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Unformatted text preview: 1 ANSWER KEY Midterm 3 Advanced Financial Management and Policy FNAN522-1SP11 Moody Hall, Room 127 Thursday, March 24, 2011 3:00 P.M. to 4:30 P.M. 80 Points Total 60 Minutes 16 Questions All questions are worth 5 points. Please read the following instructions first: DO NOT TURN OVER THIS PAGE UNTIL YOU ARE INSTRUCTED TO DO SO. Write your name, the date, and the subject on the bubble sheet. Only answers that are clearly recorded on the bubble sheet will counted towards you mark. There is only one correct answer per question. You may only give one answer per question. It is strongly recommended that you bubble your responses clearly in pencil. This will allow you to erase answers if you change your mind. Nevertheless, unclear or multiple marks on a single question will result in no points. No credit will be given for scrap work. Partial credit will NOT be given. Hand in your bubble sheet to the instructor when you are finished. You will NOT be allowed back into the test room once you leave. 2 Multiple Choice Questions Instructions: To answer these questions, bubble in the letter that corresponds with the best answer for each question on you answer key. 1. Given the following data for Golf Corporation: market price/share = $12; Book value/share = $10; Number of shares outstanding = 100 million; market price/bond = $800; Face value/bond = $1,000; Number of bonds outstanding = 1 million; Calculate the proportions of debt (D/V) and equity (E/V) for the firm that you would use for estimating the weighted average cost of capital (WACC): A. 40% debt and 60% equity B. 50% debt and 50% equity C. 45.5% debt and 54.5% equity D. 35% debt and 65% equity Use market values (in Millions): E = (12) * (100) = $1,200; D = (800) * (1) = $800; V = D + E = $2,000 D/V = 800/2,000 = 0.4 (40%); E/V = 1,200/2,000 = 0.6 (60%) pp. 472-473 2. Given the following data for year-1: Profits after taxes = $20 million; Depreciation = $6 million; Interest expense = $4...
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This note was uploaded on 05/09/2011 for the course FNAN 522 taught by Professor Wilson during the Spring '11 term at University of Louisiana at Lafayette.
- Spring '11