Multiple Choice Question 51
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?
- 38.3 days
- 46.4 days
- 83.5 days
- 129.9 days
Multiple Choice Question 58
The cash conversion cycle
- begins when the firm uses its cash to purchase raw
materials and ends when the firm collects cash payments on its credit
sales.
- estimates how long it takes on average for the firm to
collect its outstanding accounts receivable balance.
- shows how long the firm keeps its inventory before
selling it.
- begins when the firm invests cash to purchase the raw
materials that would be used to produce the goods that the firm
manufactures.
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Multiple
Choice Question 30
Payout
and retention ratio: Drekker, Inc., has revenues of $312,766, costs of
$220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid
dividends of $34,125 to shareholders. Find the firm's dividend payout ratio and
retention ratio.
- 85%, 15%
- 55%, 45%
- 15%, 85%
- 45%, 55%
Multiple
Choice Question 75
Firms
that achieve higher growth rates without seeking external financing
- are highly leveraged.
- none of these.
- have less equity and/or are able to generate high net
income leading to a high ROE.
- have a low plowback ratio.
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Multiple
Choice Question 67
The strategic plan does NOT identify
- working capital strategies.
- the lines of business a firm will compete in.
- major areas of investment in real assets.
- future mergers, alliances, and divestitures.
Multiple
Choice Question 41
Which
of the following does maximizing shareholder wealth not usually account for?
- The timing of cash flows.
- Amount of Cash flows.
- Risk.
- Government regulation.
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Multiple
Choice Question 80
Which
of the following cannot be engaged in managing the business?
- a sole proprietor
- a general partner
- none of these
- a limited partner
Multiple
Choice Question 46
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?
- 30.3%
- 25.1%
- 27.3%
- 32.9%
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Multiple
Choice Question 86
Multiple
Analysis: 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.
- $1,787 million
- $1,315 million
- $453.6 million
- $1,334 million
Multiple
Choice Question 69
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?
- $375
- $600
- $225
- $321
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Multiple
Choice Question 54
A
firm's capital structure is the mix of financial securities used to finance its
activities and can include all of the following except
- stock.
- bonds.
- equity options.
- preferred stock.
Multiple
Choice Question 32
If
a company's weighted average cost of capital is less than the required return
on equity, then the firm:
- Is perceived to be safe
- Has debt in its capital structure
- Must have preferred stock in its capital structure
- Is financed with more than 50% debt
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Multiple Choice Question 85
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?
- 15.36%
- 12.00%
- 14.65%
- 15.00%
Multiple
Choice Question 68
How
firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You
know that the firm's cost of debt capital is 10 percent and the cost of equity
capital is 20%. What proportion of the firm is financed with debt?
- 30%
- 50%
- 70%
- 33%
Multiple
Choice Question 60
What
decision criteria should managers use in selecting projects when there is not
enough capital to invest in all available positive NPV projects?
- The profitability index.
- The modified internal rate of return.
- The internal rate of return.
- The discounted payback.
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Multiple
Choice Question 88
Capital
rationing. 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?
- 0.11
- 1.90
- 1.11
- 0.90
Multiple
Choice Question 79
PV
of dividends: 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 is 14 percent, what is the present value of
their dividends over the next four years?
- $13.50
- $11.63
- $9.72
- $12.50
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Multiple
Choice Question 57
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.)
- $1,014
- $1,066
- $923
- $972
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Multiple
Choice Question 62
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.)
- 16%
- 32%
- 12%
- 40%
Multiple
Choice Question 57
Future
value of an annuity: Jayadev Athreya has started on his first job. He plans to
start saving for retirement early. He will invest $5,000 at the end of each
year for the next 45 years in a fund that will earn a return of 10 percent. How
much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)
- $1,745,600
- $3,594,524
- $5,233,442
- $2,667,904
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Multiple
Choice Question 72
PV
of multiple cash flows: 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.)
- $480,906
- $414,322
- $477,235
- $429,560
Multiple
Choice Question 64
PV
of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of
8 percent and will repay the loan with interest over the next five years. Their
scheduled payments, starting at the end of the year are as follows—$450,000,
$560,000, $750,000, $875,000, and $1,000,000. What is the present value of
these payments? (Round to the nearest dollar.)
- $2,431,224
- $2,815,885
- $2,735,200
- $2,615,432
Multiple
Choice Question 62
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.)
- $22,680
- $26,454
- $19,444
- $16,670
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Multiple
Choice Question 67
Which
of the following is not a method of “benchmarking”?
- Conduct an industry group analysis.
- Evaluating a single firm’s performance over time.(112)
- Utilize the DuPont system to analyze a firm’s
performance.
- Identify a group of firms that compete with the company
being analyzed.
Multiple
Choice Question 84
Leverage
ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity
ratio?
- 1.74
- 0.60
- 1.47(95)
- 0
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Multiple
Choice Question 70
Efficiency
ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's
days's sales in inventory?
- 65.2 days
- 64.3 days
- 61.7 days
- 57.9 days
Multiple
Choice Question 63
Which
of the following presents a summary of the changes in a firm’s balance sheet
from the beginning of an accounting period to the end of that accounting
period?
- The statement of retained earnings.
- The statement of working capital.
- The statement of cash flows.(66)
- The statement of net worth.
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Multiple
Choice Question 78
Teakap,
Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the
year ending September 30, 2006. It also has current liabilities of $1,041,012,
common equity of $1,500,000, and retained earnings of $1,468,347. How much
long-term debt does the firm have?
- $2,123,612
- $803,010
- $1,844,022
- $2,303,010
Multiple
Choice Question 57
Which
of the following is a principal within the agency relationship?
- the CEO of the firm
- a shareholder
- the board of directors
- a company engineer
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Multiple
Choice Question 59
Which
of the following is considered a hybrid organizational form?
- limited liability partnership
- partnership
- corporation
- sole proprietorship
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