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##### FIN571 FIN/571 WEEK 3 QUIZ

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Question;Q.1 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;Operating cycle: What is the operating cycle for Ridge Company?;51 days;47 days;85 days;36 days;Q.2 The operating cycle;Ends not with the finished goods being;sold to customers and the cash collected on the sales, but when you take into;account the time taken by the firm to pay for its purchases.;Begins when the firm uses its cash to;purchase raw materials and ends when the firm collects cash payments on its;credit sales.;Begins when the firm receives the raw;materials it purchased that would be used to produce the goods that the firm;manufactures.;To measure operating cycle we need;another measure called the days? payables outstanding.;Q.3. Ticktock Clocks sells 10,000 alarm clocks each;year. If the total cost of placing an order is \$65 and it costs \$85 per year to;carry the alarm clock in inventory, use the EOQ formula to calculate the;optimal order size.;161 clocks;124 clocks;26,154 clocks;15, 294 clocks;Q.4 The;asset substitution problem occurs when;Managers substitute less risky assets;for riskier ones to the detriment of bondholders.;Managers substitute riskier assets for;less risky ones to the detriment of bondholders.;Managers substitute riskier assets for;less risky ones to the detriment of equity holders.;Managers substitute less risky assets;for riskier ones to the detriment of equity holders.;Q.5 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.;How much are your cash flows today?;\$12.38;\$15;\$4.50;\$150;Q.6 Melba's;Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of;debt is 6%, and its cost of equity is 10%. The firm's marginal corporate income;tax rate is 35%. What is the appropriate WACC?;8.80%;8.17%;6.35%;7.44%;Q.7 According;to the text, the financial plan covers a period of;One year.;Three to five years.;Ten years.;None of these.;Q.8 The;financing plan of a firm will indicate;The firm?s dividend policy, the desired;capital structure for the firm, and the firm?s working capital policy.;The dollar amount of funds that has to;be raised externally and the sources of funds available to the firm, the;desired capital structure for the firm, and the firm?s working capital policy.;The dollar amount of funds that has to;be raised externally and the sources of funds available to the firm, the firm?s;dividend policy, and the firm?s working capital policy.;The dollar amount of funds that has to;be raised externally and the sources of funds available to the firm, the;desired capital structure for the firm, and the firm?s dividend policy.;Q.9;Tradewinds Corp. has revenues of \$9,651,220, costs of \$6,080,412, interest;payment of \$511,233, and a tax rate of 34 percent. It paid dividends of;\$1,384,125 to shareholders. Find the firm's dividend payout ratio and retention;ratio.;25%, 75%;34%, 66%;66%, 34%;69%, 31%

Paper#47445 | Written in 18-Jul-2015

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