Multiple Choice Question 51
You are provided the following working capital information for the
Ridge Company:
|
Ridge Company
|
|
|
Account
|
$
|
|
|
|
|
Inventory
|
$12,890
|
|
Accounts receivable
|
12,800
|
|
Accounts payable
|
12,670
|
|
|
|
|
Net sales
|
$124,589
|
|
Cost of goods sold
|
99,630
|
Cash conversion cycle: What is the cash conversion cycle for Ridge
Company?
·
38.3 days
·
46.4 days
·
83.5 days
·
129.9 days
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571 Final Exam
Multiple Choice Question 58
The cash conversion cycle
·
begins when the firm
uses its cash to purchase raw materials and ends when the firm collects cash
payments on its credit sales.
·
estimates how long it
takes on average for the firm to collect its outstanding accounts receivable
balance.
·
shows how long the firm
keeps its inventory before selling it.
·
begins when the firm
invests cash to purchase the raw materials that would be used to produce the
goods that the firm manufactures.
Multiple Choice Question 30
Payout and retention ratio: Drekker, Inc., has revenues of
$312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34
percent. It paid dividends of $34,125 to shareholders. Find the firm's dividend
payout ratio and retention ratio.
·
85%, 15%
·
55%, 45%
·
15%, 85%
·
45%, 55%
Multiple Choice Question 75
Firms that achieve higher growth rates without seeking external
financing
·
are highly leveraged.
·
none of these.
·
have less equity and/or
are able to generate high net income leading to a high ROE.
·
have a low plowback
ratio.
Multiple Choice Question 67
The strategic plan does NOT identify
·
working capital
strategies.
·
the lines of business a
firm will compete in.
·
major areas of
investment in real assets.
·
future mergers,
alliances, and divestitures.
Multiple Choice Question 41
Which of the following does maximizing shareholder wealth not
usually account for?
·
The timing of cash
flows.
·
Amount of Cash flows.
·
Risk.
·
Government regulation.
Multiple Choice Question 80
Which of the following cannot be engaged in managing the business?
·
a sole proprietor
·
a general partner
·
none of these
·
a limited partner
Multiple Choice Question 46
External financing needed: Jockey Company has total assets worth
$4,417,665. At year-end it will have net income of $2,771,342 and pay out 60
percent as dividends. If the firm wants no external financing, what is the
growth rate it can support?
·
30.3%
·
25.1%
·
27.3%
·
32.9%
Multiple Choice Question 86
Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in
the last fiscal year. Its depreciation and amortization expenses amounted to
$84 million. The firm has 135 million shares outstanding and a share price of
$12.80. A competing firm that is very similar to Turnbull has an enterprise
value/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the
nearest million dollars.
·
$1,787 million
·
$1,315 million
·
$453.6 million
·
$1,334 million
Multiple Choice Question 69
M&M Proposition 1: Dynamo Corp. produces annual cash flows of
$150 and is expected to exist forever. The company is currently financed with
75 percent equity and 25 percent debt. Your analysis tells you that the
appropriate discount rates are 10 percent for the cash flows, and 7 percent for
the debt. You currently own 10 percent of the stock.
If Dynamo wishes to change its capital structure from 75 percent
to 60 percent equity and use the debt proceeds to pay a special dividend to
shareholders, how much debt should they issue?
·
$375
·
$600
·
$225
·
$321
Multiple Choice Question 54
A firm's capital structure is the mix of financial securities used
to finance its activities and can include all of the following except
·
stock.
·
bonds.
·
equity options.
·
preferred stock.
Multiple Choice Question 32
If a company's weighted average cost of capital is less than the
required return on equity, then the firm:
·
Is perceived to be safe
·
Has debt in its capital
structure
·
Must have preferred
stock in its capital structure
·
Is financed with more
than 50% debt
Multiple Choice Question 85
The cost of equity: Gangland Water Guns, Inc., is expected to pay
a dividend of $2.10 one year from today. If the firm's growth in dividends is
expected to remain at a flat 3 percent forever, then what is the cost of equity
capital for Gangland if the price of its common shares is currently $17.50?
·
15.36%
·
12.00%
·
14.65%
·
15.00%
Multiple Choice Question 68
How firms estimate their cost of capital: The WACC for a firm is
13.00 percent. You know that the firm's cost of debt capital is 10 percent and
the cost of equity capital is 20%. What proportion of the firm is financed with
debt?
·
30%
·
50%
·
70%
·
33%
Multiple Choice Question 60
What decision criteria should managers use in selecting projects
when there is not enough capital to invest in all available positive NPV
projects?
·
The profitability index.
·
The modified internal
rate of return.
·
The internal rate of
return.
·
The discounted payback.
Multiple Choice Question 88
Capital rationing. TuleTime Comics is considering a new show that
will generate annual cash flows of $100,000 into the infinite future. If the
initial outlay for such a production is $1,500,000 and the appropriate discount
rate is 6 percent for the cash flows, then what is the profitability index for
the project?
·
0.11
·
1.90
·
1.11
·
0.90
Multiple Choice Question 79
PV of dividends: Next year Jenkins Traders will pay a dividend of
$3.00. It expects to increase its dividend by $0.25 in each of the following
three years. If their required rate of return is 14 percent, what is the
present value of their dividends over the next four years?
·
$13.50
·
$11.63
·
$9.72
·
$12.50
Multiple Choice Question 57
Bond price: Regatta, Inc., has six-year bonds outstanding that pay
a 8.25 percent coupon rate. Investors buying the bond today can expect to earn
a yield to maturity of 6.875 percent. What should the company's bonds be priced
at today? Assume annual coupon payments. (Round to the nearest dollar.)
·
$1,014
·
$1,066
·
$923
·
$972
Multiple Choice Question 62
Serox stock was selling for $20 two years ago. The stock sold for
$25 one year ago, and it is currently selling for $28. Serox pays a $1.10
dividend per year. What was the rate of return for owning Serox in the most
recent year? (Round to the nearest percent.)
·
16%
·
32%
·
12%
·
40%
Multiple Choice Question 57
Future value of an annuity: Jayadev Athreya has started on his
first job. He plans to start saving for retirement early. He will invest $5,000
at the end of each year for the next 45 years in a fund that will earn a return
of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the
nearest dollar.)
·
$1,745,600
·
$3,594,524
·
$5,233,442
·
$2,667,904
Multiple Choice Question 72
PV of multiple cash flows: Ajax Corp. is expecting the following
cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next
five years. If the company's opportunity cost is 15 percent, what is the
present value of these cash flows? (Round to the nearest dollar.)
·
$480,906
·
$414,322
·
$477,235
·
$429,560
Multiple Choice Question 64
PV of multiple cash flows: Ferris, Inc., has borrowed from their
bank at a rate of 8 percent and will repay the loan with interest over the next
five years. Their scheduled payments, starting at the end of the year are as
follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the
present value of these payments? (Round to the nearest dollar.)
·
$2,431,224
·
$2,815,885
·
$2,735,200
·
$2,615,432
Multiple Choice Question 62
Present value: Jack Robbins is saving for a new car. He needs to
have $ 21,000 for the car in three years. How much will he have to invest today
in an account paying 8 percent annually to achieve his target? (Round to
nearest dollar.)
·
$22,680
·
$26,454
·
$19,444
·
$16,670
Multiple Choice Question 67
Which of the following is not a method of “benchmarking”?
·
Conduct an industry
group analysis.
·
Evaluating a single
firm’s performance over time.(112)
·
Utilize the DuPont
system to analyze a firm’s performance.
·
Identify a group of
firms that compete with the company being analyzed.
Multiple Choice Question 84
Leverage ratio: Your firm has an equity multiplier of 2.47. What
is its debt-to-equity ratio?
·
1.74
·
0.60
·
1.47(95)
·
0
Multiple Choice Question 70
Efficiency ratio: Gateway Corp. has an inventory turnover ratio of
5.6. What is the firm's days's sales in inventory?
·
65.2 days
·
64.3 days
·
61.7 days
·
57.9 days
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Multiple Choice Question 63
Which of the following presents a summary of the changes in a
firm’s balance sheet from the beginning of an accounting period to the end of
that accounting period?
·
The statement of
retained earnings.
·
The statement of working
capital.
·
The statement of cash
flows.(66)
·
The statement of net
worth.
Multiple Choice Question 78
Teakap, Inc., has current assets of $ 1,456,312 and total assets
of $4,812,369 for the year ending September 30, 2006. It also has current
liabilities of $1,041,012, common equity of $1,500,000, and retained earnings
of $1,468,347. How much long-term debt does the firm have?
·
$2,123,612
·
$803,010
·
$1,844,022
·
$2,303,010
Multiple Choice Question 57
Which of the following is a principal within the agency
relationship?
·
the CEO of the firm
·
a shareholder
·
the board of directors
·
a company engineer
Multiple Choice Question 59
Which of the following is considered a hybrid organizational form?
·
limited liability
partnership
·
partnership
·
corporation
·
sole proprietorship
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