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FIN 515 Final Exam New Version Set 5

FIN 515 Final Exam New Version Set 5

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Author: Christine Farr
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1. (TCO A) In the United States, which of the following types of organization has the greatest revenue in total? (Points : 5)
2. (TCO A) The one thing that makes a corporation different from the other forms of business ownership is (Points : 5)
3. (TCO B) Which of the following would cause the present value of an annuity to decrease? (Points : 5)
4. (TCO B) In a TVM calculation, if incoming cash flows are positive, outgoing cash flows must be (Points : 5)
5. (TCO G) If net income, total assets, and book value of equity stayed the same, what would be the effect on the DuPont Identity of an increase in sales? (Points : 20)
6. (TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is not expected to grow. The return on equity for similar stocks is 12%. What is P0? (Points : 20)
7. (TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)
8. (TCO D) A given bond has 5 years to maturity. It has a face value of $1,000. It has a YTM of 6% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? (Points : 10)
9. (TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)
10. (TCO D) What is β and why is it important to investors and issuers of stock? Describe the behavior of stocks with βs of greater than one, less than one, and less than zero. (Points : 30)
11. (TCO E) A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)
12. (TCO A) What is the difference between capital structure and capital budgeting? Explain and give an example of a capital structure decision and an example of a capital budgeting decision. (Points : 25)
13. (TCO H) What is the Cash Conversion Cycle (CCC)? Name the components of the CCC and explain why the CCC is important to business. (Points : 30)
14. (TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.


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