FINANCE 301 Final Exam| 47 Questions all with
100% Correct Answers-A+
Which of the following goals of the firm is equivalent to the maximization of
shareholder wealth? - ANSWER Maximization of the total market value of the firm's
common stock
What is the expected rate of return on a bond that matures in seven years, has a par
value of 1,000, a coupon rate of 14%, and is currently selling for $911? - ANSWER
16.22%
P. Noel Company's common stock has just paid a $2.00 dividend. If investors believe
that the expected rate of return on P. Noel is 14% and that dividends will grow at the
rate of 5% per year for the foreseeable future, what is the value of a share of P. Noel's
stock? - ANSWER $23.33
If you have $20,000 in an account earning 8% annually, what constant amount could you
withdraw each year and have nothing remaining at the end of 5 years? - ANSWER
$5,009.13
Which of the following statements best represents what finance is about? - ANSWER
The study of how people and businesses make investment decisions and how to finance
those decisions.
Based on the information in table 1, the current ratio is - ANSWER 2.97
Based on the information in Table 1 the average collection period is - ANSWER 127 days
Based on the information table above the net profit margin is - ANSWER 2.94%
, Based on the information is Table 1 the debt ratio is - ANSWER .42
A firm currently has the following capital structure which it intends to maintain: Debt
$3,000,000 par value of 9% bonds outstanding with an annual before-tax yield to
maturity of 7.67% on a new issue. The bonds currently sell for 11 per 100 par value.
Common stock: 66,000 shares outstanding currently selling for $50 per share. The firm
expects to pay a $5.00 dividend per share one year from now and is experiencing a
3.67% growth rate in dividends which it expects to continue indefinitely. The firm's
marginal tax rate is 40%. The company has no plans to issue new securities. - ANSWER
After Tax Cost of Debt: 4.60%
After tax Cost of Common Stock: 14.04%
Current total value of firm: 6,600,000
WACC: 9.32%
Proportion of debt: 40%
Three years from now, Barbara Waters will purchase a laptop computer that will cost
$2,250. Assume that Barbara can earn 6.25% on her money compounded monthly. How
much should she set aside today for her purchase? - ANSWER $1,866
You bought a painting 10 years ago as an investment. You originally paid $85,000 for it.
If you sold it for $484,050, what was your annual return for it? - ANSWER 19%
You purchased a parcel of land for $10,000. If you expect 12% annual rate of return on
your investment, how much will you sell the land for in 12 years? - ANSWER $31,060
Which of the following financial instruments entails the most risk and potential the
highest returns for investors? - ANSWER Common Stock
100% Correct Answers-A+
Which of the following goals of the firm is equivalent to the maximization of
shareholder wealth? - ANSWER Maximization of the total market value of the firm's
common stock
What is the expected rate of return on a bond that matures in seven years, has a par
value of 1,000, a coupon rate of 14%, and is currently selling for $911? - ANSWER
16.22%
P. Noel Company's common stock has just paid a $2.00 dividend. If investors believe
that the expected rate of return on P. Noel is 14% and that dividends will grow at the
rate of 5% per year for the foreseeable future, what is the value of a share of P. Noel's
stock? - ANSWER $23.33
If you have $20,000 in an account earning 8% annually, what constant amount could you
withdraw each year and have nothing remaining at the end of 5 years? - ANSWER
$5,009.13
Which of the following statements best represents what finance is about? - ANSWER
The study of how people and businesses make investment decisions and how to finance
those decisions.
Based on the information in table 1, the current ratio is - ANSWER 2.97
Based on the information in Table 1 the average collection period is - ANSWER 127 days
Based on the information table above the net profit margin is - ANSWER 2.94%
, Based on the information is Table 1 the debt ratio is - ANSWER .42
A firm currently has the following capital structure which it intends to maintain: Debt
$3,000,000 par value of 9% bonds outstanding with an annual before-tax yield to
maturity of 7.67% on a new issue. The bonds currently sell for 11 per 100 par value.
Common stock: 66,000 shares outstanding currently selling for $50 per share. The firm
expects to pay a $5.00 dividend per share one year from now and is experiencing a
3.67% growth rate in dividends which it expects to continue indefinitely. The firm's
marginal tax rate is 40%. The company has no plans to issue new securities. - ANSWER
After Tax Cost of Debt: 4.60%
After tax Cost of Common Stock: 14.04%
Current total value of firm: 6,600,000
WACC: 9.32%
Proportion of debt: 40%
Three years from now, Barbara Waters will purchase a laptop computer that will cost
$2,250. Assume that Barbara can earn 6.25% on her money compounded monthly. How
much should she set aside today for her purchase? - ANSWER $1,866
You bought a painting 10 years ago as an investment. You originally paid $85,000 for it.
If you sold it for $484,050, what was your annual return for it? - ANSWER 19%
You purchased a parcel of land for $10,000. If you expect 12% annual rate of return on
your investment, how much will you sell the land for in 12 years? - ANSWER $31,060
Which of the following financial instruments entails the most risk and potential the
highest returns for investors? - ANSWER Common Stock
