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FIN534 Final Exam Part 1 |A+ work
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Review Test Submission: Week 11 Final Exam Part 1

 

•             Question 1

2 out of 2 points

               

                BLW Corporation is considering the terms to be set on the options it plans to issue to its executives. Which of the following actions would decrease the value of the options, other things held constant?

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•             Question 2

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 3

2 out of 2 points

               

                Suppose you believe that Florio Company's stock price is going to decline from its current level of $82.50 sometime during the next 5 months. For $5.10 you could buy a 5-month put option giving you the right to sell 1 share at a price of $85 per share. If you bought this option for $5.10 and Florio's stock price actually dropped to $60, what would your pre-tax net profit be?

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•             Question 4

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 5

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 6

2 out of 2 points

               

                Which of the following statements is most correct, holding other things constant, for XYZ Corporation's traded call options?

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•             Question 7

2 out of 2 points

               

                To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and g = 6.50% (constant). Based on the DCF approach, what is the cost of common from reinvested earnings?

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•             Question 8

2 out of 2 points

               

                Which of the following statements is CORRECT? Assume a company's target capital structure is 50% debt and 50% common equity.

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•             Question 9

2 out of 2 points

               

                A company's perpetual preferred stock currently sells for $92.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock?

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                Selected Answer:              

9.10%

Correct Answer:                 

9.10%

                                               

•             Question 10

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 11

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 12

2 out of 2 points

               

                You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 1.30. Based on the CAPM approach, what is the cost of common from reinvested earnings?

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•             Question 13

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 14

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 15

2 out of 2 points

               

                Projects C and D both have normal cash flows and are mutually exclusive. Project C has a higher NPV if the WACC is less than 12%, whereas Project D has a higher NPV if the WACC exceeds 12%. Which of the following statements is CORRECT?

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•             Question 16

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 17

2 out of 2 points

               

                Projects S and L are both normal projects with an initial cost of $10,000, followed by a series of positive cash inflows. Project S's undiscounted net cash flows total $20,000, while L's total undiscounted flows are $30,000. At a WACC of 10%, the two projects have identical NPVs. Which project's NPV is more sensitive to changes in the WACC?

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•             Question 18

0 out of 2 points

               

                Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

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•             Question 19

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 20

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 21

2 out of 2 points

               

                Collins Inc. is investigating whether to develop a new product. In evaluating whether to go ahead with the project, which of the following items should NOT be explicitly considered when cash flows are estimated?

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•             Question 22

2 out of 2 points

               

                Which of the following rules is CORRECT for capital budgeting analysis?

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•             Question 23

2 out of 2 points

               

                Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

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•             Question 24

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 25

2 out of 2 points

               

                A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase?

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•             Question 26

2 out of 2 points

               

                Last year National Aeronautics had a FASales ratio of 40%, comprised of $250 million of sales and $100 million of fixed assets. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed AssetsSales ratio at the level it would have had had it been operating at full capacity. What target FASales ratio should the company set?

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•             Question 27

2 out of 2 points

               

                F. Marston, Inc. has developed a forecasting model to estimate its AFN for the upcoming year. All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)?

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•             Question 28

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 29

2 out of 2 points

               

                Which of the following statements is CORRECT?

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•             Question 30

2 out of 2 points

               

                The capital intensity ratio is generally defined as follows:

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Result 94 % 

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