FIN 370 FINALS

1.
Which
one of the following statements is correct concerning the cash cycle
2.
Precise
Machinery is analyzing a proposed project. The company expects to sell 2,100
units, give or take 5 percent. The expected variable cost per unit is $260 and
the expected fixed costs are $589,000. Cost estimates are considered accurate
within a plus or minus 4 percent range. The depreciation expense is $129,000.
The sales price is estimated at $750 per unit, give or take 2 percent. The tax
rate is 35 percent. The company is conducting a sensitivity analysis on the
sales price using a sales price estimate of $755. What is the operating cash
flow based on this analysis.
3.
You
are doing some comparison shopping. Five stores offer the product you want at
basically the same price but with differing credit terms. Which one of these
terms is best-suited to you if you plan to forgo the discount
4.
The
plowback ratio is
5.
Which
one of the following is the financial statement that summarizes a firm’s
revenue and expenses over a period of time
6.
Kelly’s
Corner Bakery purchased a lot in Oil City six years ago at a cost of $278,000.
Today, that lot has a market value of $264,000. At the time of the purchase,
the company spent $6,000 to level the lot and another $8,000 to install storm
drains. The company now wants to build a new facility on that site. The
building cost is estimated at $1.03 million. What amount should be used as the
initial cash flow for this project
7.
Al
invested $7,200 in an account that pays 4 percent simple interest. How much
money will he have at the end of five years
8.
All
of the following represent potential gains from an acquisition except the
9.
Fresno
Salads has current sales of $6,000 and a profit margin of 6.5 percent. The firm
estimates that sales will increase by 4 percent next year and that all costs
will vary in direct relationship to sales. What is the pro forma net income
10.
A
news flash just appeared that caused about a dozen stocks to suddenly drop in
value by 20 percent. What type of risk does this news flash best represent
11.
Which
one of the following terms is defined as the mixture of a firm’s debt and
equity financing
12.
George
and Pat just made an agreement to exchange currencies based on today’s exchange
rate. Settlement will occur tomorrow. Which one of the following is the
exchange rate that applies to this agreement
13.
Webster
United is paying a dividend of $1.32 per share today. There are 350,000 shares
outstanding with a market price of $22.40 per share prior to the dividend
payment. Ignore taxes. Before the dividend, the company had earnings per share
of $1.68. As a result of this dividend, the
14.
The common
stock of Dayton Repair sells for $43.19 a share. The stock is expected to pay
$2.28 per share next year when the annual dividend is distributed. The firm has
established a pattern of increasing its dividends by 2.15 percent annually and
expects to continue doing so. What is the market rate of return on this stock
15.
Which
one of the following should earn the most risk premium based on CAPM
16.
Which
one of these actions will increase the operating cycle? Assume all else held
constant
17.
Oil
Wells offers 6.5 percent coupon bonds with semiannual payments and a yield to
maturity of 6.94 percent. The bonds mature in seven years. What is the market
price per bond if the face value is $1,000
18.
Three
Corners Markets paid an annual dividend of $1.37 a share last month. Today, the
company announced that future dividends will be increasing by 2.8 percent
annually. If you require a return of 11.6 percent, how much are you willing to
pay to purchase one share of this stock today
19.
Which
one of the following is a source of cash
20.
Nadine’s
Home Fashions has $2.12 million in net working capital. The firm has fixed
assets with a book value of $31.64 million and a market value of $33.9 million.
The firm has no long-term debt. The Home Centre is buying Nadine’s for $37.5
million in cash. The acquisition will be recorded using the purchase accounting
method. What is the amount of goodwill that The Home Centre will record on its
balance sheet as a result of this acquisition??
21.
Chelsea
Fashions is expected to pay an annual dividend of $1.10 a share next year.
The market price of the stock is $21.80 and the growth rate is 4.5
percent. What is the firm’s cost of equity
22.
Operating
leverage is the degree of dependence a firm places on its
23.
Phillips
Equipment has 75,000 bonds outstanding that are selling at par. Bonds with
similar characteristics are yielding 7.5 percent. The company also has
750,000 shares of 6 percent preferred stock and 2.5 million shares of
common stock outstanding. The preferred stock sells for $64 a share. The common
stock has a beta of 1.21 and sells for $44 a share. The U.S. Treasury bill
is yielding 2.3 percent and the return on the market is 11.2 percent. The
corporate tax rate is 34 percent. What is the firm’s weighted average cost
of capital
24.
Andy
deposited $3,000 this morning into an account that pays 5 percent interest,
compounded annually. Barb also deposited $3,000 this morning into an account
that pays 5 percent interest, compounded annually. Andy will withdraw his
interest earnings and spend it as soon as possible. Barb will reinvest her
interest earnings into her account. Given this, which one of the following statements
is true
25. When utilizing the percentage of sales approach,
managers:?
I. Estimate company sales based on a desired
level of net income and the current profit margin.
II. Consider only those assets that vary
directly with sales.
III. Consider the current production capacity
level.
IV. Can project both net income and net cash
flows
26.
You
are comparing two investment options that each pay 6 percent interest, compounded
annually. Both options will provide you with $12,000 of income. Option A pays
$2,000 the first year followed by two annual payments of $5,000 each. Option B
pays three annual payments of $4,000 each. Which one of the following
statements is correct given these two investment options? Assume a positive
discount rate
27.
The
condition stating that the interest rate differential between two countries is
equal to the percentage difference between the forward exchange rate and the
spot exchange rate is called
28.
The
Dry Dock is considering a project with an initial cost of $118,400. The
project’s cash inflows for years 1 through 3 are $37,200, $54,600, and $46,900,
respectively. What is the IRR of this project
29.
The 7
percent bonds issued by Modern Kitchens pay interest semiannually, mature in
eight years, and have a $1,000 face value. Currently, the bonds sell for
$1,032. What is the yield to maturity
30.
Isaac
has analyzed two mutually exclusive projects that have 3-year lives. Project A
has an NPV of $81,406, a payback period of 2.48 years, and an AAR of 9.31
percent. Project B has an NPV of $82,909, a payback period of 2.57 years, and
an AAR of 9.22 percent. The required return for Project A is 11.5 percent while
it is 12 percent for Project B. Both projects have a required AAR of 9.25
percent. Isaac must make a recommendation and justify it in 15 words or less.
What should his recommendation be