FIN 515 Week 8 Final Exam (Version 2)

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1. (TCO A) Which of the following statements is NOT correct? (Points : 5)

2. (TCO F) Which of the following statements is correct? (Points : 5) (a) (TCO F) Which of
the following statements is correct? (Points : 5)
3. 3 (TCO D) The Ackert Company's last dividend was $1.55. The dividend growth rate is
expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a
rate of 8.0% forever. The firm's required return (rs) is 12.0%. What is the best estimate of
the current stock price? (a) (TCO D) Church Inc. is presently enjoying relatively high
growth because of a surge in the demand for its new product. Management expects......?
4. (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in
January, $35,000 in February, and $35,000 in March. If 20% of sales are for cash, 40% are
credit sales paid in the month......?
5. (TCO G) Clayton Industries is planning its operations for next year, and Ronnie Clayton,
the CEO, wants you to forecast the firm's additional funds needed (AFN). The firm is
operating at full capacity. Data for use in your forecast are shown below. Based on the
AFN equation, what is the AFN for the coming year?.......
6. (TCO H) The Dewey Corporation has the following data, in thousands. Assuming a
365-day year, what is the firm's cash conversion cycle?
7. (TCO C) Your company has been offered credit terms of 4/30, net 90 days. What will be
the nominal annual percentage cost of its nonfree trade credit if it pays 120 days after the
purchase? (Assume a 365-day year.)
8. (TCO E) Daves Inc. recently hired you as a consultant to estimate the company's WACC.
You have obtained the following information. (1) The firm's noncallable bonds mature in
20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of
$1,050.00. (2) The company's tax rate is 40%. (3).......?
9. (TCO B) Zhdanov Inc. forecasts that its free cash flow in the coming year, that is, at t = 1,
will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected
to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%,
what is the firm's value of operations, in millions?
10. (TCO G) Based on the corporate valuation model, the value of a company's operations is
$1,200 million. The company's balance sheet shows $80 million in accounts receivable,
$60 million in inventory, and $100 million in short-term investments that are unrelated to
operations. The balance sheet also shows $90 million.......?