Quiz_2_Review_Fall_2010[1]

# Quiz_2_Review_Fall_2010[1] - FIN 351 Quiz 2 Review Chapters...

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FIN 351 Quiz 2 Review Chapters 16, 17, 20, & 21 Expectations: Bring Green Scranton Pencil Calculator 1 Cheat Sheet Allowed – One Sided Only Have entire class period to take the exam 40 questions Questions based on questions discussed in class and posted on ilearn and homework questions.

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Review Questions Chapter 16 1. DTL=1.3 DFL=2 DTL=2.6 a. If operating income increase by 5%, how does net income change? b. If unites sold decrease by 2%, how does operating income change? 2. Global Auto has: Q= 20 cars P=\$10,000 a car VC = \$5,000 C = \$20,000 F = \$15,000 What is the degree of operating leverage? 3. Impulse Robotics has: F=\$300,000 Financial Costs = \$50,000 P=\$10 VC per unit =\$3 What is the breakeven number of units? 4. What effect does an increase in a firm’s financial leverage have? 5. According to MMI, how does capital structure affect firm value? 6. According to MM2, what happens to the firm’s return on equity when debt increases? 7. What is the expected return on equity for a firm with 14% expected return on assets that pays 9% on its debt, which totals 70% of assets? 8. Company A has Zero debt WACC=12.5% T=35% I=10% 50,000 in operating cash flows If company A issues \$125,000 in debt what is the new value of the firm? Chapter 17 9. Name the 3 options that firms can do with their earnings? 10. Amoeba Products has 100,000 shares outstanding at a price of \$15 per share. The company declares a 25% dividend. How many shares are now outstanding and what is the new price?
11. The record date to receive a dividend for Altria is Thursday 11/04/2010. When do you

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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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Quiz_2_Review_Fall_2010[1] - FIN 351 Quiz 2 Review Chapters...

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