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FIN 534- WEEK 11 FINAL EXAM PART 1 | A+ work
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Question 1

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 2

2 out of 2 points

 

 
 

An option that gives the holder the right to sell a stock at a specified price at some future time is

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 3

2 out of 2 points

 

 
 

Cazden Motors' stock is trading at $30 a share. Call options on the company's stock are also available, some with a strike price of $25 and some with a strike price of $35. Both options expire in three months. Which of the following best describes the value of these options?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 4

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 5

2 out of 2 points

 

 
 

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

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 6

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 7

2 out of 2 points

 

 
 

Perpetual preferred stock from Franklin Inc. sells for $97.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 8

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 9

2 out of 2 points

 

 
 

Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 10

2 out of 2 points

 

 
 

With its current financial policies, Flagstaff Inc. will have to issue new common stock to fund its capital budget. Since new stock has a higher cost than reinvested earnings, Flagstaff would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 11

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?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 12

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?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 13

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 14

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 15

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 16

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 17

0 out of 2 points

 

 
 

The WACC for two mutually exclusive projects that are being considered is 8%. Project K has an IRR of 20% while Project R's IRR is 15%. The projects have the same NPV at the 8% current WACC. However, you believe that money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 18

2 out of 2 points

 

 
 

The WACC for two mutually exclusive projects that are being considered is 12%. Project K has an IRR of 20% while Project R's IRR is 15%. The projects have the same NPV at the 12% current WACC. Interest rates are currently high. However, you believe that money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 19

2 out of 2 points

 

 
 

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 20

2 out of 2 points

 

 
 

Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 21

2 out of 2 points

 

 
 

Puckett Inc. risk-adjusts its WACC to account for project risk. It uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Puckett accept, assuming that the company uses the NPV method when choosing projects?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 22

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?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 23

2 out of 2 points

 

 
 

Which of the following procedures does the text say is used most frequently by businesses when they do capital budgeting analyses?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 24

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 25

2 out of 2 points

 

 
 

North Construction had $850 million of sales last year, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate North could achieve before it had to increase its fixed assets?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 26

2 out of 2 points

 

 
 

The Besnier Company had $250 million of sales last year, and it had $75 million of fixed assets that were being operated at 80% of capacity. In millions, how large could sales have been if the company had operated at full capacity?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 27

2 out of 2 points

 

 
 

Last year Baron Enterprises had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity last year. In millions, by how much could Baron's sales increase before it is required to increase its fixed assets?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 28

2 out of 2 points

 

 
 

Last year National Aeronautics had a FA/Sales 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 Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 29

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)?

     
       

https://blackboard.strayer.edu/images/ci/icons/generic_updown.gifQuestion 30

2 out of 2 points

 

 
 

Which of the following statements is CORRECT?

     
       

 

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