FIN 370 Examination Questions with Answers
1 What are reasons for the firm to go abroad?
• Lower production cost
• All of the above
• Access to raw materials
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
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.
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
We call the process of earning interest on both the original deposit and on the earlier interest payments:
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
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...