#### FIN 571 Final Exam Paper

## FIN 571 Final Exam Paper

- Financial managers should primarily strive to:
- The process of planning and managing a firm’s long-term assets is called:
- Which one of the following actions by a financial manager creates an agency problem?
- Which one of these is a cash outflow from a corporation?
- For each of the following, compute the present value
- Gerold invested $115 in an account that pays 5 percent simple interest. How much money will he have at the end of 5 years?
- What is the future value of $920 a year for 5 years at a 6 percent interest?
- 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?
- 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?
- The financial statement summarizing a firm’s accounting performance over a period of time is the:
- Which one of these accounts is classified as a current asset on the balance sheet?
- Net working capital is defined as:
- Which one of these equations is an accurate expression of the balance sheet?
- The Purple Martin has annual sales of $4,900, total debt of $1,280, total equity of $2,300, and a profit margin of 5 percent. What is the return on assets?
- A firm has a debt-equity ratio of .35. What is the total debt ratio?
- Galaxy United, 2009 Income Statement ($ in millions)

What is the quick ratio for 2009?

- 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?

- The most common means of financing a temporary cash deficit is a:
- The length of time between the acquisition of inventory and its sale is called the:
- 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.

- When estimating the cost of equity using the DDM, which one of these is most apt to add error to this estimate?
- When computing WACC, you should use the:
- The cost of preferred stock:
- No matter how many forms of investment analysis you employ:
- Which statement concerning the net present value (NPV) of an investment or a financing project is correct?
- The net present value method of capital budgeting analysis does all of the following except:
- Graham and Harvey (2001) found that
- The primary reason that company projects with positive net present values are considered acceptable is that:
- 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.
- 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?

- 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?
- 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?