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STR581 Week 4 Final Exam Part 2




Question;STR581 Week;4 Final Exam Part 2;1. 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?;2. Ajax Corp. is expecting the following cash flows ? $79,000, $112,000;$164,000, $84,000, and $242,000 ? over 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.);3. Variance reports are;4. A cost which remains constant per unit at various levels of activity is;a;5. 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.);6. The convention of consistency refers to consistent use of;accounting principles;7. The major element in budgetary control is;8. Firms that achieve higher growth rates without seeking external;financing;9. Gateway, Corp. has an inventory turnover of 5.6. What;is the firm?s days?s sales in inventory?;10. Which of the following financial statements is concerned with the;company at a point in time?;11.The cash conversion cycle?;12. The process of evaluating financial data that change under alternative;courses of action is called;13. Jayadev Athreya has started his first job. 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?;14. If a company?s weighted average cost of capital is less than the;required return on equity, then the firm;15. 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);16. Horizontal analysis is a technique for evaluating a series of financial;statement data over a period of time;17. Process costing is used when;18. What decision criteria should managers use in selecting projects when;there is not enough capital to invest in all available positive NPV projects?;19. Which of the following is considered a hybrid organizational form;20. Which of the following is an advantage of corporations relative to;partnerships and sole proprietorships?;21. Horizontal analysis is also known as;22. In a process cost system, product costs are summarized;23. An activity that has a direct cause-effect relationship with the;resources consumed is a(n);24. The break-even point is where;25. Your firm has an equity multiplier of 2.47. What is the;debt-to-equity ratio?;26. M&M 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;equity to 60 percent equity and use the debt proceeds to pay a special dividend;to shareholders, how much debt should they use?;27. An unrealistic budget is more likely to result when it;28. 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.;29. 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?;30. The most important information needed to determine if companies can pay;their current obligations is the;31. 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 if 14 percent, what is the present value;of their dividends over the next four years?;32. Internal reports that review the actual impact of decisions are prepared;by;33. 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?;34. Which of the following presents a summary of changes in a firm?s balance;sheet from the beginning of an accounting period to the end of that accounting;period?;35. 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.);36. The group of users of accounting information charged with achieving the;goals of the business is its;37. The accumulation of accounting data on the basis of the individual;manager who has the authority to make day-to-day decisions about activities in;an area is called;38. 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?;39. When a company assigns the costs of direct materials, direct labor, and;both variable and fixed manufacturing overhead to products, that company is;using


Paper#52192 | Written in 18-Jul-2015

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