FIN 515 Final Exam Set 4 New

FIN 515 Final Exam Set 4 New

Author: Christine Farr


1. (TCO A) In the United States, the most common type of business by number of businesses is the _____. (Points : 5)
2. (TCO A) Sole proprietorships have all of the following advantages except (Points : 5)
3. (TCO B) Which of the following would cause the future value of an annuity to decrease? (Points : 5)
4. (TCO B) Which of the following is an annuity due? (Points : 5)
5. (TCO G) What are the names of the four components of the DuPont Identity and how are they calculated? What does each measure? (Points : 20)
6. (TCO D) A stock pays an annual dividend of $2.50 and that dividend is not expected to change. Similar stocks pay a return of 10%. What is P0? (Points : 20)
7. (TCO D) A stock has just declared an annual dividend of $2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)
8. (TCO D) A particular bond has 8 years to maturity. It has a face value of $1,000. It has a YTM of 7% 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) Using examples, explain the difference between systematic risk and nonsystematic risk. Explain why the distinction is important for both investors and issuers of stock.(Points : 30)
11. (TCO E) A company has 10 million shares outstanding trading for $7 per share. It also has $300 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)
12. (TCO A) Relate how the job of the financial manager can be explained using the balance sheet. (Points : 25)
13. (TCO H) Other things being equal, would a firm prefer a longer or shorter Cash Conversion Cycle? What are some examples of ways a firm could attain this? (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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