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FIN 571 Week 3 Quiz

FIN 571 Week 3 Quiz
FIN 571 Week 3 Quiz -

Multiple Choice Question 32      

The operating cycle

  • ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by the firm to pay for its purchases.
  • To measure operating cycle we need another measure called the days' payables outstanding.
  • begins when the firm receives the raw materials it purchased that would be used to produce the goods that the firm manufactures.
  • begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

 

Multiple Choice Question 57      

You are provided the following working capital information for the Ridge Company:

Ridge Company

Account        $         

Inventory      $12,890

Accounts receivable         12,800

Accounts payable  12,670           

Net sales       $124,589

Cost of goods sold            99,630

Operating cycle: What is the operating cycle for Ridge Company?

  • 51 days
  • 47 days
  • 85 days
  • 36 days

 

Multiple Choice Question 80

Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size.

  • 26,154 clocks
  • 124 clocks
  • 15,294 clocks
  • 161 clocks

 

Multiple Choice Question 49      

The asset substitution problem occurs when

  • managers substitute less risky assets for riskier ones to the detriment of equity holders.
  • managers substitute riskier assets for less risky ones to the detriment of bondholders.
  • managers substitute less risky assets for riskier ones to the detriment of bondholders.
  • managers substitute riskier assets for less risky ones to the detriment of equity holders.

 

Multiple Choice Question 53      

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.

How much are your cash flows today?

  • $4.50
  • $12.38
  • $150
  • $15

 

Multiple Choice Question 62      

M&M Proposition 2: Melba's Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm's marginal corporate income tax rate is 35%. What is the appropriate WACC?

  • 6.35%
  • 7.44%
  • 8.80%
  • 8.17%

 

Multiple Choice Question 39      

According to the text, the financial plan covers a period of

  • ten years.
  • none of these.
  • one year.
  • three to five years.

 

Multiple Choice Question 45

The financing plan of a firm will indicate

  • the firm's dividend policy, the desired capital structure for the firm, and the firm's working capital policy.
  • the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm's dividend policy.
  • the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm's working capital policy.
  • the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the firm's dividend policy, and the firm's working capital policy.

 

Multiple Choice Question 74

Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm's dividend payout ratio and retention ratio.

  • 25%, 75%
  • 66%, 34%
  • 34%, 66%
  • 69%, 31%

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