BFM Problems to do
Midterm 1 then the new stuff
Review midterm 2 stuff tonight
check back on new stuff once more tonight and call it a night
risk identities
Fisher Effect
premium A/beta A = premium B/beta B
dividend growth model (changing growth rates)
Pl
Capital Structure TEST Questions and Solutions
1. Moon Beam Industries has a debt-equity ratio of 1.5. Its WACC is 12 percent, and
its cost of debt is 12 percent. The corporate tax rate is 35 percent.
a. What is Moon Beam's cost of equity capital?
b. What
Suggested Test Questions: Bonds
Test 1:
What is the price of a 20 year, zero coupon bond with a 5% yield to maturity and a $1000
face value? What would be the price of this bond if it paid out coupons semiannually, with
a 4.8% coupon rate?
(Purpose: Compa
Test Questions: Capital Budgeting
Test 1:
Below are the cash flows for two mutually exclusive projects.
Year
0
1
2
3
4
CFX
(5,000)
2,085
2,085
2,085
2,085
CFY
(5,000)
0
0
1,000
10,000
Calculate the payback period for each project.
Which project would you
Capital Market History
Test 1
The dividend yield is the dividend divided by price at the beginning of the period, so:
Dividend yield = $2 / $25 = .08, = 8%
And the capital gains yield is the increase in price divided by the initial price, so:
Capital gain
E. $31,400
78.
What is the amount of the cash flow from investment activity for 2012?
A. $18,100
B. $24,800
C. $29,300
D. $32,000
E. $39,400
79.
What is the net working capital to total assets ratio for 2012?
A. 24.18 percent
B. 36.82 percent
C. 45.49 per
22.
A supplier, who requires payment within ten days, should be most concerned
with which one of the following ratios when granting credit?
A. current
B. cash
C. debt-equity
D. quick
E. total debt
Refer to section 3.3
AACSB: Analytic
Blooms: Understand
Di
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 03-02 How to compute and; more importantly; interpret some common ratios.
Section: 3.3
Topic: Liquidity ratios
72.
How many days of sales are in receivables? (Use 2012 values)
A. 17.08 d
52.
Last year, which is used as the base year, a firm had cash of $52, accounts
receivable of $218, inventory of $509, and net fixed assets of $1,107. This
year, the firm has cash of $61, accounts receivable of $198, inventory of $527,
and net fixed asset
47.
Wise's Corner Grocer had the following current account values. What effect did
the change in net working capital have on the firm's cash flows for 2012?
A. net use of cash of $37
B. net use of cash of $83
C. net source of cash of $83
D. net source of
84.
What is the return on equity for 2012?
A. 15.29 percent
B. 16.46 percent
C. 17.38 percent
D. 18.02 percent
E. 18.12 percent
Return on equity for 2012 = $3,843/($17,500 + $3,825) = 18.02 percent
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning
79.
What is the net working capital to total assets ratio for 2012?
A. 24.18 percent
B. 36.82 percent
C. 45.49 percent
D. 51.47 percent
E. 65.83 percent
Net working capital to total assets for 2012 = ($27,129 - $8,384)/$41,209 =
45.49 percent
AACSB: Analy
74.
What is debt-equity ratio? (Use 2012 values)
A. 0.52
B. 0.87
C. 0.94
D. 0.99
E. 1.06
Debt-equity ratio = ($134,700 + $135,500)/($140,000 + $131,800) = 0.99
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 03-02 How to compute and;
Fixed asset turnover for 2012 = $36,408/$14,080 = 2.59
For every $1 in net fixed assets, the firm generates $2.59 in sales.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 03-02 How to compute and; more importantly; interpret some com
112. It is commonly recommended that the managers of a firm compare the
performance of their firm to that of its peers. Increasingly, this is becoming a
more difficult task. Explain some of the reasons why comparisons of this type
can frequently be either
102. Billings, Inc. has net income of $161,000, a profit margin of 7.6 percent, and an
accounts receivable balance of $127,100. Assume that 66 percent of sales are
on credit. What is the days' sales in receivables?
A. 21.90 days
B. 27.56 days
C. 33.18 day
62.
A firm has net working capital of $2,715, net fixed assets of $22,407, sales of
$31,350, and current liabilities of $3,908. How many dollars worth of sales are
generated from every $1 in total assets?
A. $1.08
B. $1.14
C. $1.19
D. $1.26
E. $1.30
Total
67.
A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net
income of $126,400, a price-earnings ratio of 18.7, and a book value per share
of $7.92. What is the market-to-book ratio?
A. 1.87
B. 1.84
C. 2.23
D. 2.45
E. 2.57
Earnings per
97.
Coulter Supply has a total debt ratio of 0.52. What is the equity multiplier?
A. 0.89
B. 1.13
C. 1.47
D. 2.08
E. 2.13
Debt-equity ratio = .52/(1 - 0.52) = 1.083
Equity multiplier = 1 + 1.083 = 2.083
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
EOC
57.
A firm has total debt of $4,850 and a debt-equity ratio of 0.57. What is the value
of the total assets?
A. $6,128.05
B. $7,253.40
C. $9,571.95
D. $11,034.00
E. $13,358.77
Total equity = $4,850/0.57 = $8,508.77
Total assets = $4,850 + $8,508.77 = $13,3
17.
On a common-base year financial statement, accounts receivables will be
expressed relative to which one of the following?
A. current year sales
B. current year total assets
C. base-year sales
D. base-year total assets
E. base-year accounts receivables
Midland Energy Resources, Inc.:
Cost of Capital
Case Analysis
Mortensen, a senior analyst reporting to the CFO at Midland Energy
Resources (hereinafter Midland), was required to calculate the cost of
capital of the company for upcoming large stock repurch
Social Protection and Social
Inclusion in Azerbaijan
Executive Summary
European Commission
Directorate-General for Employment, Social Affairs and Inclusion
Manuscript completed in 2011
European Commission
1
Neither the European Commission nor any person a
4/9/2016
Corporate Finance
Which Capital Budgeting Tool Is
The Best?
Objectives
Which capital budgeting tool is the best?
1
4/9/2016
Which Capital Budgeting Tool
Is The Best?
Capital Budgeting
Choice of Capital Budgeting Tool
Main aim of financial manag
Assignment 1
Questions for Discussion:
1. What are the benefits of a long-term perspective on value creation for the
companies and for the economy?
Long-term perspective on value creation for companies and the economy is based on 4
cornerstones of value c