FI 360 (Financial Management) Final Exam Questions and Answers (Score A+)

FI 360 (Financial Management) Final Exam Questions and Answers (Score A+)Operating leverage describes the relationship between... EBIT and sales taxes and sales debt and equity fixed costs and variable costs Question 3 6.5 / 6.5 pts The risk-free rate is 5% and the expected return on the market portfolio is 13%. A stock has a beta of 1.5, what is its expected return? 17% 12% 19.5% 24.5% Incorrect Question 4 0 / 6.5 pts Bavarian Brew, an unlevered firm, has an expected EBIT of $500,000. The required return on assets for the firm’s assets is 10%. The company has 250,000 shares outstanding. The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase outstanding stock. What is the value of Bavarian Brew before restructuring? Assume no corporate taxes. $500,000 $5,000,000 $1,000,000 $3,300,000 Question 5 6.5 / 6.5 pts Net working capital decreases when inventory falls, accounts receivable falls, or accounts payable increases inventory increases, accounts receivable increases, or accounts payable falls cost of goods sold falls, or interest rate falls operating expenses fall, or current assets increase Question 6 6.5 / 6.5 pts The uncertainty caused by the variability of a firm’s cash flows is called . . . financial risk business risk financial leverage none of the above Question 7 6.5 / 6.5 pts A bond sold by foreign corporations to U.S. investors is called a(n Eurobond foreign bond Yankee bond none of the above Question 8 6.5 / 6.5 pts You want to buy your dream car, but you are $5,000 short. If you could invest your entire savings of $2,350 at an annual interest of 12%, how long would you have to wait until you have accumulated enough money to buy the car? 9.40 years 3.48 years 7.24 years 6.66 years Question 9 6.5 / 6.5 pts How do we calculate a company’s operating cash flow? EBIT - taxes + depreciation EBIT - taxes - depreciation EBIT + taxes + depreciation EBIT – Sales Question 10 6.5 / 6.5 pts Holding all other things constant, which of the following represents a cash outflow? The company sells a machine. The company acquires inventory. The company receives a bank loan. The company increases accounts payable. Question 11 6.5 / 6.5 pts Which statement about common shareholders is incorrect? Shareholders only have a residual claim. Shareholders have precedence over all other claimholders in the case of bankruptcy. Shareholders have a voting right. Shareholders are the ultimate owners of a corporation. Question 12 6.5 / 6.5 pts A company is planning on going public. Under the underwriting agreement the underwriting discount is 7.25%. If the offering price of the stock is set at $12.50 per share, what is the per share proceeds that Bavarian will receive? $11.59 $10.67 $13.41 $12.50 Question 13 6.5 / 6.5 pts You bought a share of stock for $46.50 at the beginning of the year. During the year the stock paid a $2.75 dividend and at the end of the year it trades at $52.75. What is the capital gain/loss on your stock investment? 5.91% 13.44% 19.35% 28.24% Question 14 6.5 / 6.5 pts A balloon payment is payment made on circus debt. a large front-end debt payment, followed by smaller payments. a large lump-sum payment at maturity of a debt. none of the above. Question 15 6.5 / 6.5 pts Choc-lattes Corp. earned $5.00 per share in 2006, and paid a dividend of $2.00 per share. If it earns $5.50 in 2007 and follows a constant nominal payout policy, its dividend will be $3.30 $3.00 $2.20 $2.00