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davenport finc620 week 5 quiz

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Question;?;uestion 1;2 out of 2 points;Brammer Corp.'s projected capital budget is;$1,000,000, its target capital structure is 60% debt and 40% equity, and its;forecasted net income is $550,000. If the company follows a residual dividend;policy, what total dividends, if any, will it pay out?;?;Question 2;2 out of 2 points;Which of the following statements is CORRECT?;?;Question 3;2 out of 2 points;Brooks Corp.'s projected capital budget is;$2,000,000, its target capital structure is 60% debt and 40% equity, and its;forecasted net income is $600,000. If the company follows a residual dividend;policy, what total dividends, if any, will it pay out?;?;Question 4;2 out of 2 points;Vu Enterprises expects to have the following data during the coming;year. What is Vu's expected ROE?;Assets;$200,000;Interest rate;8%;D/A;65%;Tax rate;40%;EBIT;$;25,000;?;Question 5;2 out of 2 points;Senbet Ventures is considering starting a new;company to produce stereos. The sales price would be set at 1.5 times the;variable cost per unit, the VC/unit is estimated to be $2.50, and fixed costs;are estimated at $120,000. What sales volume would be required in order to;break even, i.e., to have an EBIT of zero for the stereo business?;?;Question 6;2 out of 2 points;Pate & Co. has a capital budget of;$3,000,000. The company wants to maintain a target capital structure that is;15% debt and 85% equity. The company forecasts that its net income this year;will be $3,500,000. If the company follows a residual dividend policy, what;will be its total dividend payment?;?;Question 7;2 out of 2 points;Reynolds Resorts is currently 100% equity;financed. The CFO is considering a recapitalization plan under which the firm;would issue long-term debt with a yield of 9% and use the proceeds to;repurchase common stock. The recapitalization would not change the company's;total assets, nor would it affect the firm's basic earning power, which is;currently 15%. The CFO believes that this recapitalization would reduce the;WACC and increase stock price. Which of the following would also be likely to;occur if the company goes ahead with the recapitalization plan?;?;Question 8;0 out of 2 points;Multi-Part 15-4:The A. J. Croft Company (AJC) currently has;$200,000 market value (and book value) of perpetual debt outstanding carrying;a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are;$100,000, and it is a zero growth company. AJC's current cost of equity is;8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock;outstanding selling at a price per share of $60.00.;Refer to Multi-Part 15-4. What is AJC's current total market value and;weighted average cost of capital?;?;Question 9;2 out of 2 points;Which of the following statements is correct?;?;Question 10;2 out of 2 points;Firm M is a mature firm in a mature industry. Its;annual net income and net cash flows are both consistently high and stable.;However, M's growth prospects are quite limited, so its capital budget is;small relative to its net income. Firm N is a relatively new firm in a new;and growing industry. Its markets and products have not stabilized, so its;annual operating income fluctuates considerably. However, N has substantial;growth opportunities, and its capital budget is expected to be large relative;to its net income for the foreseeable future. Which of the following;statements is correct?;?;Question 11;2 out of 2 points;Which of the following statements is CORRECT?;?;Question 12;2 out of 2 points;Which of the following statements is CORRECT?;?;Question 13;2 out of 2 points;Multi-Part 15-1:Powell Plastics, Inc. (PP) currently has zero;debt. Its earnings before interest and taxes (EBIT) are $80,000, and it is a;zero growth company. PP's current cost of equity is 10%, and its tax rate is;40%. The firm has 10,000 shares of common stock outstanding selling at a;price per share of $48.00.;Refer to Multi-Part 15-1. PP is considering moving to a capital structure;that is comprised of 30% debt and 70% equity, based on market values. The;debt would have an interest rate of 8%. The new funds would be used to;repurchase stock. It is estimated that the increase in risk resulting from;the added leverage would cause the required rate of return on equity to rise;to 12%. If this plan were carried out, what would be PP's new value of;operations?;?;Question 14;2 out of 2 points;Which of the following statements is CORRECT?;?;Question 15;2 out of 2 points;DeLong Inc. has fixed operating costs of;$470,000, variable costs of $2.80 per unit produced, and its products sell;for $4.00 per unit. What is the company's breakeven point, i.e., at what unit;sales volume would income equal costs?

 

Paper#50574 | Written in 18-Jul-2015

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