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Financial Management Exam Paper A

Financial Management Exam Paper A - Financial Management...

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Financial Management Exam Paper A 1. Preparing a Balance Sheet Prepare a balance sheet for Tim’s Couch Corp. as of December 31, 2002, based on the following information: . 20 marksi cash = $175,000; patents and copyrights = $720,000; accounts payable=$430,000; accounts receivable = $140,000; tangible net fixed assets=$2,900,000; inventory =$265,000; notes payable = $180,000; accumulated retained earnings=$1,240,000; long-term debt= $1,430,000. 2. Fama’s Llamas has a weighted average cost of capital of 11.5 percent. The company’s cost of equity is 16 percent and its cost of debt is 8.5 percent. The tax rate is 35 percent. What is Fama’s target debt-equity ratio? i 15 marksi 3. The most recent financial statements for Moose Tours, Inc., follow. Sales for 2005’ are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what is the external financing needed to support the 20 percent growth rate in sales?
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