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Fin500 midterm exam

Question # 00002966
Subject: Business / Finance
Due on: 10/31/2013
Posted On: 10/30/2013 02:35 AM
Posted By:
neel2103
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1. JBCO. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year?

Answer

a.

$1,357.13

b.

$1,428.56

c.

$1,503.75

d.

$1,578.94

e.

$1,657.88

2.

YNP Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets.

a.

$4,831.31

b.

$5,085.59

c.

$5,353.25

d.

$5,635.00

e.

$5,916.75






3. Commerce Bank offers to lend you $100,000 at an 8.5% annual interest rate to start your new business. The terms require you to amortize the loan with 10 equal end-of-year payments. How much interest would you be paying in Year 2?

a.

$7,531

b.

$7,927

c.

$8,323

d.

$8,740

e.

$9,177

4. Jim Angel holds a $200,000 portfolio consisting of the following stocks:

Stock Investment Beta
A $ 50,000 0.95
B 50,000 0.80
C 50,000 1.00
D 50,000 1.20
Total $200,000

What is the portfolio's beta?

a.

0.938

b.

0.988

c.

1.037

d.

1.089

e.

1.143

5. Lindley Corp.'s stock price at the end of last year was $33.50, and its book value per share was $25.00. What was its market/book ratio?

a.

1.34

b.

1.41

c.

1.48

d.

1.55

e.

1.63

6. Garvin Enterprises’ bonds currently sell for $1,150. They have a 6-year maturity, an annual coupon of $85, and a par value of $1,000. What is their current yield?

a.

7.39%

b.

7.76%

c.

8.15%

d.

8.56%

e.

8.98%

7. The Morrissey Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price?

a.

$923.22

b.

$946.30

c.

$969.96

d.

$994.21

e.

$1019.06

8. Qualcomm`s 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Keys' bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) x 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Keys' bonds?

a.

0.99%

b.

1.10%

c.

1.21%

d.

1.33%

e.

1.46%

9. Ten years ago, Spielberg Inc. earned $0.50 per share. Its earnings this year were $2.20. What was the growth rate in earnings per share (EPS) over the 10-year period?

a.

15.17%

b.

15.97%

c.

16.77%

d.

17.61%

e.

18.49%

10. Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) the firm has a beta of 1.00, and (5) its realized rate of return has averaged 15.0% over the last 5 years.

a.

10.29%

b.

10.83%

c.

11.40%

d.

12.00%

e.

12.60%

11.

Staple Supplies recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding that carry a 7.5% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's taxable income, or earnings before taxes (EBT)?

a.

$3,230.00

b.

$3,400.00

c.

$3,570.00

d.

$3,748.50

e.

$3,935.93





a.

$3,230.00

b.

$3,400.00

c.

$3,570.00

d.

$3,748.50

e.

$3,935.93

12. Noblerse Enterprises has a beta of 1.10, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Scheuer's required rate of return?

a.

9.43%

b.

9.67%

c.

9.92%

d.

10.17%

e.

10.42%

13 What’s the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?

a. $8,509
b. $8,957
c. $9,428
d. $9,924
e. $10,446

a.

$8,509

b.

$8,957

c.

$9,428

d.

$9,924

e.

$10,446

.

14.
What is the PV of an annuity due with 5 payments of $2,500 at an interest rate of 5.5%?

a.

$11,262.88

b.

$11,826.02

c.

$12,417.32

d.

$13,038.19

e.

$13,690.10

15. Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be?

a.

$3704.02

b.

$3.889

c.

$4083.69

d.

$4,287.87

e.

$4,502.26

16. A 25-year, $1,000 par value bond has an 8.5% annual coupon. The bond currently sells for $875. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

a.

$839.31

b.

$860.83

c.

$882.90

d.

$904.97

e.

$927.60

17. John paid $10,000 (CF at t = 0) for an investment that promises to pay $750 at the end of each of the next 5 years, then an additional lump sum payment of $10,000 at the end of the 5th year. What is the expected rate of return on this investment?

a.

6.77%

b.

7.13%

c.

7.50%

d.

7.88%

e.

8.27%

18. Moerdyk Company's stock has a beta of 1.40, the risk-free rate is4.25%, and the market risk premium is5.50%. What is the firm's required rate of return?

a.

11.36%

b.

11.65%

c.

11.95%

d.

12.25%

e.

12.55%

19.

PAT Financial has the following income statement. How much net operating profit after taxes (NOPAT) does the firm have?

Sales

$1,800.00

Costs

1,400.00

Depreciation

250.00

EBIT

$ 150.00

Interest expense

70.00

EBT

$ 80.00

Taxes (40%)

32.00

Net income

$ 48.00

a.

$81.23

b.

$85.50

c.

$90.00

d.

$94.50

e.

$99.23









a.

$81.23

b.

$85.50

c.

$90.00

d.

$94.50

e.

$99.23

20. PuchualaInc believes the following probability distribution exists for its stock. What is the coefficient of variation on the company's stock?

Probability Stock's
State of of State Expected
the Economy Occurring Return
Boom 0.45 25%
Normal 0.50 15%
Recession 0.05 5%

a.

0.2839

b.

0.3069

c.

0.3299

d.

0.3547

e.

0.3813

21. Karen just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?

a.

$15,234

b.

$16,035

c.

$16,837

d.

$17,679

e.

$18,563

22. Jim Angel holds a $200,000 portfolio consisting of the following stocks:

Stock Investment Beta
A $ 50,000 0.95
B 50,000 0.80
C 50,000 1.00
D 50,000 1.20
Total $200,000

What is the portfolio's beta?

a.

0.938

b.

0.988

c.

1.037

d.

1.089

e.

1.143

23. Stewart Inc.'s latest EPS was $3.50, its book value per share was $22.75, it had 215,000 shares outstanding, and its debt ratio was 46%. How much debt was outstanding?

a.

$3,393,738

b.

$3,572,356

c.

$3,760,375

d.

$3,958,289

e.

$4,166,620

24. Harper Corp.'s sales last year were $395,000, and its year-end receivables were $42,500. Harper sells on terms that call for customers to pay 30 days after the purchase, but many delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO - Allowed credit period = Average days late, and use a 365-day year when calculating the DSO.

a.

7.95

b.

8.37

c.

8.81

d.

9.27

e.

9.74

25. Scheuer Enterprises has a beta of 1.10, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Scheuer's required rate of return?

a.

9.43%

b.

9.67%

c.

9.92%

d.

10.17%

e.

10.42%

26. BCO stock has a beta of 1.30, and its required return is 12.00%. LAP Stock's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on LAP Beta's stock? (Hint: First find the market risk premium.)

a.

8.76%

b.

8.98%

c.

9.21%

d.

9.44%

e.

9.68%

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Preview: (NOPAT) xxxx the xxxx have?     Sales   $1,800 00 Costs   1,400 xxxxxxxxxxxxxxxxxxxxxxxx 250 00 EBIT   $  xxx 00 Interest xxxxxxxxxxxxxxxxx xx 00 EBT   $   xx 00 Taxes (40%)      xx 00 Net income  $   xx 00      a xxx xxxxxxxxx $85 xxxxxxxxx $90 00   d xxx 50   e $99 xxxxxxxxx $81 xxx xxx 50c xxx 00d $94 xxx $99 2320 xxxxxxxxxxx believes xxx xxxxxxxxx probability xxxxxxxxxxxx exists for xxx stock   xxxx is xxx xxxxxxxxxxx of xxxxxxxxx on the xxxxxxxxxxx stock?                                   Probability                     Stock’sState xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx of xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxx Economy                 Occurring                      xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 0 45                            xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 0 50                            xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 0 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxx 0 xxxxx 0 3069c x 3299d 0 xxxxx 0 xxxxxx xxxxx just xxxxxxxxx $2,500 in x bank account xxxx pays x x 0% xxxxxxx interest rate, xxxxxxxxxx quarterly If xxx also xxx xxxxxxx $5,000 xx the account xxx year (4 xxxxxxxxx from xxx xxx another xxxxxx to the xxxxxxx two years xx quarters) xxxx xxxx how xxxx will be xx the account xxxxx years xxx xxxxxxxxx from xxxxx $15,234b $16,035c xxxxxxxx $17,679e $18,56322 xxx Angel xxxxx x $200,000 xxxxxxxxx consisting of xxx following stocks:                                Stock                                        Investment                               Beta                                       xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx $ xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx x 95                                       xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 50,000                                    0 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx C                                                50,000                                    x 00                                       xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 1 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Total                                           $200,000What is xxx portfolio’s beta?a x 938b x xxxx 1 xxxx 1 089e x 14323 Stewart xxx ’s xxxxxx xxx was xx 50, its xxxx value per xxxxx was xxx xxx it xxx 215,000 shares xxxxxxxxxxxx and its xxxx ratio xxx xxx How xxxx debt was xxxxxxxxxxxxx $3,393,738b $3,572,356c xxxxxxxxxxx $3,958,289e xxxxxxxxxxxx xxxxxx Corp xxxx sales last xxxx were $395,000, xxx its xxxxxxxx xxxxxxxxxxx were xxxxxxx Harper sells xx terms that xxxx for xxxxxxxxx xx pay xx days after xxx purchase, but xxxx delay xxxxxxx xxxxxx Day xx On average, xxx many days xxxx do xxxxxxxxx xxxx Base
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