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Connect Finance Final Exam

connect finance course help Q1. The simplest approach to estimating a future period’s sales is to assume that they will be equal to those of the latest observed period. In statistics, this is often simply referred to as which of the following?

Base case approach
Naïve approach
Pro forma approach
Deseasonalized approach

Q2. Time to Maturity A bond issued by a corporation on June 15, 2007 is scheduled to mature on June 15, 2034. If today is December 16, 2008, what is this bond’s time to maturity?

25 years, 6 months
1 year, 6 months
27 years
25 years

Q3. Asset Management Ratios Corn Products, Corp. ended the year 2018 with an average collection period of 38 days. The firm’s credit sales for 2011 were $10.1 million. What is the approximate year-end 2013 balance in accounts receivable for Corn Products? (Consider 365 days a year.)

$383.8 million
$3.7624 million
$1.0515 million
$0.2658 million

Q4. Exchange Rate Quote Convert the following direct quote to a dollar indirect quote (round your answer to 4 decimal places):

1 Danish krone = $0.1705

0.8295 krone
1.1705 krone
5.8651 krone
0.1705 krone

Q5. B24&Co stock has a beta of 1.52, the current risk-free rate is 3.02 percent, and the expected return on the market is 10.52 percent. What is B24&Co’s cost of equity?

14.42%
15.06%
23.60%
19.01%

Q6. Suppose that Tucker Industries has annual sales of $5.00 million, cost of goods sold of $2.78 million, average inventories of $1,125,000, and average accounts receivable of $500,000. Assuming that all of Tucker’s sales are on credit, what will be the firm’s operating cycle? (Round your answer to 2 decimal places.)

147.71
111.21
36.50
184.21

Q7. Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13.00 percent. Their recent dividend was $.69. What is the value of their stock when the required rate of return is 14.33 percent?

$51.88
$58.62
$5.86
$4.50

Q8. If a firm has a cash cycle of 35 days and an operating cycle of 100 days, what is its average payment period?

Q9. Future Value of an Annuity What is the future value of a $590 annuity payment over 9 years if the interest rates are 8 percent?

$6,506.80
$7,367.66
$5,734.80
$1,179.41

Q10. Currency Exchange Compute the number of dollars that can be bought with 2.15 million of foreign currency units (round your answer to 2 decimal places):

$1 = 16,065 Vietnam dong

$2.15
$133.83
$3,453.97
$13,383

Q11. Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent and the maximum allowable payback is 4 years.

Time:	0	1	2	3	4	5
Cash flow:	-2,900	900	550	800	775	575

2.84 years, Accept
3.84 years, Accept
3.84 years, Reject
2.84 years, Reject

Q12. Cross Rate Given these two exchange rates, $1 = 11.60 Mexican peso and $1 = €0.7549, compute the cross rate between the Mexican peso and the euro. State this exchange rate in pesos and in euros. (Closest to)

1.3247 euros, 0.0862 pesos
15.3610 euros, .0651 pesos
0.0862 euros, 1.3247 pesos
0.0651 euros, 15.3610 pesos

Q13. Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.

Time	0	1	2	3	4	5	6
Cash Flow	-1,050	150	450	650	650	250	650

Use the NPV decision rule to evaluate this project; should it be accepted or rejected?

$829.74, accept
$1,962.72, accept
$-270.26, reject
$912.72, accept

Q14. Future Value Compute the future value in year 9 of a $400 deposit in year 4 and another $200 deposit at the end of year 5 using a 10% interest rate.

$1,414.77
$880.00
$937.02
$1,060.00

Q15. One Year Future Value What is the future value of $6,000 deposited for one year earning 9% interest rate annually?

$12,540
$6,540
$6,000
$540

Q16. Balance Sheet Jack and Jill Corporation’s year-end 2018 balance sheet lists current assets of $238,000, fixed assets of $790,000, current liabilities of $182,000, and long-term debt of $290,000. What is Jack and Jill’s total stockholders’ equity?

$472,000
$1,028,000
$556,000
There is not enough information to calculate total stockholder’s equity.

Q17. Time to Maturity A bond issued by a corporation on September 1, 1989 is scheduled to mature on September 1, 2054. If today is September 2, 2009, what is this bond’s time to maturity?

65 years
45 years
20 years
54 years

Q18. Your Company is considering a new project that will require $28,000 of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $1,600 using straight-line depreciation. The cost of capital is 11%, and the firm’s tax rate is 21%. Estimate the present value of the tax benefits from depreciation.

$693
$3,300
$2,607
$3,566

Q19. Liquidity Ratios You have the following information on Marco’s Polo Shop: total liabilities and equity = $208 million; current liabilities = $48 million, inventory = $63 million, and quick ratio = 1.9 times. Using this information, what is the balance for fixed assets on Marco’s Polo balance sheet?

$97 m
$53.8 m
$116.8 m
$88.3 m

Q20. Your Company is considering a new project that will require $640,000 of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $208,000 using straight-line depreciation. The cost of capital is 13%, and the firm’s tax rate is 21%. Estimate the present value of the tax benefits from depreciation.

$54,000
$11,340
$42,660
$54,418

Q21. Income Statement Bullseye, Inc.’s 2018 income statement lists the following income and expenses: EBIT = $904,500, Interest expense = $81,000, and Net income = $585,000. What is the 2008 Taxes reported on the income statement?

$238,500
There is not enough information to calculate 2018 Taxes.
$823,500
$319,500

Q22. Time to Maturity A bond issued by a corporation on May 1, 1999 is scheduled to mature on May 1, 2029. If today is May 2, 2009, what is this bond’s time to maturity?

29 years
30 years
9 years
20 years

Q23. Elle Mae Industries has a cash balance of $53,000, accounts payable of $165,000; inventory of $205,000; accounts receivable of $265,000; notes payable of $213,000; and accrued wages and taxes of $43,000. How much net working capital does the firm need to fund?

$110,000
$145,000
$53,000
$102,000

Q24. One Year Future Value What is the future value of $12,000 deposited for one year earning 6% interest rate annually?

$720
$12,720
$24,720
$12,000

Q25. Your Company is considering a new project that will require $1,070,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $309,500 using straight-line depreciation. The cost of capital is 12%, and the firm’s tax rate is 21%. Estimate the present value of the tax benefits from depreciation (closest to).

$17,745
$94,550
$66,755
$84,500

Q26. CJ Co stock has a beta of 1.05 the current risk-free rate is 5.75 percent, and the expected return on the market is 13.15percent. What is CJ Co’s cost of equity?

19.56
13.52
19.95
25.60

Q27. Value a Constant Growth Stock Financial analysts forecast Wal-Mart Stores (WMT) growth for the future to be 13.00 percent. Their recent dividend was $2.13. What is the value of their stock when the required rate of return is 16.00 percent?

$80.23
$71.00
$.8023
$.7100

Q28. Liquidity Ratios Burt’s TVs has current liabilities of $24.8 million. Cash makes up 39 percent of the current assets and accounts receivable makes up another 19 percent of current assets. Burt’s current ratio = .97 times. What is the value of inventory listed on the firm’s balance sheet? (Do not round intermediate steps.)

$9.67 m
$42 m
$10.11 m
$4.57 m

Q29. Balance Sheet You are evaluating the balance sheet for Cypress Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $500,000, Accounts receivable = $700,000, Inventory = $400,000, Accrued wages and taxes = $40,000, Accounts payable = $100,000, and Notes payable = $900,000. What is Cypress’s net working capital?

$560,000
$1,600,000
$1,040,000
$2,640,000

Q30. Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.

Time	0	1	2	3	4	5	6
Cash Flow	-970	170	430	630	630	230	630

Use the payback decision rule to evaluate this project; should it be accepted or rejected?

1.27 years, accept
2.59 years, reject
0 years, accept
4.00 years, reject

Q31. Future Value of an Annuity What is the future value of a $300 annuity payment over 6 years if the interest rates are 7 percent?

$2,145.99
$1,926.00
$2,518.15
$450.22

Q32. P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $7.30 and a P/E ratio of 15.28. What is the stock price?

$.48
$2.09
$111.54
$45.16

Q33. Which of the following is a set of financial statements depicting an operating division of a firm’s expected financial situation in the foreseeable future under the most reasonable set of assumptions concerning relevant factors?

Pro forma financial statements
Deseasonalized financial statements
Base case projections
Naïve financial statements

Q34. FlavR Co stock has a beta of 2.02, the current risk-free rate is 2.02 percent, and the expected return on the market is 9.02 percent. What is FlavR Co’s cost of equity?

11.04%
16.16%
20.24%
13.06%

Q35. What is computed by dividing the amount of assets tied directly to sales (A*) by the amount of current sales (S0)?

Capital intensity ratio
Quick ratio
Spontaneous assets
Current ratio

Q36. Three Years Future Value What is the future value of $500 deposited for three years earning 7% interest rate annually?

$113
$1,113
$500
$613

Q37. Currency Exchange Compute the amount of foreign currency that can be purchased for $300,000 (round your answer to 2 decimal places): 1 Danish krone = $0.1705

300,000 krone
1,759,530.79 krone
51,150 krone
17,595.31 krone

Q38. Suppose that a company’s equity is currently selling for $27.75 per share and that there are 4.5 million shares outstanding. If the firm also has 25.0 thousand bonds outstanding, which are selling at 99.5 percent of par, what are the firm’s current capital structure weights for equity and debt respectively?

80.08 percent, 19.92 percent
83.39 percent, 16.61 percent
27.89 percent, 72.11 percent
50 percent, 50 percent

Q39. Your company doesn’t face any taxes and has $750 million in assets, currently financed entirely with equity. Equity is worth $50.00 per share, and book value of equity is equal to market value of equity. Also, let’s assume that the firm’s expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below:

State	Recession			Average			Boom
Probability of state		0.15			0.65			0.20
Expected EBIT in state	$	100	million	$	175	million	$	235	million

The firm is considering switching to a 30 percent debt capital structure, and has determined that they would have to pay a 9 percent yield on perpetual debt in either event. What will be the standard deviation in EPS if they switch to the proposed capital structure? (Round your intermediate calculations and final answer to 2 decimal places except calculation of number of shares which should be rounded to nearest whole number.)

6.54
14.81
14.26
3.76

Q40. Suppose that a company’s equity is currently selling for $22.00 per share and that there are 4.00 million shares outstanding. If the firm also has 30 thousand bonds outstanding, which are selling at 101.00 percent of par, what are the firm’s current capital structure weights for equity and debt respectively?

74.39 percent, 25.61 percent
65.57 percent, 34.43 percent
50 percent, 50 percent
21.78 percent, 78.22 percent