FIN 350 MINI TEST 1 CHAPTER 2

FIN 350 MINI TEST 1 CHAPTER 2 - FIN 350 MINI TEST 1 CHAPTER...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
FIN 350 MINI TEST 1 CHAPTER 2 Search: The Web Angelfire Report Abuse « Previous | Top 100 | Next » share: del.icio.us | digg | reddit | furl | facebook FIN 350 MINI TEST 1 CHAPTER 2 A 1. A firm has notes payable of $1,546,000, long-term debt of $13,000,000, and total interest expense of $1,300,000. If the firm pays 8 percent interest on its long-term debt, what interest rate does it pay on its notes payable? 16.8% 2. A start-up firm is making an initial investment in new plant and equipment. Currently, equipment is depreciated on a straight-line basis over 10 years. Assume that Congress is considering legislation that will allow the corporation to depreciate the equipment over 7 years. If the legislation becomes law, and the firm implements the 7-year depreciation basis, which of the following will occur? The firm's net cash flow will increase. 3. A stock analyst has acquired the following information for Palmer Products: Retained earnings on the year-end 2001 balance sheet was $700,000. Retained earnings on the year-end 2002 balance sheet was $320,000. The company does not pay dividends. The company's depreciation expense is its only non-cash expense. The company has no non-cash revenues. The company's net cash flow for 2002 was $150,000. On the basis of this information, which of the following statements is most correct? Palmer Products had negative net income in 2002. 4. A stock market analyst has forecasted the following year-end numbers for Raedebe Technology: Sales $70 million EBITDA $20 million Depreciation $ 7 million Amortization $ 0 The company's tax rate is 40 percent. The company does not expect any changes in its net operating working capital. This year the company's planned gross capital expenditures will total $12 million. (Gross capital expenditures represent capital expenditures before deducting depreciation.) What is the company's forecasted free cash flow for the year? $ 2.8 million 5. All else equal, which of the following actions will increase the amount of cash on a company's balance sheet? The company issues new common stock. 6. An analyst has acquired the following information regarding Company A and Company B: Company A has a higher net cash flow than Company B. Company B has higher net income than Company A. Company B has a higher operating cash flow than Company A. The companies have the same tax rate, investor-supplied operating capital, and cost of capital (WACC). Assume that non-cash revenues equal zero for both companies, and depreciation is the only non-cash expense for both companies. Which of the following statements is most correct? http://www.angelfire.com/ab8/socool/ (1 of 115)6/25/2009 6:50:59 PM
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
FIN 350 MINI TEST 1 CHAPTER 2 All of the statements above are correct. 7.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/20/2010 for the course FCBA Investment taught by Professor Az during the Spring '10 term at Beirut Arab University.

Page1 / 115

FIN 350 MINI TEST 1 CHAPTER 2 - FIN 350 MINI TEST 1 CHAPTER...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online