FIN 571 Final Exam Paper

FIN 571 Final Exam Paper

  1. Financial managers should primarily strive to:
  2. The process of planning and managing a firm’s long-term assets is called:
  3. Which one of the following actions by a financial manager creates an agency problem?
  4. Which one of these is a cash outflow from a corporation?
  5. For each of the following, compute the present value
  6. Gerold invested $115 in an account that pays 5 percent simple interest. How much money will he have at the end of 5 years?
  7. What is the future value of $920 a year for 5 years at a 6 percent interest?
  8. You bought 360 shares of stock at a total cost of $7,754.40. You received a total of $403.20 in dividends and sold your shares for $19.98 a share. What was your total rate of return?
  9. A year ago, you purchased 500 shares of New Tech stock at a price of $49.03 per share. The stock pays an annual dividend of $.10 per share. Today, you sold all of your shares for $58.14 per share. What is your total dollar return on this investment?
  10. The financial statement summarizing a firm’s accounting performance over a period of time is the:
  11. Which one of these accounts is classified as a current asset on the balance sheet?
  12. Net working capital is defined as:
  13. Which one of these equations is an accurate expression of the balance sheet?
  14. The Purple Martin has annual sales of $4,900, total debt of $1,280, total equity of $2,300, and a profit margin of 5 percent. What is the return on assets?
  15. A firm has a debt-equity ratio of .35. What is the total debt ratio?
  16. Galaxy United, 2009 Income Statement ($ in millions)

 

What is the quick ratio for 2009?

  1. Reliable Cars has sales of $3,700, total assets of $3,050, and a profit margin of 5 percent. The firm has a total debt ratio of 41 percent. What is the return on equity?

The company not only opened the stores across Arkansas but also across the United States of America (Wal-Mart Corporate, 2010).

Wal-Mart was opposed by the unorganized retail business holders in the USA as their business was affected by opening Wal-Mart stores. The company also opened its first store outside the USA in South America in 1995. What is the company’s sustainable growth rate?

  1. The most common means of financing a temporary cash deficit is a:
  2. The length of time between the acquisition of inventory and its sale is called the:
  3. Titan Mining Corporation has 9.5 million shares of common stock outstanding and 390,000 5 percentsemiannual bonds outstanding, par value

$1,000 each. The common stock currently sells for $43 per share and has a beta of 1.25, and the bonds have 15 years to maturity and sell for 114 percent of par. The market risk premium is 8.3 percent, T-bills are yielding 4 percent, and the company’s tax rate is 36 percent.

Suppose the company’s stock has a beta of 1.2. The risk-free rate is 3.7 percent, and the market risk premium is 7.6 percent.

  1. When estimating the cost of equity using the DDM, which one of these is most apt to add error to this estimate?
  2. When computing WACC, you should use the:
  3. The cost of preferred stock:
  4. No matter how many forms of investment analysis you employ:
  5. Which statement concerning the net present value (NPV) of an investment or a financing project is correct?
  6. The net present value method of capital budgeting analysis does all of the following except:
  7. Graham and Harvey (2001) found that were the two most popular capital budgeting methods.
  8. The primary reason that company projects with positive net present values are considered acceptable is that:
  9. What is the net present value of a project with an initial cost of $36,900 and cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3, respectively? The discount rate is 13 percent.
  10. Flatte Restaurant is considering the purchase of a $10,800 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 2,400 soufflés per year, with each costing $2.80 to make and priced at $5.65. Assume that the discount rate is 16 percent and the tax rate is 35

What is the NPV of the project?

 

Should the company make the purchase?

  1. A project costing $6,200 initially should produce cash inflows of $2,860 a year for three years. After the three years, the project will be shut down and will be sold at the end of Year 4 for an estimated net cash amount of $3,300. What is the net present value of this project if the required rate of return is 11.3 percent?
  2. Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $2,090,000 in annual sales, with costs of $785,000. The tax rate is 30 percent and the required return is 13

What is the project’s NPV?

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