NOVA southern FIN5080 final exam spring 2015

1. ABC Company has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 9 years, and have a 9.5 percent coupon. The current price is quoted at 105 percent of par. What is the yield to maturity?

   Enter yur answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

1 points

QUESTION 2

1. ABC Company has the following projected sales:

   Month	Sales $
   April	28,660
   May	34,510
   June	13,703
   July	22,629

   
   ABC collects 56 percent of its sales in the month of sale, 22 percent in the month following the month of sale, and another 1 percent in the second month following the month of sale. The remainder is bad debts and is not collected. What is the amount of the July collections?

   Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

QUESTION 3

1. Suppose that today's stock price is $57.81. If the required rate on equity is 12.3% and the growth rate is 3.5%, compute the expected dividend (i.e. compute D1)

   Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

   
   

1 points

QUESTION 4

1. ABC Company has an average collection period of 37 days and factors all of its receivables immediately at a 1.4 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing?

   Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

   
   

1 points

QUESTION 5

1. The common stock of ABC Industries is valued at $82.2 a share. The company increases their dividend by 3.9 percent annually and expects their next dividend to be $2.59. What is the required rate of return on this stock?

   Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

   
   

1 points

QUESTION 6

1. ABC Corp. currently has an inventory turnover of 6, a payables turnover of 6.13, and a receivables turnover of 9.46. How many days are in the cash cycle?

   Enter your answer rounded off to two decimal points.

1 points

QUESTION 7

1. The terms of the sale were 1/11, net 37. What is the effective annual rate of interest?

   Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

1 points

QUESTION 8

1. ABC Inc. just paid its first annual dividend of $0.73 a share. The firm plans to increase the dividend by 5 percent per year indefinitely. What is the firm’s cost of equity if the current stock price is $38.56 a share?

   Enter your answer in percentages rounded off to two decimal points.

   
   

1 points

QUESTION 9

1. Annual demand 170,780 units

   Carrying costs $0.56 per unit

   Fixed Costs per order $6.7

   Number of orders 23

   What are the total costs?

   Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.

   
   

1 points

QUESTION 10

1. Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?

   Rights offer

   Initial public offering

   Private placement

   Firm commitment underwriting

   Best efforts underwriting

1 points

QUESTION 11

1. The principal amount of a bond that is repaid at the end of term is called the par value or the:

   back-end value

   perpetuity value

   call premium

   coupon value

   face value

1 points

QUESTION 12

1. A company sells 157,441 units per year. Fixed costs per order are $125 and carrying cost is $28 per unit per year. If management uses an EOQ model, how many orders will it place per year?

   Enter your answer rounded off to two decimal points.

1 points

QUESTION 13

1. The ABC Co. has $1,000 face value stock outstanding with a market price of $1,051.6. The stock pays interest annually, matures in 6 years, and has a yield to maturity of 7.6 percent. What is the annual dollar coupon amount?

   Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.
   

1 points

QUESTION 14

1. ABC’s last dividend paid was $7.68, its required return is 21%, its growth rate is 6%. What is ABC's expected stock price in 11 years?

   Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

   
   

1 points

QUESTION 15

1. ABC Company writes 215 checks a day for an average amount of $609 each. These checks generally clear the bank in 2 days. In addition, the firm generally receives an average of $119,875 a day in checks that are deposited immediately. Deposited funds are available in 1 days. What is the firm's net float?

   Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

   
   

1 points

QUESTION 16

1. The spot rate for the pound is £0.64 = $1 and the spot rate for the Canadian dollar is C$1.2219 = $1. What is the £/C$ cross rate?

   Enter your answer rounded off to FOUR decimal points. Do not enter any currency sign in the answer box.

1 points

QUESTION 17

1. ABC Company's last dividend was $2.1. The dividend growth rate is expected to be constant at 9% for 3 years, after which dividends are expected to grow at a rate of 3% forever. The firm's required return (r_s) is 10%. What is its current stock price (i.e. solve for Po)?

   Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

   
   

1 points

QUESTION 18

1. Suppose the exchange rate is $1.2505 per euro. If the dollar depreciates by 21% against the dollar, how many euros would a dollar buy tomorrow?

   Enter your answer rounded off to FOUR decimal points. Do not enter any currency unit in the answer box.

   
   

1 points

QUESTION 19

1. A bond that sells for less than face value is called as:
   

   perpetuity

   debenture

   par value bond

   discount bond

   premium bond

1 points

QUESTION 20

1. A company sells 139,413 units per year. Fixed costs per order are $105 and carrying cost is $21 per unit per year. What is the Economic Order Quantity?
   

   Enter your answer rounded off to two decimal points.

1 points

QUESTION 21

1. ABC’s next dividend is expected to be $2.02, its required return is 21%, its growth rate is 6%. What is ABC's expected stock price in 7 years?

   Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

   
   

1 points

QUESTION 22

1. ABC’s credit terms are 1/7, net 39. Based on experience, 62 percent of all customers take the discount. ABC has annual credit sales of $195,305. What is the average investment in accounts receivable as shown on the balance sheet?

   Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.

   
   

1 points

QUESTION 23

1. If the coupon rate is less than the yield to maturity, the bond will:

   sell at par

   sell at a premium

   sell at a discount

1 points

QUESTION 24

1. ABC, Inc. has bonds outstanding that mature in 13 years. The annual coupon rate is 6%. The bonds pay interest annually and have a face value of $1,000. Currently, the bonds are selling for $940. What is the yield to maturity?

   Enter your answer as a percentage rounded off to TWO decimal points.

   
   

1 points

QUESTION 25

1. Identify which of the following will increase the operating cycle. Choose only one.

   decrease in inventory period

   increase in cash cycle

   decrease in accounts payable period

   decrease in accounts receivable turnover ratio

   increase in accounts payable turnover ratio