FIN 419 FINAL EXAM NEW JUNE 2018\u00a0\t\u00a0\tYou want to invest in a stock that pays $6.00 annual cash dividends for the next five years. At the end of the five years you will sell the stock for $30.00. If you want to earn 10% on this investment what is a fair price for this stock if you buy it today?\t“\ufffd $22.75\t“\ufffd $40.37\t“\ufffd $18.63\t“\ufffd $41.37\t\u00a0\t________ provides financial advice helps design bond terms makes sure that new bonds meet listing requirements and then markets new bond issues.\t“\ufffd An investment banker\t“\ufffd The Federal Reserve\t“\ufffd A stock broker\t“\ufffd The Securities and Exchange Commission\t\u00a0\tAn investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment?\t“\ufffd The interest earned in year one is $8.64 and the interest earned in year two is $8.00.\t“\ufffd There is not enough information to solve this problem.\t“\ufffd The interest earned in year one is $8.00 and the interest earned in year two is $8.64.\t“\ufffd The interest earned in year one is $8.32 and the interest earned in year two is $8.32.\t\u00a0\tThe ________ is\/are critical to business decisions business growth and ultimately business success.\t“\ufffd currency denomination of profits\t“\ufffd timing and amount of cash flow\t“\ufffd risk and timing but not the amount of cash flow\t“\ufffd risk and profits but not the amount of cash flow\t\u00a0\t________ is a financial term for “free money”\ufffd that is the opportunity to make a profit without risk.\t“\ufffd Free rider\t“\ufffd Trading in perfect markets\t“\ufffd Arbitrage\t“\ufffd Trading in imperfect markets\t\u00a0\tAn aspect of short-term financial planning is forecasting operating cash flow and ultimately the profitability of the company in the coming period. This type of financial planning typically uses forecasted ________.\t“\ufffd income statements\t“\ufffd All of these\t“\ufffd earnings\t“\ufffd working capital statements\t\u00a0\tWhich of the following will result in a future value greater than $100?\t“\ufffd PV = $50, r = an annual interest rate of 10%, and n = 8 years.\t“\ufffd PV = $90, r = an annual interest rate of 14%, and n = 1 year.\t“\ufffd All of the future values are greater than $100.\t“\ufffd PV = $75, r = an annual interest rate of 12%, and n = 3 years.\t\u00a0\tWhich of the statements below is FALSE?\t“\ufffd An equity claim is a claim to all the assets and cash flows of a company once debt claimants have been paid.\t“\ufffd Bond ownership gives the right to participate in the management of the company.\t“\ufffd For common stock, there is no maturity date and the promised cash flow is not stated on the asset, but is determined at a later date by the board of directors.\t“\ufffd Like a bond, common stock entitles the owner to some of the cash flow of a company.\t\u00a0\tDweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000 and $30,000 for years 1, 2, 3 and 4, respectively. Dweller uses the net present value method and has a discount rate of 12%. Will Dweller accept the project?\t“\ufffd Dweller rejects the project because the NPV is less than -$4,000.\t“\ufffd Dweller accepts the project because the NPV is greater than $30,000.\t“\ufffd Dweller rejects the project because the NPV is -$3,021.\t“\ufffd Dweller accepts the project because it has a positive NPV of over $28,000.\t\u00a0\tFrom the financial statements, we can look at specific performance areas of a company by selecting key pieces of information and analyzing this information ________.\t“\ufffd All of these\t“\ufffd at a point in time\t“\ufffd at a point in time or over a specific time horizon\t“\ufffd over a specific time horizon\t\u00a0\tWhich of the statements below is FALSE?\t“\ufffd When cross rates are out of line, there can be an arbitrage opportunity.\t“\ufffd The opportunity to make a profit without risk by exchanging three currencies is known as triple arbitrage.\t“\ufffd Exchange rates vary from one day to the next.\t“\ufffd Even if you could not do a direct exchange between pounds and yen, you could convert pounds to dollars and then dollars to yen and ultimately end up changing pounds into yen.\t\u00a0\tWhen there are conflicts among managerial goals in U.S. markets, the most important priority is to ________.\t“\ufffd increase the current market value of equity\t“\ufffd keep all of the company’s customers happy\t“\ufffd foster good relationships with the community\t“\ufffd maintain a safe and happy work place\t\u00a0\tA ________ has limited liability, is a legal entity, and has the greatest potential to raise capital.\t“\ufffd corporation\t“\ufffd limited partnership\t“\ufffd sole proprietorship\t“\ufffd general partnership\t\u00a0\tExtending credit to a customer has three major components:\t“\ufffd a policy on how customers will qualify for credit, a policy on the payment plan allowed creditors, and a policy on accounting for depreciation.\t“\ufffd a policy on how customers will qualify for credit, a policy on paying commissions on sales, and a policy for collecting overdue bills.\t“\ufffd a policy on how customers will qualify for credit, a policy on the payment plan allowed creditors, and a policy for collecting overdue bills.\t“\ufffd a policy on how customers will qualify for credit, a policy on accounting for depreciation, and a policy on paying commissions on sales.\t\u00a0\tWhich of the following is NOT true regarding the total payment in an equal payment amortization table?\t“\ufffd The total payment for any period is equal to the principal plus interest payments for that same period.\t“\ufffd The final total payment will be greater than the beginning principal for the final period, assuming a positive interest rate.\t“\ufffd The total payment is calculated using the present value of an annuity formula rearranged to solve for the payment.\t“\ufffd All of the above are true.\t\u00a0\tWhich of the statements below is TRUE?\t“\ufffd The increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project.\t“\ufffd An increase in working capital can be brought about by an increase in inventory.\t“\ufffd Decreases in accounts receivables constitute a use of cash flow because you are helping your customers finance their purchases.\t“\ufffd Decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations.\t\u00a0\t\u00a0\tWhich of the following is NOT a generally accepted way to remove ineffective management of a publicly traded firm?\t“\ufffd Outside management teams can “take over”\ufffd the company.\t“\ufffd Each of the above are recognized methods for the removal of ineffective management.\t“\ufffd The Board of Directors can vote to remove management.\t“\ufffd The shareholders can vote out directors who won’t discipline managers.\t\u00a0\tA major issue with venture capitalists and angel investors is the rate at which their funds will be used up. This is called the ________.\t“\ufffd depreciation rate\t“\ufffd IV rate\t“\ufffd burn rate or bleed rate\t“\ufffd consumption or constriction rate\t\u00a0\tWhich of the statements below is TRUE?\t“\ufffd Investors want to minimize return and minimize risk.\t“\ufffd Investors want to maximize return and maximize risk.\t“\ufffd Investors want to minimize return and maximize risk.\t“\ufffd Investors want to maximize return and minimize risk.\t\u00a0\tOf the following, which is the most recent example of legislation passed by the federal government to deal with a major economic or highly visible corporate event?\t“\ufffd The Federal Deposit Insurance Corporation Improvement Act\t“\ufffd The Securities and Exchange Act\t“\ufffd The Sarbanes-Oxley Act\t“\ufffd The Securities Act of 1933\t\u00a0\tWhich of the following statements is TRUE if you increase your monthly payment above the required loan payment?\t“\ufffd The extra portion of the payment increases the principal.\t“\ufffd You can significantly increase the number of payments needed to pay off the loan.\t“\ufffd You can significantly reduce the number of payments needed to pay off the loan.\t“\ufffd The extra portion of the payment does not go to the principal.\t\u00a0\tIn their first venture into the optimal capital structure question, Nobel laureates Franco Modigliani and Merton Miller began with a very simple model and a hypothetical world of ________.\t“\ufffd no taxes and no bankruptcy\t“\ufffd taxes but no bankruptcy\t“\ufffd bankruptcy costs but no taxes\t“\ufffd both taxes and bankruptcy\t\u00a0\tThe company offering a discount on accounts payable is trying to ________ and the firm that pays on time rather than taking a discount is attempting to ________.\t“\ufffd speed up cash outflow; slow down cash inflow\t“\ufffd speed up cash inflow; slow down cash outflow\t“\ufffd speed up cash inflow; slow down cash inflow\t“\ufffd speed up cash outflow; slow down cash outflow\t________ refers to the way a company finances itself through some combination of loans, bond sales, preferred stock sales, common stock sales, and retention of earnings\t“\ufffd Working capital management\t“\ufffd NPV\t“\ufffd Cost of capital\t“\ufffd Capital structure\t\u00a0\t\u00a0\tThere are four primary financial statements that are used to measure the performance of a firm. Which of the choices below are included among these four?\t“\ufffd The income sheet and statement of retained earnings\t“\ufffd The balance sheet and statement of cash flows\t“\ufffd The balance statement and income statement\t“\ufffd The statement of cash flows and statement of balance\t\u00a0\tAcme Supply Co. has a new project that will require the company to borrow $3,000,000. Acme has made an agreement with three lenders for the needed financing. First National Bank will give $1,500,000 and wants 10% interest on the loan. Lockup Bank will give $1,000,000 and wants 12% interest on the loan. Southern National Bank will give $500,000 and wants 13% interest on the loan. What is the weighted average cost of capital for this $3,000,000?\t“\ufffd 12.16%\t“\ufffd 10.55%\t“\ufffd 11.66%\t“\ufffd 17%\t\u00a0\tWhich of the following statements is TRUE?\t“\ufffd The current ratio is current assets divided by current liabilities.\t“\ufffd Total asset turnover is net income divided by total assets.\t“\ufffd The quick ratio equals current assets “\ufffd current liabilities divided by current liabilities.\t“\ufffd The cash coverage ratio equals cash divided by current liabilities.\u00a0\t\u00a0\t\u00a0\tWhich of the statements below is FALSE?\t“\ufffd There are three basic defensive mechanisms that can guard against the extreme case of nationalized assets. These include keeping critical operations private, financing operations and assets with local money, and receiving primary inputs outside the local economy.\t“\ufffd One way that a multinational firm can minimize the potential of nationalization of assets by a foreign government is to share key elements of operations with the government.\t“\ufffd Political risk involves changes in a foreign government. At one extreme is the case in which a local government “takes over”\ufffd the assets of the company and nationalizes it.\t“\ufffd Political risk involves changes in a foreign government. An extreme example is the case in which a government encourages foreign investment and gives breaks to companies willing to move operations locally.\t\u00a0\tThe current indirect exchange rate is 12 pesos per dollar. The anticipated annual inflation rate is 6% in the United States and 14% in Mexico. If the cash inflow in pesos is 50,000 in one year, what are the 50,000 pesos worth in U.S. dollars after conversion from pesos to dollars using the forward exchange rate?\t“\ufffd $3,874.27\t“\ufffd $3,882.13\t“\ufffd $3,480.78\t“\ufffd $3,983.78\t“\ufffd \t________ is the area of finance concerned with activities such as repayment of borrowed funds through dividends or interest payments.\t“\ufffd International finance\t“\ufffd Capital budgeting\t“\ufffd Corporate finance\t“\ufffd Investments<\/p>\n","protected":false},"excerpt":{"rendered":"
FIN 419 FINAL EXAM NEW JUNE 2018\u00a0 \u00a0 You want to invest in a stock that pays $6.00 annual cash dividends for the next five years. At the end of the five years you will sell the stock for $30.00. Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-216677","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216677","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=216677"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216677\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=216677"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=216677"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=216677"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}