STR 581 WEEK 2 CAPSTONE EXAM

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STR 581 WEEK 2 CAPSTONE EXAM

1. Which of the following financial statements is concerned with the company
at a point in time?
2. A cost which remains constant per unit at various levels of activity is a:
3. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and
is expected to exist forever. The company is currently financed with 75
percent equity and 25 percent debt. Your analysis tells you that the
appropriate discount rates are 10 percent for the cash flows, and 7 percent
for the debt. You currently own 10 percent of the stock.
If Dynamo wishes to change its capital structure from 75 percent equity to 60
percent equity and use the debt proceeds to pay a special dividend to
shareholders, how much debt should they use?
4. Serox stock was selling for $20 two years ago. The stock sold for $25 one
year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per
year. What was the rate of return for owning Serox in the most recent year?
(Round to the nearest percent.)
5. The process of evaluating financial data that change under alternative
courses of action is called:
6. What decision criteria should managers use in selecting projects when
there is not enough capital to invest in all available positive NPV projects?
7. The convention of consistency refers to consistent use of accounting
principles:

8. External financing needed: Jockey Company has total assets worth

$4,417,665. At year-end it will have net income of $2,771,342 and pay out
60 percent as dividends. If the firm wants no external financing, what is the
growth rate it can support?
9. Which of the following is considered a hybrid organizational form?
10. An activity that has a direct cause-effect relationship with the resources
consumed is a(n):
11. Next year Jenkins Traders will pay a dividend of $3.00. It expects to
increase its dividend by $0.25 in each of the following three years. If their
required rate of return if 14 percent, what is the present value of their
dividends over the next four years?
12. TuleTime Comics is considering a new show that will generate annual
cash flows of $100,000 into the infinite future. If the initial outlay for such a
production is $1,500,000 and the appropriate discount rate is 6 percent for
the cash flows, then what is the profitability index for the project?
13. Your firm has an equity multiplier of 2.47. What is the debt-to-equity
ratio?
14. If a companys weighted average cost of capital is less than the required
return on equity, then the firm:
15. When a company assigns the costs of direct materials, direct labor, and
both variable and fixed manufacturing overhead to products, that company is
using:
16. The major element in budgetary control is:
17. Horizontal analysis is a technique for evaluating a series of financial
statement data over a period of time:
18. Which of the following is an advantage of corporations relative to
partnerships and sole proprietorships?
19. The break-even point is where:

20. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its
depreciation and amortization expenses amounted to $84 million. The firm
has 135 million shares outstanding and a share price of $12.80. A competing
firm that is very similar to Turnbull has an enterprise value/EBITDA multiple
of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the nearest million
dollars.
21. Which of the following is considered a hybrid organizational form?
22. The most important information needed to determine if companies can
pay their current obligations is the:
23. Gateway, Corp. has an inventory turnover of 5.6. What is the firms
dayss sales in inventory?
24. Horizontal analysis is also known as:
25. Which of the following presents a summary of changes in a firms
balance sheet from the beginning of an accounting period to the end of that
accounting period?
26. Ajax Corp. is expecting the following cash flows - $79,000, $112,000,
$164,000, $84,000, and $242,000 over the next five years. If the
companys opportunity cost is 15 percent, what is the present value of these
cash flows? (Round to the nearest dollar.)
27. Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25
percent coupon rate. Investors buying the bond today can expect to earn a
yield to maturity of 6.875 percent. What should the company's bonds be
priced at today? Assume annual coupon payments. (Round to the nearest
dollar.)
28. Process costing is used when:
29. Jack Robbins is saving for a new car. He needs to have $21,000 for the
car in three years. How much will he have to invest today in an account
paying 8 percent annually to achieve his target? (Round to nearest dollar)

30. The accumulation of accounting data on the basis of the individual

manager who has the authority to make day-to-day decisions about activities
in an area is called:
STR 581 Week 2 Capstone Exam