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FIN 571Final Exam

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• 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

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• 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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• 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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• 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.
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• 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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• 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
• MM 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
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  Exam Answers
• 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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• 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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• 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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• 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 
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  Questions With Answers
• 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 flows79,000,
  112,000, 164,000, 84,000, and 242,000over
  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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• 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
  follows450,000, 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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• Multiple Choice Question 67
• Which of the following is not a method of
  benchmarking?
• Conduct an industry group analysis.
• Evaluating a single firms performance over
  time.(112)
• Utilize the DuPont system to analyze a firms
  performance.
• Identify a group of firms that compete with the
  company being analyzed. 
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• 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 firms 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 

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• 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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