FIN 370 Examination Questions with Answers
1 What are reasons for the firm to go abroad?
Suppose that Model Nails, Inc.’s capital structure features 60 percent equity, 40 percent debt, and that its before-tax cost of debt is 6 percent, while its cost of equity is 10 percent. If the appropriate weighted average tax rate is 28 percent, what will be Model Nails’ WACC?
A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.
What’s the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?
We call the process of earning interest on both the original deposit and on the earlier interest payments:
We can estimate a stock’s value by__________.
You are trying to pick the least-expensive machine for your company. You have two choices: machine A, which will cost $50,000 to purchase and which will have OCF of -$3,500 annually throughout the machine’s expected life of three years; and machine B, which will cost $75,000 to purchase and which will have OCF of -$4,900 annually throughout that machine’s four-year life. Both machines will be worthless at the end of their life. If you intend to replace whichever type of machine you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 14 percent, which one should you choose?
Which of these is the process of estimating expected future cash flows of a project using only the relevant parts of the balance sheet and income statements?
We commonly measure the risk-return relationship using which of the following?
Which of these ratios show the combined effects of liquidity, asset management, and debt management on the overall operation results of the firm?
Which of these provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds?
When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm’s cash flows as__________.
Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (ending 20 years from now). James can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?
Which of these is the term for portfolios with the highest return possible for each risk level?
Which of the following is a true statement?
Which of these statements is true regarding divisional WACC?
Which of these does NOT perform vital functions to securities markets of all sorts by channeling funds from those with surplus funds to those with shortages of funds?
Financial plans include which of the following?
Will’s Wheels, Inc. reported a debt-to-equity ratio of 0.65 times at the end of 2013. If the firm’s total debt at year-end was $5 million, how much equity does Will’s Wheels have?
Which financial statement reports a firm’s assets, liabilities, and equity at a particular point in time?
Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?
The top part of Mars, Inc.’s 2013 balance sheet is listed as follows (in millions of dollars).
What are Mars, Inc.’s current ratio, quick ratio, and cash ratio for 2013?
Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time — generally one year?
Which of the following can create ethical dilemmas between corporate managers and stockholders?
Which of the following terms means that during periods when interest rates change substantially, bondholders experience distinct gains and losses in their bond investments?
What are the tools available for the manager in financial planning?
The overall goal of the financial manager is to__________.
As new capital budgeting projects arise, we must estimate__________.
The Rule of 72 is a simple mathematical approximation for__________.
the number of years required to double an investment