FI361 Final Exam
Birds of a Feather has bonds outstanding that carry an annual coupon of 6%. The bonds mature in 11 years and are currently priced at 94% of the face value. What is the firm's pretax cost of debt?
6.79%
Which of these is a speculative motive for holding cash?
Buying extra inventory because a key supplier offered a special one-time discount
Which of the following terms refers to the termination of a firm as a going concern?
Liquidation
The cash cycle is equal to the
accounts receivable period minus the accounts payable period plus the inventory period
As of the morning, a firm had a ledger balance of $684 with no outstanding deposits or checks. Today, the firm deposited six checks in the amount of $49 each and wrote a check in the amount $283. What is the amount of the collection float as of the end of the day? Assuming none of the checks had cleared.
$294
Ernst Electrical has 7,500 shares of stock outstanding and no debt. The new CFO is considering issuing $50,000 of debt and using the proceeds to retire 600 shares of stock. The coupon rate on the debt is 8.5%. What is the break-even level of earnings before interest and taxes (EBIT) between these two capital structure options?
$53,125
Design Interiors has a cost of equity of 14.9% and a pretax cost of debt of 8.6%. The firm's target weighted average cost of capital is 11% and its tax rate is 34%. What is the firm's target debt-equity ratio?
.73
Country Cook's cost of equity is 16.2% and its aftertax cost of debt is 5.8%. What is the firm's weighted average cost of capital if its debt-equity ratio is .42 and the tax rate is 34%?
13.12%
The Green Balloon just paid its first annual dividend of $0.87 a share. The Firm plans to increase the dividend by 3.2% per year indefinitely. What is the firm's cost of equity if the current stock price is $4.75 a share?
22.1%
The HOT Truck operates several vehicles that provide hot food and beverages for firms that have workers employed in outlying regions. The company has annual sales of $489,500, cost of goods sold average 59% of sales, and the profit margin is 6.1%. The average accounts receivable balance is $41,700. On average, how long does it take this food truck to collect payment for its services?
31.09 Days
BL Motors has sales for the year of $287,400, cost of goods sold equal to 68% of sales, and an average inventory of $37,800. The profit margin is 7% and the tax rate is 34%. How many days on average does it take the firm to sell an inventory item?
70.6 Days
The 7.5% preferred stock of Rock Bottom Floors is selling for $84 a share. What is the firm's cost of preferred stock if the tax rate is 35% and the par value per share is $100?
8.93%
Donut Delites has a beta of 1.06, a dividend growth rate of 1.2%, a stock price of $12 a share, and an expected annual dividend of $0.68 per share next year. The market rate of return is 11.4% and the risk free rate is 3.8%. What is the firm's cost of equity?
9.36%
Which one of the following is the equity risk arising from the daily operations of a firm?
Business Risk
Lester lent money to The Corner Store by purchasing bonds issued by the store. The rate of return that he and the other lenders require is referred to as the...
Cost of Debt
Which of these is a use of cash?
Decreasing accounts payable
Laurie's Ice Rink keeps an extra $1,000 in its checking account simply in case of an emergency arises. Which type of motive for holding cash does this represent?
Precautionary
Ted is trying to decide what cost of capital he should assign to a project. Which one of the following should be his primary consideration in this decision?
Risk level of the project
Which one of the following is an implication of M&M Proposition 2 without taxes?
The risk of equity is affected by both financial and operating leverage
Float is defined as the difference between the
ledger balance and the available balance