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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.


question 30


The cash conversion cycle






estimates how long it takes on average for the firm to collect its outstanding accounts receivable balance.







begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.







shows how long the firm keeps its inventory before selling it.







begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.


Question 58







You are provided the following working capital information for the Ridge Company:


Ridge Company











Accounts receivable




Accounts payable





Net sales




Cost of goods sold





Cash conversion cycle: What is the cash conversion cycle for Ridge Company?


















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?









Which of the following is a principal within the agency relationship?









the CEO of the firm










the board of directors







Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm’s days’s sales in inventory?





















Which of the following is not a method of “benchmarking”?






Evaluating a single firm’s performance over time.







Conduct an industry group analysis.







Utilize the DuPont system to analyze a firm’s performance.







Identify a group of firms that compete with the company being analyzed.







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.)


















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.)















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.)























If a company’s weighted average cost of capital is less than the required return on equity, then the firm:






Has debt in its capital structure







Is financed with more than 50% debt







Must have preferred stock in its capital structure







Is perceived to be safe








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?

















Multiple Choice Question 80







Which of the following does maximizing shareholder wealth not usually account for?






The timing of cash flows.










Amount of Cash flows.







Government regulation.



question 41


The strategic plan does NOT identify






future mergers, alliances, and divestitures.







working capital strategies.







the lines of business a firm will compete in.







major areas of investment in real assets