Midterm 1 (spring 2009)

Midterm 1 (spring 2009) - FN 361 Corporate Finance Midterm...

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FN 361: Corporate Finance Midterm Exam 1 (February 19, 2009) Instructions: There are three sections to this exam. Section I is comprised of four true/false questions and each question is worth five points. Section II contains four short answer questions. You must answer all four and each question is worth ten points. Section III includes three calculation problems and you must answer all three questions. Each calculation question is worth twenty (20) points. Partial credit will be awarded on all questions so please show all of your work. Calculation question without any supporting work will result in zero credit. NAME__________________________________________________ Section I. True/False – explain [Total points 20]. Answer all four questions. Each explanation should show an understanding of any italicized/underlined words included in the statement. Without an explanation no credit will be given. 1. If a firm’s debt-equity ratio is 0.25 then the firm’s debt ratio is always 0.20. 2. Capital budgeting refers to how firms deal with their everyday financial activities.
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FN 361-02 Page: 2/10 Midterm Exam 1 Date: February 19, 2009 3. D epreciation has on no impact on the operating cash flow (OCF) of a firm since it is first subtracted from total revenues minus costs of goods sold to calculate Earnings Before Interest and Taxes (EBIT) and then added back to calculate OCF. 4. Based on your knowledge of the time value of money , it is a good idea to increase the amount of federal income taxes withheld from your paycheck each month so that you will get a larger refund come April 15th. That is, you take home less today but get a bigger lump sum when you get your refund.
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Midterm 1 (spring 2009) - FN 361 Corporate Finance Midterm...

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