STR 581 Week 2 Capstone Exam,
STR 581 WEEK 2 CAPSTONE EXAM
1. Which of the following financial statements is concerned with the company at a point in time?
2. A cost which remains constant per unit at various levels of activity is a:
3. 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 equity to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they use?
4. 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.)
5. The process of evaluating financial data that change under alternative courses of action is called:
6. What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?
7. The convention of consistency refers to consistent use of accounting principles:
8. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?
9. Which of the following is considered a hybrid organizational form?
10. An activity that has a direct cause-effect relationship with the resources consumed is a(n):
11. Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return if 14 percent, what is the present value of their dividends over the next four years?
12. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?
13. Your firm has an equity multiplier of 2.47. What is the debt-to-equity ratio?
14. If a company’s weighted average cost of capital is less than the required return on equity, then the firm:
15. When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using:
16. The major element in budgetary control is:
17. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time:
18. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
19. The break-even point is where:
20. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.
21. Which of the following is considered a hybrid organizational form?
22. The most important information needed to determine if companies can pay their current obligations is the:
23. Gateway, Corp. has an inventory turnover of 5.6. What is the firm’s days’s sales in inventory?
24. Horizontal analysis is also known as:
25. Which of the following presents a summary of changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?
26. Ajax Corp. is expecting the following cash flows – $79,000, $112,000, $164,000, $84,000, and $242,000 – over the next five years. If the company’s opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)
27. 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.)
28. Process costing is used when:
29. 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)
30. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called: