FIN 370 FINALS 2017 LATEST VERSION 1

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August 15, 2020
BUSI 465 CASE STUDY
August 15, 2020

1. Which one of the following statements is correct concerning the cash cycle
2. Precise Machinery is analyzing a proposed project. The company expects to sell 2100 units give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129000. The sales price is estimated at $750 per unit give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $755. What is the operating cash flow based on this analysis.
3. You are doing some comparison shopping. Five stores offer the product you want at basically the same price but with differing credit terms. Which one of these terms is best-suited to you if you plan to forgo the discount
4. The plowback ratio is
5. Which one of the following is the financial statement that summarizes a firm’s revenue and expenses over a period of time
6. Kelly’s Corner Bakery purchased a lot in Oil City six years ago at a cost of $278000. Today that lot has a market value of $264000. At the time of the purchase the company spent $6000 to level the lot and another $8000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.03 million. What amount should be used as the initial cash flow for this project
7. Al invested $7200 in an account that pays 4 percent simple interest. How much money will he have at the end of five years
8. All of the following represent potential gains from an acquisition except the
9. Fresno Salads has current sales of $6000 and a profit margin of 6.5 percent. The firm estimates that sales will increase by 4 percent next year and that all costs will vary in direct relationship to sales. What is the pro forma net income
10. A news flash just appeared that caused about a dozen stocks to suddenly drop in value by 20 percent. What type of risk does this news flash best represent
11. Which one of the following terms is defined as the mixture of a firm’s debt and equity financing
12. George and Pat just made an agreement to exchange currencies based on today’s exchange rate. Settlement will occur tomorrow. Which one of the following is the exchange rate that applies to this agreement
13. Webster United is paying a dividend of $1.32 per share today. There are 350000 shares outstanding with a market price of $22.40 per share prior to the dividend payment. Ignore taxes. Before the dividend the company had earnings per share of $1.68. As a result of this dividend the
14. The common stock of Dayton Repair sells for $43.19 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing its dividends by 2.15 percent annually and expects to continue doing so. What is the market rate of return on this stock
15. Which one of the following should earn the most risk premium based on CAPM
16. Which one of these actions will increase the operating cycle? Assume all else held constant
17. Oil Wells offers 6.5 percent coupon bonds with semiannual payments and a yield to maturity of 6.94 percent. The bonds mature in seven years. What is the market price per bond if the face value is $1000
18. Three Corners Markets paid an annual dividend of $1.37 a share last month. Today the company announced that future dividends will be increasing by 2.8 percent annually. If you require a return of 11.6 percent how much are you willing to pay to purchase one share of this stock today
19. Which one of the following is a source of cash
20. Nadines Home Fashions has $2.12 million in net working capital. The firm has fixed assets with a book value of $31.64 million and a market value of $33.9 million. The firm has no long-term debt. The Home Centre is buying Nadines for $37.5 million in cash. The acquisition will be recorded using the purchase accounting method. What is the amount of goodwill that The Home Centre will record on its balance sheet as a result of this acquisition?
21. Chelsea Fashions is expected to pay an annual dividend of $1.10 a share next year. Themarket price of the stock is $21.80 and the growth rate is 4.5 percent. What is the firm’s cost ofequity
22. Operating leverage is the degree of dependence a firm places on its
23. Phillips Equipment has 75000 bonds outstanding that are selling at par. Bonds with similarcharacteristics are yielding 7.5 percent. The company also has 750000 shares of 6 percentpreferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for$64 a share. The common stock has a beta of 1.21 and sells for $44 a share. The U.S. Treasurybill is yielding 2.3 percent and the return on the market is 11.2 percent. The corporate tax rate is34 percent. What is the firm’s weighted average cost of capital
24. Andy deposited $3000 this morning into an account that pays 5 percent interest compounded annually. Barb also deposited $3000 this morning into an account that pays 5 percent interest compounded annually. Andy will withdraw his interest earnings and spend it as soon as possible. Barb will reinvest her interest earnings into her account. Given this which one of the following statements is true
25. When utilizing the percentage of sales approach managers:
I. Estimate company sales based on a desired level of net income and the current profit margin.
II. Consider only those assets that vary directly with sales.
III. Consider the current production capacity level.
IV. Can project both net income and net cash flows
26. You are comparing two investment options that each pay 6 percent interest compounded annually. Both options will provide you with $12000 of income. Option A pays $2000 the first year followed by two annual payments of $5000 each. Option B pays three annual payments of $4000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate
27. The condition stating that the interest rate differential between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate is called
28. The Dry Dock is considering a project with an initial cost of $118400. The projects cash inflows for years 1 through 3 are $37200 $54600 and $46900 respectively. What is the IRR of this project
29. The 7 percent bonds issued by Modern Kitchens pay interest semiannually mature in eight years and have a $1000 face value. Currently the bonds sell for $1032. What is the yield to maturity
30. Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV of $81406 a payback period of 2.48 years and an AAR of 9.31 percent. Project B has an NPV of $82909 a payback period of 2.57 years and an AAR of 9.22 percent. The required return for Project A is 11.5 percent while it is 12 percent for Project B. Both projects have a required AAR of 9.25 percent. Isaac must make a recommendation and justify it in 15 words or less. What should his recommendation be

 
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