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##### davenport finc620 week 4 quiz

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Question;?;qn 1;2 out of 2 points;Leak Inc. forecasts the free cash flows (in millions) shown below. If;the weighted average cost of capital is 11% and FCF is expected to grow at a;rate of 5% after Year 2, what is the Year 0 value of operations, in millions?;Assume that the ROIC is expected to remain constant in Year 2 and beyond (and;do not make any half-year adjustments).;Year;1;2;Free cash flow;-$50;$100;?;Question 2;2 out of 2 points;Based on the corporate valuation model, the value;of a company's operations is $900 million. Its balance sheet shows $70;million in accounts receivable, $50 million in inventory, $30 million in;short-term investments that are unrelated to operations, $20 million in;accounts payable, $110 million in notes payable, $90 million in long-term;debt, $20 million in preferred stock, $140 million in retained earnings, and;$280 million in total common equity. If the company has 25 million shares of;stock outstanding, what is the best estimate of the stock's price per share?;?;Question 3;2 out of 2 points;Which of the following is NOT normally;regarded as being a good reason to establish an ESOP?;?;Question 4;2 out of 2 points;Which of the following statements is NOT CORRECT?;?;Question 5;2 out of 2 points;Simonyan Inc. forecasts a free cash flow of $40;million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant;rate of 5% thereafter. If the weighted average cost of capital is 10% and the;cost of equity is 15%, what is the horizon value, in millions at t = 3?;?;Question 6;2 out of 2 points;Suppose Leonard, Nixon, & Shull Corporation's;projected free cash flow for next year is $100,000, and FCF is expected to;grow at a constant rate of 6%. If the company's weighted average cost of;capital is 11%, what is the value of its operations?;?;Question 7;2 out of 2 points;Based on the corporate valuation model, Bernile;Inc.'s value of operations is $750 million. Its balance sheet shows $50;million of short-term investments that are unrelated to operations, $100;million of accounts payable, $100 million of notes payable, $200 million of;long-term debt, $40 million of common stock (par plus paid-in-capital), and;$160 million of retained earnings. What is the best estimate for the firm's;value of equity, in millions?;?;Question 8;2 out of 2 points;Based on the corporate valuation model, the value;of a company's operations is $1,200 million. The company's balance sheet;shows $80 million in accounts receivable, $60 million in inventory, and $100;million in short-term investments that are unrelated to operations. The;balance sheet also shows $90 million in accounts payable, $120 million in;notes payable, $300 million in long-term debt, $50 million in preferred;stock, $180 million in retained earnings, and $800 million in total common;equity. If the company has 30 million shares of stock outstanding, what is;the best estimate of the stock's price per share?;?;Question 9;2 out of 2 points;Based on the corporate valuation model;Hunsader's value of operations is $300 million. The balance sheet shows $20;million of short-term investments that are unrelated to operations, $50;million of accounts payable, $90 million of notes payable, $30 million of;long-term debt, $40 million of preferred stock, and $100 million of common;equity. The company has 10 million shares of stock outstanding. What is the;best estimate of the stock's price per share?;?;Question 10;2 out of 2 points;Which of the following does NOT always;increase a company's market value?;?;Question 11;2 out of 2 points;Vasudevan Inc. forecasts the free cash flows (in millions) shown;below. If the weighted average cost of capital is 13% and the free cash flows;are expected to continue growing at the same rate after Year 3 as from Year 2;to Year 3, what is the Year 0 value of operations, in millions?;Year;1;2;3;Free cash flow;-$20;$42;$45;?;Question 12;2 out of 2 points;A company forecasts the free cash flows (in millions) shown below. The;weighted average cost of capital is 13%, and the FCFs are expected to;continue growing at a 5% rate after Year 3. Assuming that the ROIC is;expected to remain constant in Year 3 and beyond, what is the Year 0 value of;operations, in millions?;Year;1;2;3;Free cash flow;-$15;$10;$40;?;Question 13;2 out of 2 points;Which of the following is NOT normally;regarded as being a barrier to hostile takeovers?;?;Question 14;2 out of 2 points;Suppose Yon Sun Corporation's free cash flow;during the just-ended year (t = 0) was $100 million, and FCF is expected to;grow at a constant rate of 5% in the future. If the weighted average cost of;capital is 15%, what is the firm's value of operations, in millions?;?;Question 15;2 out of 2 points;Zhdanov Inc. forecasts that its free cash flow in;the coming year, i.e., at t = 1, will be-$10 million, but its FCF at t = 2 will be $20 million. After Year 2;FCF is expected to grow at a constant rate of 4% forever. If the weighted;average cost of capital is 14%, what is the firm's value of operations, in;millions?

Paper#50573 | Written in 18-Jul-2015

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