Fin 370 Examination Questions with Answers

FIN 370 Examination Questions with Answers
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1 What are reasons for the firm to go abroad?

• Lower production cost

• Diversification

• All of the above

• Access to raw materials


2
Suppose that Model Nails, Inc.’s capital structure features 60 percent equity, 40 percent debt, and that its before-tax cost of debt is 6 percent, while its cost of equity is 10 percent. If the appropriate weighted average tax rate is 28 percent, what will be Model Nails’ WACC?

• 8.40 percent

• 7.73 percent

• 16.00 percent

• 8.00 percent


3
A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

• $79.14

• $66.67

• $65.57

• $65.40


4
What’s the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?

• 5.9 percent

• 6.1 percent

• 6.0 percent

• 10.2 percent


5
We call the process of earning interest on both the original deposit and on the earlier interest payments:

• multiplying.

• compounding.

• computing.

• discounting.


6
We can estimate a stock’s value by__________.

• discounting the future dividends and future stock price appreciation

• using the book value of the total assets divided by the number of shares outstanding

• compounding the past dividends and past stock price appreciation

• using the book value of the total stockholder equity section


7
You are trying to pick the least-expensive machine for your company. You have two choices: machine A, which will cost $50,000 to purchase and which will have OCF of -$3,500 annually throughout the machine’s expected life of three years; and machine B, which will cost $75,000 to purchase and which will have OCF of...