Fin 370 Examination Questions Solution

FIN 370 Examination Questions Solution

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1 What are reasons for the firm to go abroad?

o Lower production cost

o Diversification

o All of the above

o 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?

o 8.40 percent

o 7.73 percent

o 16.00 percent

o 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.

o $79.14

o $66.67

o $65.57

o $65.40






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

o 5.9 percent

o 6.1 percent

o 6.0 percent

o 10.2 percent


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

o multiplying.

o compounding.

o computing.

o discounting.


6
We can estimate a stock's value by__________.

o discounting the future dividends and future stock price appreciation

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

o compounding the past dividends and past stock price appreciation

o 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...