT)$ 560$ 460Less interest 68108Pre-tax earnings$ 492$ 352Taxes (25%)12388Net Income $ 369$ 264Notes:a Computron has no amortization charges.Other Data20182019Stock price$50.00$30.00Shares outstanding (millions)100100Common dividends (millions)$90$84Tax rate25%25%Weighted average cost of capital (WACC)10.00%10.00%Computron's Statement of Cash Flows (Millions of Dollars)
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
2019Operating Activities Net Income before preferred dividends$ 264Noncash adjustments Depreciation and amortization320Due to changes in working capital Change in accounts receivable(120) Change in inventories(200) Change in accounts payable100 Change in accruals40Net cash provided by operating activities$ 404Investing activities Cash used to acquire fixed assets$ (920)
Bart Kreps: Make sure to add back annual Depreciation to Net PP&E.
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
Change in short-term investments90Net cash provided by investing activities$ (830)Financing Activities Change in notes payable$ 200 Change in long-term debt300 Payment of cash dividends(84)Net cash provided by financing activities$ 416Net change in cash.
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
1.Which of the following is considered a hybrid organizational for.docxelliotkimberlee
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. 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?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
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.)
$22,680
$26,454
$16,670
$19,444
9. 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.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
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.)
$480,906
$414,322
$477,235
$429,560
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.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
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.)
40%
12%
16%
32%
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.)
$1,066
$923
$972
$1,014
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 pe.
STR 581 Capstone Final Examination, Part 2 - STR 581 Capstone Final Examinati...Transweb E Tutors
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash $45 Accounts payables $45
Receivables 66 Notes payables 45
Inventory 159 Other current liabilities 21
Marketable securities 33 Total current liabilities $111
Total current assets $303
FIN623_Assessment Tool Page 1 of 6 Goldey-Beacom College.docxmydrynan
FIN623_Assessment Tool
Page 1 of 6
Goldey-Beacom College
Assessment Survey
Corporate Finance (FIN623)
Time: 50 minutes
Choose the alternative the best answers the question.
Du Pont equation
1. The Wilson Corporation has the following relationships:
Sales/Total assets 2.0
Return on assets (ROA) 4%
Return on equity (ROE) 6%
What is Wilson’s profit margin and debt ratio?
a. 2% and 0.33
b. 4% and 0.33
c. 4% and 0.67
d. 2% and 0.67
e. 4% and 0.50
P/E ratio and stock price
2. Cleveland Corporation has 100,000 shares of common stock outstanding. The company’s net
income is $750,000 and its P/E is 8. What is the company’s stock price?
a. $20.00
b. $30.00
c. $40.00
d. $50.00
e. $60.00
ROA
3. The Meryl Corporation's common stock is currently selling at $100 per share, which represents a
P/E ratio of 10. If the firm has 100 shares of common stock outstanding, a return on equity of 20
percent, and a debt ratio of 60 percent, what is its return on total assets (ROA)?
a. 8.0%
b. 10.0%
c. 12.0%
d. 16.7%
e. 20.0%
Equity multiplier
4. A firm which has an equity multiplier of 4.0 will have a debt ratio of
a. 4.00
b. 3.00
c. 1.00
d. 0.75
e. 0.25
FIN623_Assessment Tool
Page 2 of 6
Liquidity ratios
5. Oliver Incorporated has a current ratio = 1.6, and a quick ratio equal to 1.2. The company has $2
million in sales and its current liabilities are $1 million. What is the company’s inventory turnover
ratio?
a. 5.0
b. 5.2
c. 5.5
d. 6.0
e. 6.3
Profit margin
6. The Merriam Company has determined that its return on equity is 15 percent. Management is
interested in the various components that went into this calculation. You are given the following
information: total debt/total assets = 0.35 and total assets turnover = 2.8. What is the profit
margin?
a. 3.48%
b. 5.42%
c. 6.96%
d. 2.45%
e. 12.82%
PV of an annuity
7. What is the present value of a 5-year ordinary annuity with annual payments of $200, evaluated at
a 15 percent interest rate?
a. $ 670.43
b. $ 842.91
c. $1,169.56
d. $1,348.48
e. $1,522.64
Interest rate of an annuity
8. South Penn Trucking is financing a new truck with a loan of $10,000 to be repaid in 5 annual end-
of-year installments of $2,504.56. What annual interest rate is the company paying?
a. 7%
b. 8%
c. 9%
d. 10%
e. 11%
Number of periods for an annuity
9. Your subscription to Jogger's World Monthly is about to run out and you have the choice of
renewing it by sending in the $10 a year regular rate or of getting a lifetime subscription to the
magazine by paying $100. Your cost of capital is 7 percent. How many years would you have to
live to make the lifetime subscription the better buy? Payments for the regular subscription are
made at the beginning of each year. (Round up if necessary to obtain a whole number of years.)
a. 15 years ...
Similar to BUS 401 Week 3 Quiz 3 (Principles of Finance - entirecourse.com) (20)
FIN623_Assessment Tool Page 1 of 6 Goldey-Beacom College.docx
BUS 401 Week 3 Quiz 3 (Principles of Finance - entirecourse.com)
1. BUS 401 Week 3 Quiz 3
1. Jiffy Wax Corp. Can sell common stock for $15 per share and its investors require a 14 % return.
However, the administrative or flotation costs associated with selling the stock amount to $2.40 per
share. What is the cost of capital for Jiffy Wax if the corporation raises money by selling preferred
stock?
30.00%
21.50%
16.67%
14.00%
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2. Kinslow Manufacturing Company paid a dividend yesterday of $2.50 per share. The dividend is
expected to grow at a constant rate of 5% per year. The price of Kinslow’s common stock today is $25
per share. If Kinslow decides to issue new common stock, flotation costs will equal $2.00 per share.
Key’s marginal tax rate is 34 %. Based on the above information, the cost of retained earnings is
_________
16.14%
15.50%
15.00%
10.55 %
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-3-Quiz-3
3. Nickel Industries is considering the purchase of a new machine that will cost $178,000, plus an
additional $12,000 to ship and install. The new machine will have a 5 year useful life and will be
depreciated using the straight line method. The machine is expected to generate new sales of $85,000
per year and is expected to increase operating costs by $ 10,000 annually. Nickel’s income tax rate is
40%. What is the projected incremental cash flow of the machine or year 1?
$54,800
$60,200
$66,350
$68,200
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4. Nargo Inc. Wants to replace a 7 year old machine with a new machine that is more efficient. The old
machine cost $50,000 when new and has a current book value of $10,000. Margo can sell the machine
to a foreign buyer for $12,000. Margo’s tax rate is 30%. The effect of the sale of the old machine on the
initial outlay for the new machine is ________
[$12,600]
[$11,400]
[$8,400]
$0
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5. A capital budgeting project has a net present value of $10,000 and a modified internal rate of return
of 13%. The project's required rate of return is 11 %. The internal rate of return is ______
Greater than 13 %
Less than 11 %
Between 11% and 13%
2. Less than $10,000
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6. Higgins Office Corp. Plans to maintain its optimal capital structure of 40 percent debt, 10 percent
preferred stock, and 50 percent common equity indefinitely. The required return on each component
source of capital is as follows: debt - 8 percent; preferred stock- 12 percent; common equity- 16
percent. Assuming a 40 percent marginal tax rate, what after tax rate of exchange must Higgins Office
Corp. Earn on its investments if the value of the firm is to remain unchanged?
12.40 percent
12.00 percent
11.12 percent
10.64 percent
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7. Zellar’s, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is
expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is
expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in
year four. Zellar, Inc.’s required rate of return for these projects is 10%. The internal rate of return for
Project B is ________
26.74%
20.79%
18.64%
16.77%
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8. A new machine can be purchased for $1,000,000. It will cost $65,000 to ship and $35,000 to modify
the machine. A $30,000 recently completed feasibility study indicated that the firm can employ an
existing factory owned by the firm, which would have otherwise been sold for $150,000. The firm will
borrow $750,000 to finance the acquisition. Total interest expense for 5 years is expected to
approximate $250,000. What is the investment cost of the machine for capital budgeting purposes?
$1,100,000
$1,250,000
$1,280,000
$1,530,000
$ 2,030,000
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9. Zellar’s, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $ 75,000 and is
expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is
expected to generate $34,000 on year one, $37,000 in year two, $26,000 in year three, and $25,000 in
year four. Zellar, Inc.’s required rate of return for these projects is 10%. The profitability index for
Project B is ________
1.56
1.41
1.29
1.23
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10. Jones Company has a target capital structure of 40% debt, 10% preferred stock, and 50% common
3. equity. The company’s after tax cost of debt is 8%, its cost of preferred debt is 10%, its cost of retained
earnings is 14%, and its cost of new common stock is 16%. The company stock has a beta of 1.2 and
the company’s marginal tax rate is 35%. What is the company’s weighted average cost of capital if
retained earnings are used to fund the common equity portion?
11.20%
6.72%
16.80%
8.00%
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