FIN 419 Latest Final Exam Click on the Link Given Below To get Final Exam: http://hwguiders.com/index.php? route=product/product&path=144&product_id=2931 1. There are 3 most common legal forms of business organization. Name those 3:
2. The corporation's goal is to maximize the "bottom line" or profit.
3. Please fill in the following financial statement account identification: Column 1 - IS- Income Statement, BS -Balance Sheet Column 2 - CA - Current Asset, CL- Current Liability, E- Expense, FA - Fixed Asset LTD - Long Term Debt, R- Revenue, SE - Stockholders' Equity (1) Statement
(2) Type of Account
Cash Accumulated Depreciation Cost of Goods Sold Paid-In Capital in excess of par Preferred Stock Retained Earnings 4. The ________________________________ gives the details of a company's financial performance for the year while the _______________________shows a company's financial position at any given time. 5. Amortizing a loan into equal annual payments involves finding the present payments whose future value at the loan interest rate equals the amount of the initial principal borrowed. T/F
6. Jody Smith wishes to determine the number of years it will take for her initial $1,000 deposit, earning 8% annual interest, to grow to equal $2,500. In other words, at an 8% annual rate of interest, how many yeas, n, will it take for Ann's $1,000, PV to to $2,500, FVn? Answer: 7. Assume a company makes a $2,500 deposit in its money market account. If this account is currently paying 0.7% (yes, less than 1%), what will the account balance be after 1 year? Answer: 8. Time value of money is one of the most important concepts in finance. Money that the firm has in its possession today is more valuable than money in the future because the money it now has can be invested and earn positive returns. T/F 9. You can deposit $10,000 into an account paying 9% annual interest either today or exactly 10 years from today. How much better off will be you at the end of 40 years if you decide to make the initial deposit today rather than 10 years from today? Answer: 10 There's a chance that a firm will not be able to cover its financial obligations. The level is driven by the predictability of the firm's operating cash flows and its fixed-cost financial obligations. Which risk does this represent? A. Market Risk B. Purchasing Power Risk C. Financial Risk Answer: 11. The risk-free rate on T-bills recently was 1.23%. If the real rate of interest is estimated to be
0.80%, what was the expected level of inflation? Answer: 12. The claims of preferred stockholders are senior to those of the common stockholders with respect to the distribution of both earnings and assets. T/F 13. ____________________ capitalists are typically business entities that are organized for the purpose of investing in attractive growth companies. Answer: 14. A balance sheet balances assets with their sources of debt and equity financing. If a corporation has assets equal to $5.2 million and a debt ratio of 75.0%, how much debt does the corporation have on its books? Answer: 15. Stacker Weight Loss currently pays an annual year-end dividend of $1.20 per share. It plans to increase this dividend by 5% next year and maintain it at the new level for the foreseeable future. If the required return on the firm's stock is 8%, what is the value of Stacker's stock? Answer: 16. There are 3 different approaches for dealing with project risk in order to capture variable cash flows and net present values. Two of them are sensitivity analysis and simulation. Please name the 3rd one: Answer: 17. Assets are current debts that a company owes.
18. There is an approach that is used with present values to determine if a group of projects will maximize owners' wealth. Choose the correct approach:
A. B. C. D.
Gross Present Value Approach Asset Value Approach Net Present Value Approach Capital Value Approach
Answer: 19, You are to evaluate a project requiring an initial investment of $45,000 having a life of 5 years. If the project is forecast to earn $12,500 per year over 5 years, what is its IRR? Answer: 20. You are hired by Outcast, Inc. to advise the firm on a capital budgeting issue involving 2 unequal-lived, mutually exclusive projects, S and T. The cash flows are listed below. Calculate the NPV of each project and which would you advise Outcast to proceed with? The firm's cost of capital is 8%. Project S Project T Initial Investment $35,000
Cash Inflows Year 1 $12,000 $18,000 Year 2 $25,000 $15,000 Year 3 $30,000 $25,000 Year 4 0 $10,000 Year 5 0 $8,000 Year 6 0 $5,000 Year 7 0 $5,000 Answer:
(NPV of each project and which one to recommend?)
21. Operating leverage refers to the sensitivity of earnings before interest and taxes to changes in sales revenue. _________________________ refers to the sensitivity of earnings available to common shareholders to changes in earnings before interest and taxes. Answer: 22. The firm's operating breakeven point is the level of sales at which all fixed and variable operating costs are covered; i.e. EBIT is greater than zero. T/F
23. There are 3 factors that affect business risk. Two are the use of fixed operating costs and cost stability. Name the 3rd: Answer: 24. Canvas Reproductions has fixed operating costs of $12,500, variable operating costs of $10 per unit, and sells its paintings for $25 each. At what level of unit sales will the company breakeven in terms of EBIT? Answer: 25.
Reveune: $200,000 Name which numbers represent EBIT? Less Less COGS: 75,000 $125,000 Less Interest 15,000 Answer: $110,000 Less Taxes 20,000 $90,000
26. The board of directors has a fiduciary duty towards it's vendors rather than its stockholders. T/F 27. The "nearer" a current asset is to cash, the greater its liquidity may be and the lower its risk. Which is less risky, an investment in accounts receivable or inventory? Answer: 28. My business, Frosty Treats, has seasonal funding requirements. When I'm busy I carry $35,000 cash, $125,000 inventory, $70,000 accounts receivable and $65,000 accounts payable. When it's my slow season I carry $10,000 cash, $55,000 inventory, $40,000 accounts receivable and $35,000 accounts payable. What are my maximum and minimum seasonal funding requirements? Answer: Answer:
29. I really need to secure a short term loan for my business. I'm not sure if I should pledge my
accounts receivable or factor my accounts receivable. Which should I do to obtain this loan? Answer: 30. Net working capital = Current assets - Current liabilities My current assets are $4,000,000 My long term liabilities are $600,000 My current liabilities are $2,500,000 My tax rate is 32% Determine my Net Working Capital: Answer:
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