FI 504 Exam with All Correct & 100% Verified Answers |
Latest Version |Already Graded A+
ROA = 5% and D/E = 1/4.
ROE for this firm is_____
a. 5%
b. 6.25%
c. 9%
d. 6%
e. 5% ✔Correct Answer-b. 6.25%
ROA = -5%
ROE for this firm is _____.
a. -6.25%
b. -5%
c. -9%
d. -6%
e. -5% ✔Correct Answer-a. -6.25%
D/E = 1/4. The firm's capital structure is _____.
a. 25% debt
b. 20% equity
c. 80% equity
d. 75% equity
e. 50% debt ✔Correct Answer-c. 80% equity
Identify the correct statements.
I Adding debt adds volatility (risk) to ROE
II Debt impacts only ROE; it does not impact ROA
III D/E has an upper limit of 1.0
a. I. II, and III
b. I only
c. II only
d. I and III
e. II and III ✔Correct Answer-d. I and III
R = 1000, C = 450, D = 65, Interest = 45, and the tax rate is 20%. Find the firm's operating cash flows
(OCF).
a. 352
b. 485
c. 440
d. 550
e. 462 ✔Correct Answer-e. 462
R = 1000, C = 450, D = 65, Interest = 45, and the tax rate is 20%. If the firm pays dividends of 264, the
retention ratio is _____.
a. 0.75
b. 0.25
c. 0.2
, d. 0
e. 1 ✔Correct Answer-b. 0.25
If the retention ratio is b > 0, then
I The firm must should have investment projects that increase the firm's value
II The firm's value is expected to increase
III Net working capital is positive (NWC > 0)
a. II and III
b. I and II
c. I, II and III
d. III only
e. I and III ✔Correct Answer-b. I and II
The objective of the firm is to
I Survive in the long run
II Maximize its value
III Maximize shareholder wealth
a. I only
b. II only
c. II and III
d. I and III
e. I, II and III ✔Correct Answer-c. II and III
A large increase in a firm's cash account could be from
I A large increase in net income (assuming the retention ratio is constant)
II Sale of a large amount of assets
III Significantly increasing notes payable (N/P)
a. I only
b. I and II only
c. II and III
d. II only
e. I, II, and III ✔Correct Answer-e. I, II, and III
Finance is the study of
I The efficient allocation of a scarce resource known as financial capital
II The market valuation of assets
III Net Income
a. I and II
b. I, II, and III
c. III only
d. II and III
e. I only ✔Correct Answer-a. I and II
An individual can afford $1750 per month as a mortgage payment. If the mortgage is amortized over
30 years with monthly payments, the amount borrowed at 3% is_____.
a. 630,000
b. 58,332
c. 415,081
d. 116,118
e. Not enough information ✔Correct Answer-c. 415,081
Latest Version |Already Graded A+
ROA = 5% and D/E = 1/4.
ROE for this firm is_____
a. 5%
b. 6.25%
c. 9%
d. 6%
e. 5% ✔Correct Answer-b. 6.25%
ROA = -5%
ROE for this firm is _____.
a. -6.25%
b. -5%
c. -9%
d. -6%
e. -5% ✔Correct Answer-a. -6.25%
D/E = 1/4. The firm's capital structure is _____.
a. 25% debt
b. 20% equity
c. 80% equity
d. 75% equity
e. 50% debt ✔Correct Answer-c. 80% equity
Identify the correct statements.
I Adding debt adds volatility (risk) to ROE
II Debt impacts only ROE; it does not impact ROA
III D/E has an upper limit of 1.0
a. I. II, and III
b. I only
c. II only
d. I and III
e. II and III ✔Correct Answer-d. I and III
R = 1000, C = 450, D = 65, Interest = 45, and the tax rate is 20%. Find the firm's operating cash flows
(OCF).
a. 352
b. 485
c. 440
d. 550
e. 462 ✔Correct Answer-e. 462
R = 1000, C = 450, D = 65, Interest = 45, and the tax rate is 20%. If the firm pays dividends of 264, the
retention ratio is _____.
a. 0.75
b. 0.25
c. 0.2
, d. 0
e. 1 ✔Correct Answer-b. 0.25
If the retention ratio is b > 0, then
I The firm must should have investment projects that increase the firm's value
II The firm's value is expected to increase
III Net working capital is positive (NWC > 0)
a. II and III
b. I and II
c. I, II and III
d. III only
e. I and III ✔Correct Answer-b. I and II
The objective of the firm is to
I Survive in the long run
II Maximize its value
III Maximize shareholder wealth
a. I only
b. II only
c. II and III
d. I and III
e. I, II and III ✔Correct Answer-c. II and III
A large increase in a firm's cash account could be from
I A large increase in net income (assuming the retention ratio is constant)
II Sale of a large amount of assets
III Significantly increasing notes payable (N/P)
a. I only
b. I and II only
c. II and III
d. II only
e. I, II, and III ✔Correct Answer-e. I, II, and III
Finance is the study of
I The efficient allocation of a scarce resource known as financial capital
II The market valuation of assets
III Net Income
a. I and II
b. I, II, and III
c. III only
d. II and III
e. I only ✔Correct Answer-a. I and II
An individual can afford $1750 per month as a mortgage payment. If the mortgage is amortized over
30 years with monthly payments, the amount borrowed at 3% is_____.
a. 630,000
b. 58,332
c. 415,081
d. 116,118
e. Not enough information ✔Correct Answer-c. 415,081
