FIN 515 Week 8 Final Exam

FIN 515 Week 8 Final Exam


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Asked by 1 year ago
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1 (TCO A) Which of the following statements is NOT correct? (Points : 5) 2 (TCO F) Which of the following statements is correct? (Points : 5) 2 (a) (TCO F) Which of the following statements is correct? (Points : 5) 3 (TCO D) The Ackert Company's last dividend was $. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 12.0%. What is the best estimate of the current stock price? 3 (a) (TCO D) Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company's last dividend,D0, was $, its beta is , the market risk premium is %, and the risk-free rate is %. What is the current price of the common stock? 4 (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in January, $35,000 in February, and $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, what are the expected cash receipts for March? 5 (TCO G) Clayton Industries is planning its operations for next year, and Ronnie Clayton, the CEO, wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions. 6 (TCO H) The Dewey Corporation has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle? 7 (TCO C) Your company has been offered credit terms of 4/30, net 90 days. What will be the nominal annual percentage cost of its nonfree trade credit if it pays 120 days after the purchase? (Assume a 365-day year.) 8 (TCO E) Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an % annual coupon, a par value of $1,000, and a market price of $1,. (2) The company's tax rate is 40%. (3) The risk-free rate is %, the market risk premium is %, and the stock's beta is . (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of common stock, and it does not expect to issue any new shares. What is its WACC? 9 (TCO B) Zhdanov Inc. forecasts that its free cash flow in the coming year, that is, at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? 10 (TCO G) Based on the corporate valuation model, the value of a company's operations is $1,200 million. The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 million in accounts payable, $120 million in notes payable, $300 million in long-term debt, $50 million in preferred stock, $180 million in retained earnings, and $800 million in total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of the stock's price per share?

FIN 515
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Answered by 1 year ago
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FIN 515 Week 8 Final Exam

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Excerpt from file: 1. (TCOA)WhichofthefollowingstatementsisNOTcorrect? (Points : 5) Thecorporatevaluationmodelcanbeusedbothforcompaniesthatpaydividendsandthosethatdonotpay dividends. Thecorporatevaluationmodeldiscountsfreecashflowsbytherequiredreturnonequity.

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