A+ Grade Solution

FIN 571 Week 3 Individual Practice Quiz

University of Phoenix

The operating cycle

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

Ridge Company Account$

Inventory$12,890 Accounts receivable12,800 Accounts payable12,670

Net sales$124,589 Cost of goods sold99,630

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

Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size.

The asset substitution problem occurs when

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.

How much are your cash flows today?

M&M Proposition 2: Melba's Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm's marginal corporate income tax rate is 35%. What is the appropriate WACC?

According to the text, the financial plan covers a period of

The financing plan of a firm will indicate

Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm's dividend payout ratio and retention ratio.

FIN 571

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**Excerpt from file: **MultipleChoiceQuestion32 Youransweriscorrect. Theoperatingcycle endsnotwiththefinishedgoodsbeingsoldtocustomersandthecashcollectedonthe sales;butwhenyoutakeintoaccountthetimetakenbythefirmtopayforitspurchases. Tomeasureoperatingcycleweneedanothermeasurecalledthedays'payables outstanding. ...

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