Fin 370 Final Exam Study Guide

Week One unveiling to Finance and Analysis accusing place basic financial terminology. 1. Which of the following reasons is virtually responsible for corpo balancens being the most distinguished form of disdain organization in the United States? 1. Corporations hurl limited life. 2. Stockholders have unlimited liability. 3. Corporations atomic number 18 subject to little government regulation than the other forms of business organization. 4. Corporations have the ability to raise larger sums of metropolis of the United States than the other forms of business organization. bearing Explain how financial markets work in the United States. . Which of the following is NOT an favour of a private placement (as comp ard to a existence offering)? 1. Greater backing tractability 2. turn away flotation costs 3. Lower interest costs 4. Quicker handiness of funds intention Assess the character of ethics and compliance in the pay environment. 3. Which of the following is a ch aracteristic of an competent market? 1. Small number of individuals. 2. Opportunities survive for investors to profit from publicly available information. 3. certificate prices reflect fair abide by of the sign of the zodiac. 4. quick response occurs for new public information. heading prize financial performance using financial ratios. 4. Which of the following is taked in the denominator of the times-interest-earned ratio? 1. Lease payments 2. Principal payments 3. Interest write down 4. Gross profit Week devil pecuniary Planning Objective pull out the relationship between st countgic provision and financial planning. 5. Which of the following statements is true? 1. The future day value of an annuity would be great if funds ar invested at the set-back of severally achievement alternatively of at the end of each period. 2.An annuity is a series of equal payments that atomic number 18 made, or received, forever. 3. The effective yearbook rate (APR) of a loan is h igher the less overmuch payments are made. 4. The future value of an annuity would be greater if funds are invested at the end of each period rather than at the beginning of each period. Objective Prepare a coin budget. 6. A company collects 60% of its sales during the month of the sale, 30% one month afterward the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November.How much property is expected to be collected in October? 1. $25,000 2. $15,000 3. $35,000 4. None of the above Objective put to death a break-even analysis. 7. Potential applications of the break-even model include 1. replacement for time- ad excepted bang-up budgeting techniques. 2. pricing policy. 3. optimizing the cash-marketable securities stick of a trusty. 4. none of these Objective weigh present value and future value of cash flows. 8. If you invest $750 every hexad months at 8% compounded semi-annu ally, how much would you accumulate at the end of 10 years? 1. $10,065 . $10,193 3. $22,334 4. $21,731 Week Three working(a) Capital Management and Capital Budgeting Objective Evaluate effective working capital management techniques. 9. According to the hedging principle, unending assets should be financed with _______ liabilities. 1. permanent 2. spontaneous 3. on-going 4. fixed Objective Evaluate alternative capital construes. 10. Consider a assure with the following cash flows After-Tax After-Tax Accounting cash in Flow Year Profits from merchandise operations 1 $799 $ 750 $cl $1,000 3 $cc $1,200 Initial outlay = $1,500 Terminal cash flow = 0 Compute the profitableness index if the companys subtraction rate is 10%. 1. 15. 8 2. 1. 61 3. 1. 81 4. 0. 62 Objective contemplate risks associated with capital labors. 11. Aroma Candles, Inc. is evaluating a project with the following cash flows. encipher the IRR of the project. (Round to the hot whole percentage. ) Year Cas h Flows 0 ($120,000) 1 $ 30,000 2 $ 70,000 3 $ 90,000 . 18% 2. 23% 3. 28% 4. 33% Objective Identify the decision-making factors in lease versus buy. 12. A machine costs $1,000, has a three-year life, and has an estimated excuse value of $100. It will generate after-tax annual cash flows (ACF) of $600 a year, starting side by side(p) year. If your essential rate of return for the project is 10%, what is the NPV of this investment? (Round your answerwer to the nearest $10. ) 1. $490 2. $570 3. $900 4. -$150 Week Four Long-Term financial support Objective Identify the impact of financing strategies on cost of capital. 13.When calculating the intermediate cost of capital, which of the following has to be adjusted for taxes? 1. Common stock 2. Retained gain 3. Debt 4. Preferred stock Objective Calculate the weighted average cost of capital (WACC) of a firm. 14. Armadillo Mfg. Co. has a target capital structure of 50% debt and 50% equity. They are planning to invest in a project whic h will necessitate aggrandisement new capital. New debt will be issued at a before-tax yield of 12%, with a coupon rate of 10%. The equity will be provided by internally generated funds. No new impertinent equity will be issued.If the required rate of return on the firms stock is 15% and its borderline tax rate is 40%, reason the firms cost of capital. 1. 13. 5% 2. 12. 5% 3. 7. 2% 4. 11. 1% Objective Compare and contrast initial public offering (IPO) and mergers & acquisitions growth strategies. 15. Lever Brothers has a debt ratio (debt to assets) of 60%. Management is question if its current capital structure is in addition aggressive. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,440,000, with 228,571 shares of common stock outstanding.If the firm were to instead have a debt ratio of 20%, reduced interest expense would ap conjure movement profits available to stockholders to increase to $1,680,000, nevertheless 457,143 comm on shares would be outstanding. What is the difference in EPS at a debt ratio of 20% versus 60%? 1. $-1. 76 2. $-2. 63 3. $-3. 14 4. $-4. 37 Week Five world- abundant Finance Objective Describe the factors that direct to foreign stand in risk. 17. I. T. Canwait, Inc. , a U. S. -based multinational, has just sold cans to a Japanese company, I. C. descry, Inc. Spots will pay for the order in 60 days. I. T. Canwait is now exposed to which diverseness of risk? 1.Transaction 2. Translation 3. Operating 4. Financial Objective Compare and contrast methods to excuse foreign exchange rate risk. 18. The rate that a subsidiary or parent of the multinational corporation charges other divisions of the firm for its products is called a(n) 1. forward price. 2. transaction price. 3. transfer price. 4. exchange price. Objective Analyze the impact of globalization on financial decisions. 19. A wide bid/ask spread could demo which of the following? 1. The presence of arbitrageurs 2. Large-volum e transactions are taking place 3. Frequent trade of a currency 4. Infrequent trading of a currency