Fin 600 Corporate Finance Project
1. The professor will assign groups for this project. Most groups will have three or four students. Groups will be expected to work together, but the grade will be given for each project/company. 2. Every member of the cl

FIN 600
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b.
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b.
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MidTerm
17. Capital components
Which of the following statements is CORRECT?
In the WACC calculation, we must adjust the cost of preferred stock (the market yield)
because 70% of the dividends received by corporat

FIN 600
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MidTerm
25. Interest rates
Which of the following statements is CORRECT?
a.
The shorter the time to maturity, the greater the change in the value of a bond in response to a
given change in interest rates.
The longer the time to maturity, the sma

FIN 600
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21. Default Risk Premium (DRP),
.
Keys Corporation's 5-year bonds yield 6.50%, and 5-year T-bonds yield 4.40%. The real riskfree rate is r* = 2.5%, the inflation premium for 5 years bonds is IP = 1.50%, the liquidity premium for
Keys' bond

FIN 600
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MidTerm
14. Free cash flow
An analyst has forecasted the following figures for Raedebe Technology:
Sales
EBITDA
Depreciation
Amortization
$70 million
$20 million
$ 7 million
$0
The companys tax rate is 40%. The company does not expect any change

FIN 600
MidTerm
28. Non-constant growth stock
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Club Auto Parts last dividend, D0, was $0.50, and the company expects to experience no
growth for the next 2 years. However, Club will grow at an annual rate of 5% in the third and
fourth years, and, beginni

FIN 600
MidTerm
8. FV under daily compounding
. You have $2,000 invested in a bank account that pays a 4% nominal interest rate with daily
compounding. How much money will you have in the account at the end of July (in 132
days)? (Assume there are 365 day

FIN 600
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MidTerm
1. Goal of firm
The primary operating goal of a publicly-owned firm interested in serving its stockholders
should be to
a.
b.
c.
Maximize its expected total corporate income.
Maximize its expected EPS.
Minimize the chances of losses.
d.

FIN 600
MidTerm
11. Income statement: Free cash flow vs. Net income
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Hybrid Battery Systems recently reported $9,000 of sales, $6,000 of operating costs other
than depreciation, and $500 of depreciation. The company had no amortization charges, it had
$4

FIN 600
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4. FV of an uneven cash flow stream
At a rate of 8%, what is the future value of the following cash flow stream?
$0 at Time 0; $100 at the end of Year 1; $300 at the end of Year 2; $0 at the end of
Year 3; and $500 at the end of Year 4?

Vertical Merger - Buying up the supply chain; Production more cost effective; Examples: Car company
buying tire company eBay buying Paypal
Horizontal Merger - Same lines of business; Operate in the same space;
Examples: HP and Compaq /
Dow and DuPont
Corp