FIN 515 Managerial Finance Final Exam Answers
(TCO A) In the United States, the most common type of business by number of businesses is the _____. (Points : 5)
(TCO A) Sole proprietorships have all of the following advantages except (Points : 5)
(TCO B) Which of the following would cause the future value of an annuity to decrease? (Points : 5)
(TCO B) Which of the following is an annuity due? (Points : 5)
(TCO G) What are the names of the four components of the DuPont Identity and how are they calculated? What does each measure? (Points : 20)
(TCO D) A stock pays an annual dividend of \$2.50 and that dividend is not expected to change. Similar stocks pay a return of 10%. What is P0? (Points : 20)
(TCO D) A stock has just declared an annual dividend of \$2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)
(TCO D) A particular bond has 8 years to maturity. It has a face value of \$1,000. It has a YTM of 7% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? (Points : 10)
(TCO D) A bond currently sells for \$1,000 and has a par of \$1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)
(TCO D) Using examples, explain the difference between systematic risk and nonsystematic risk. Explain why the distinction is important for both investors and issuers of stock.(Points : 30)
(TCO E) A company has 10 million shares outstanding trading for \$7 per share. It also has \$300 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)
(TCO A) Relate how the job of the financial manager can be explained using the balance sheet. (Points : 25)
(TCO H) Other things being equal, would a firm prefer a longer or shorter Cash Conversion Cycle? What are some examples of ways a firm could attain this? (Points : 30)
(TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work

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