Final_Exam_FIN_351_Version_B_Answers[1]

Final_Exam_FIN_351_Version_B_Answers[1] - FIN 351 Final...

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FIN 351 Final Version B Student: ___________________________________________________________________________ 1. You are analyst who is hired to estimate a takeover price for a potential acquisition. Based on the comparable analysis you compute a stock price of $30 for Target X. Based on a database of recent takeover transactions, Target A’s pre-takeover price was $20 and the acquisition price was $25. In addition, Target B had a pre-takeover price of $30 and an acquisition price of $35. What is the estimated takeover price for this acquisition of Target X? A. $33 B. $32 C. $35 D. $36 2. A merger adds value by creating synergies. Which of the following is not a possible source of synergy? A. Economies of scale B. Economies of vertical integration C. Combining complementary resources D. Diversification 3. What is the effective annual rate of trade credit if the trade credit terms are 2/10, net 40 on a $100 sale? A. 9.6% B. 13.0% C. 15.4% D. 27.8% 4. BofE Inc. has a return on assets of 15%, the return on debt of 10%. The capital structure is 35% debt and 65% equity. What is the return on equity? Taxes are 35%. A. 15.0% B. 24.7% C. 18.8% D. 17.6% 5. The current assets of Firm A are $10,000 and the current liabilities are $8,000 for the most recent year. Last year, Firm A had $9,200 of current assets and $7,000 of current liabilities. Calculate the current ratio for the most current year. Has it improved from last year? A. 1.25, no B. 1.25, yes C. 1.30, no D. 1.30, yes
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One of the companies that you follow is Mac Company. Mac Company is considering the purchase of a new 400-ton stamping press for an expansion project. The press costs $45,000. The press will depreciate straight line to $5,000 over a four-year life. The press will generate $35,000 in revenues each year and $10,000 in expenses. The press will be sold for $20,000 after 4 years. An inventory investment of $10,000 is required during the life of the investment. Mac is in the 40 percent tax bracket. The cost of capital is 10%. 6. What is the initial outlay? A. $45,000. B. $50,000. C. $55,000. D. $60,000. 7. What is the annual after-tax operating cash flow? A. $10,000. B. $6,000. C. $21,000. D. $19,000. 8. What is the terminal year’s after-tax non-operating cash flow at the end of year 3? A. $14,000. B. $16,000. C. $20,000. D. $24,000. Suppose number of units sold (Q) = 500,000 Price per unit (P) = $10 Variable cost (V) = $4 Fixed operating costs =700,000 Fixed financing cost = 300,000 9. What is the degree of operating leverage? A. 1.10
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This note was uploaded on 09/06/2011 for the course FIN 351 taught by Professor Li during the Spring '09 term at S.F. State.

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Final_Exam_FIN_351_Version_B_Answers[1] - FIN 351 Final...

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