Practice Exam - FIRST

.xlsx

School

Western Governors University *

*We aren’t endorsed by this school

Course

C214

Subject

Finance

Date

Jan 9, 2024

Type

xlsx

Pages

Uploaded by taneisa2

Financial Management (C214) Practice Test: FIRST Insert the answer (a,b,c,d) in the green highlighted boxes The first 20 questions are calculations; the rest are concept questions. The purpose is to identify weak areas, not to achieve a high score Use Sidebar Formulas for the first 20 questions REVIEW QUESTIONS 1. A firm reported the following: Net Income 100,000 Depreciation 25,000 Change in A/R 15,000 What is the CFO (cash flow from operations)? a. 100,000 b. 110,000 c. 120,000 b. 110,000 2. What is the Cash Flow from Investing? Beginning Net PP&E 50,000 Ending Net PP&E 200,000 Depreciation Expense 40,000 a. (190,000) b. 150,000 c. 200,000 d. (150,000) 3. What is the Cash Flow from Financing? Accounts Payable 50,000 Stock Issuance 75,000 Increase in Bonds Payable 125,000 Dividends Paid 80,000 a. 150,000 b. 120,000 c. 100,000 d. 145,000 Take as "CLOSED BOOK" exam and return as Excel file for grading

a. 22,096 b. 17,752 c. 18,097 d. 18,462 a. 20% b. 15% c. 25% d. 14% a. 6.71% b. 5.50% c. 5.66% d. 6.33% a. 75 b. 79 c. 82 d. 85 a. 41.75 b. 42 c. 41 d. 39 4. A couple wants to accumlate 100,000 in five years for a down payment on a house. If the interest rate is 5%, how much should they save each year from their annual year-end bonus? 5. Hedgeco had net income of 12,000,000 and it has equity of 40,000,000. The board approved dividends of 4,000,000. What is the company’s Sustainable Growth Rate? 6. A company wishes to issue 10 year semi-annual pay bonds with a face value of $1,000 and a coupon rate of 5%. The bonds will sell at a price of 950. What is the YTM of the bonds when they are sold? 7. What does a stock have to sell for one year in the future, if it currently sells for $75, has a planned dividend of $2 a share and an expected return of 12%? 8. A company just paid a dividend of 2.00 to its shareholder. It estimates that future growth will be at 5%. What is the value of the stock if you are looking for an 10% return on your investment?

a. 1,000,000 b. 5,000,000 c. 500,000 d. 2,000,000 a. .17 b. .18 c. .21 d. .15 a. .1275 b. .125 c. .1225 d. .1095 12. What is the Initial Cash Flow (ICF) given the following information: a. (415,000) b. 615,000 c. (515,000) d. 510,000 a. 11,345 b. 12,196 c. 12,596 d. 13,208 9. To create a fund for annual college scholarships of $100,000 that will last forever, how much must be invested today if the interest rate is 5%? 10. The stock market yield is 15% and Treasury bonds are yielding 3%. If a stock has a beta of 1.5. What is that stock’s required return? 11. Common stock is valued at 500,000 and Long-term debt is valued at 300,000. What is the WACC if common stock costs 15% and long-term debt costs 7%? The tax rate is 40%. · Equipment Price 400,000 · Installation 10,000 · Shipping 5,000 · Working Capital 100,000 13. A couple wants to accumulate $500,000 in their stock investment account in 20 years when they retire. Assuming a 7% return on stocks, how much must be saved each year from their annual year-end bonus?

a. 40 mill b. 50 mill c. 15 mill d. Insufficient data to determine a. 100,000 b. 50,000 c. 136,000 d. 85,000 a. 33% b. 40% c. 43% d. 5% a. $1.2 million b. $1.3 million c. $1.0 million d. $ 0.8 million a. $10 million b. $20 million c. $8 million d. Cannot be determined a. 20 million b. 8 million c. 18 million 14. At sales of $100 million, a firm estimates current assets will be 35% of sales. If it has $5 million of equity and $15 million of debt, what is its DFN? 15. A project is closing. Equipment is sold for 80,000 even though the book value was 100,000. The tax rate is 30%. The project started with 50,000 in working capital. What is the Terminal Cash Flow? 16. If a stock is purchased for $15, receives a $1 dividend, and is sold a year later for $20, what is the return to the investor? 17. A $1 million project was delayed for 3 years. If the inflation rate is 5%, how much should be budgeted to fund the project after the delay? 18. If a firm has a 10% net margin on $100 million sales and a 20% payout ratio, what is the addition to retained earnings? 19. If a firm has $50 million of sales, 30 million of operating expenses, 10 million of depreciation, and a 20% tax rate, what is its net income?

d. 10 million 20. If a 5-year zero coupon bond sells for 900, what is its yield to maturity? a. 0% b. 10% c. 2.13% d. 2.22% a. Calculate WACC b. Change CEOs on a regular basis e. Regulate the Money Supply d. File audited financial statements 22. What does the Sarbanes-Oxley Act require companies to do? a. Have a board of directors b. Audit internal controls c. Make estimated tax payments d. Report foreign sales a. Fluctuating exchange rates b. Imports of competing products c. Immigration policy d. Inflation in Europe 24. How does a "prudent investor" select investments? a. Maximum expected return b. Lowest risk available c. Avoid stock investments d. Take an appropriated amount of risk 25. If a firm's goal is to maximize stockholder wealth, which would the firm avoid? a. Investments with negative NPV b. Risky long-term investments c. Highly paid executives d. Transparency in financial statements 26. To evaluate a non-public company, what sources would you use? a. The financial statements filed with the SEC b. The latest stock price quoted in the Wall Street Journal c. The PE of a comparable public company d. The book value of equity in its balance sheet 21. The SEC Securities & Exchange Commission requires public companies to do the following: 23. If a company produces and sells a product only in the U.S., what international developments may affect its sales?

a. Cash Flow Operations b. Cash Flow Investing c. Cash Flow Financing. d. Cash Flow Securities 28. For calculating cash flows, why is depreciation added to Net Income? a. To offset taxes b. Depreciation is a non-cash deduction c. To determine pre-tax income d. None of the above 29. What explains the size of the yield spread of bonds over Treasury? a. Coupon rate b. Riskiness of the bond c. The firm's efficiency ratio d. The firm's Beta 30 What does Beta measure? a. The yield on the S&P 500 b. The relative riskiness of an individual stock c. Indicates the market value of the stock d. Stocks to avoid purchasing 31. If market interest rates rise, what impact does it have on a given bond? a. Its price decreases b. It will have a discount price c. No impact since the coupon rate is fixed d. Its price increases 32. An increased corporate tax rate would: a. Increase cost of stock b. Increase bond cost to firm c. Decrease bond cost to firm d. None of the above 33. Why does finance require decision-making under uncertainty? a. Required by the SEC b. Uncertainty of forecast assumptions c. Formula inputs are estimates d. Both b and c 34. If debt is less costly than equity, why don't firms maximize debt use? 27. Which section of the Statement of Cash Flows descibes the production and sales of the firm's product?

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version