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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?

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?

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”?

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:

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?

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

 [removed] The timing of cash flows.

 [removed] Amount of Cash flows.

 [removed] Government regulation.

question 41

The strategic plan does NOT identify

 [removed] future mergers, alliances, and divestitures.

 [removed] working capital strategies.

 [removed] the lines of business a firm will compete in.

 [removed] major areas of investment in real assets.

• Posted: 7 years ago
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• FIN 571 Final Exam (30 Multiple Choice Questions) (100% score)

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