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davenport finc620 final exam

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Question;?;on 1;8 out of 8 points;Which;of the following statements is CORRECT?;?;Question 2;8 out of 8 points;Which of the following statements is;most CORRECT?;?;Question 3;8 out of 8 points;Stock;X has a required return of 10%, while Stock Y has a required return of 12%. Which of the following statements is;CORRECT?;?;Question 4;8 out of 8 points;Which;of the following statements is CORRECT?;?;Question 5;8 out of 8 points;Deeble Construction Co.?s stock is trading at $30;a share. Call options on;the company?s stock are also;available, some with a strike price of $25 and;some with a strike price of $35. Both options expire in three months. Which;of the following best describes the;value of these options?;?;Question 6;8 out of 8 points;You;are on the staff of Camden Inc. The CFO believes project acceptance;should be based on the NPV, but Steve Camden, the president, insists that no;project can be accepted unless its IRR exceeds the project?s risk-adjusted;WACC. Now you must make a recommendation on a project;that has a cost of $15,000 and two cash flows: $110,000 at the end of Year 1;and -$100,000 at the end of Year 2. The president and the CFO both agree;that the appropriate WACC for this project is 10%.At 10%, the NPV is $2,355.37, but you;find two IRRs, one at 6.33% and one at 527%, and a MIRR of 11.32%. Which of the following statements;best describes your optimal recommendation, i.e., the analysis and;recommendation that is best for the company and least likely to get you in;trouble with either the CFO or the president?;?;Question 7;8 out of 8 points;1. 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 8;8 out of 8 points;When;working with the CAPM, which of the following factors can be determined with;the most precision?;?;Question 9;8 out of 8 points;Volga;Publishing is considering a proposed increase in its debt ratio, which would;also increase the company?s interest expense. The plan would involve issuing new;bonds and using the proceeds to buy back shares of its common stock. The company?s CFO thinks the plan;will not change total assets or operating income, but that it will increase;earnings per share (EPS). Assuming the CFO?s estimates are;correct, which of the following statements is CORRECT?;?;Question 10;8 out of 8 points;If;two firms have the same current dividend and the same expected dividend;growth rate, their stocks must sell at the same current price or else the;market will not be in equilibrium.;?;Question 11;8 out of 8 points;A;highly risk-averse investor is considering adding one additional stock to a;3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all;have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both;have expected returns of 15%, and both are equally correlated with the;market, with r = 0.75. However, Stock A's standard deviation of returns;is 12% versus 8% for Stock B. Which stock should this investor add;to his or her portfolio, or does the choice matter?;?;Question 12;8 out of 8 points;Which;of the following statements is CORRECT?;?;Question 13;8 out of 8 points;You;are negotiating to make a 7-year loan of $25,000 to Breck Inc. To repay you, Breck will pay $2,500;at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of;Year 3, plus a fixed but currently unspecified cash flow, X, at the end of;Years 4 through 7. Breck is essentially riskless, so you are;confident the payments will be made, and you regard 8% as an appropriate rate;of return on low risk 7-year loans. What cash flow must the investment;provide at the end of each of the final 4 years, that is, what is X?;?;Question 14;8 out of 8 points;Below;is the common equity section (in millions) of Teweles Technology?s last two;year-end balance sheets;2007 2006;CommonStock $2000 $1000;RetainedEarnings 2000 2340;Total;Common;Equity $4000 $3340;Teweles;has never paid a dividend to its common stockholders. Which of the following statements is;CORRECT?;?;Question 15;8 out of 8 points;Which;of the following statements isNOT CORRECT?;?;Question 16;8 out of 8 points;In;1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same;amount of yen today but the current exchange rate is 144 yen per dollar, what;would the car be selling for today in U.S. dollars?;?;Question 17;8 out of 8 points;Edmondson;Electric Systems is considering a project that has the following cash flow;and WACC data. What is the project's NPV?Note that if a project's projected;NPV is negative, it should be rejected.;WACC: 10.00%;Year;0;1;2;3;Cash;flows: -$1000 $500 $500 $500;?;Question 18;8 out of 8 points;Suppose;firms follow similar financing policies, face similar risks, have equal;access to capital, and operate in competitive product and capital markets. Under these conditions, then firms;that have high profit margins will tend to have high asset turnover ratios;and firms with low profit margins will tend to have low turnover ratios.;?;Question 19;8 out of 8 points;Companies;E and P each reported the same earnings per share (EPS), but Company E's;stock trades at a higher price. Which of the following statements is;CORRECT?;?;Question 20;8 out of 8 points;Which;of the following statements is CORRECT?;?;Question 21;8 out of 8 points;Other;things held constant, which of the following will cause an increase in;net working capital?;?;Question 22;8 out of 8 points;Which;of the following isNOT a capital component when;calculating the weighted average cost of capital (WACC)?;?;Question 23;8 out of 8 points;Which;of the following statements is CORRECT?;?;Question 24;8 out of 8 points;Which of the following doesNOT always increase a company?s;market value?;?;Question 25;8 out of 8 points;Firm;A has a higher degree of business risk than Firm B. Firm A can offset this by using less;financial leverage. Therefore, the variability of both firms;expected EBITs could actually be identical.

 

Paper#50576 | Written in 18-Jul-2015

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