FIN 571 Connect Problems

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FIN 571 Week 1 Connect Problems
1. A business owned by a single individual is called a:

corporation.

sole proprietorship.

general partnership.

limited partnership.

limited liability company.

1 The decisions made by nancial managers should all be ones which

increase the:

size of the rm.

growth rate of the rm.

marketability of the managers.

market value of the existing owners' equity.

rms current sales.

1 The primary goal of nancial management is to:

maximize current dividends per share of the existing stock.

maximize the current value per share of the existing stock.

avoid nancial distress.

minimize operational costs and maximize rm eciency.

maintain steady growth in both sales and net earnings.

1 Accounting concepts for a rm to create value it must:

have a greater cash inow from its stockholders than its outow to them.

create more cash ow than it uses.

reduce its investment in xed assets since xed assets require the use of
cash.

avoid payments to the government so dividends can be increased.

avoid the issuance of debt securities.

1 The primary goal of nancial management is to:

maximize current dividends per share of the existing stock.

maximize the current value per share of the existing stock.

avoid nancial distress.

minimize operational costs and maximize rm eciency.

maintain steady growth in both sales and net earnings.

1 Which one of the following business types is best suited to raising large
amounts of capital?

sole proprietorship

limited liability company

corporation

general partnership

limited partnership

Read More: FIN 571 Week 1 Connect Problems

FIN 571 Week 2 Connect Problems

1. Sankey, Inc., has current assets of $5,000, net fixed assets of $23,000,
current liabilities of $3,500, and long-term debt of $7,900. (Do not round
intermediate calculations.)
What is the value of the shareholders' equity account for this firm?
Shareholders' equity

$_________

How much is net working capital?

Net working capital

$_________

1 Which one of these accounts is classied as a current asset on the balance

sheet?

intangible asset

accounts payable

preferred stock

inventory

net plant and equipment

1 It is easier to evaluate a rm using its nancial statements when the rm:

is a conglomerate.

is global in nature.

uses the same accounting procedures as other rms in its industry.

has a different scal year than other rms in its industry.

tends to have one-time events such as asset sales and property

acquisitions.

1 The cash ow resulting from a rm's ongoing, normal business activities is

referred to as the:

operating cash ow.

net capital spending.

additions to net working capital.

cash ow to retained earnings.

cash ow to investors.

1 Which one of these is a non-cash item?

depreciation

interest expense

current taxes

dividends

selling expenses

1 Sankey, Inc., has current assets of $5,000, net fixed assets of $23,300,
current liabilities of $4,450, and long-term debt of $11,000. (Do not round
intermediate calculations.)
What is the value of the shareholders' equity account for this firm?
Shareholders' equity

$_________

How much is net working capital?

Net working capital

$_________

Read More: FIN 571 Week 2 Connect Problems

FIN 571 Week 3 Connect Problems

1. If the Hunter Corp. has an ROE of 13 and a payout ratio of 30 percent, what
is its sustainable growth rate? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Sustainable growth rate

____%

1 The most recent financial statements for Williamson, Inc., are shown here
(assuming no income taxes):
Income Statement

Balance Sheet

Sales

$ 6,700

Costs
Equity 14,000

3,850

Net income

$ 2,850

Assets

Total

$22,050 Debt

$22,050 Total

$ 8,050

$22,050

Assets and costs are proportional to sales. Debt and equity are not. No dividends
are paid. Next years sales are projected to be $7,906.
What is the external financing needed? (Do not round intermediate calculations
and round your answer to the nearest whole number, e.g., 32.)
External financing needed

$_____

1 Projected future nancial statements are called:

plug statements.

pro forma statements.

reconciled statements.

aggregated statements.

comparative statements.

1 One of the primary weaknesses of many nancial planning models is that

they:

rely too much on nancial relationships and too little on accounting

relationships.

are iterative in nature.

ignore the goals and objectives of senior management.

ignore cash payouts to stockholders.

ignore the size, risk, and timing of cash ows.

1 The maximum rate at which a rm can grow while maintaining a constant

debt-equity ratio is best dened by its:

rate of return on assets.

internal rate of growth.

average historical rate of growth.

rate of return on equity.

sustainable rate of growth.

1 The external funds needed (EFN) equation projects the addition to retained
earnings as:

PM ? Sales.

PM ? Sales (1 - d).

PM Projected sales (1 - d).

Projected sales (1 - d).

PM Projected sales.

Read More: FIN 571 Week 3 Connect Problems

FIN 571 Week 4 Connect Problems

1. Microhard has issued a bond with the following characteristics:
Par: $1,000
Time to maturity: 11 years
Coupon rate: 9 percent

Semiannual payments
Calculate the price of this bond if the YTM is (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.):
Price of the Bond
a. 9 percent

$ _____

b. 11 percent

$_____

c. 7 percent

$ _____

1 Watters Umbrella Corp. issued 20-year bonds 2 years ago at a coupon rate
of 8.4 percent. The bonds make semiannual payments. If these bonds
currently sell for 90 percent of par value, what is the YTM? (Do not round
intermediate calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
YTM

_____ %

1 Grand Adventure Properties offers a 7 percent coupon bond with annual

payments. The yield to maturity is 5.85 percent and the maturity date is 8
years from today. What is the market price of this bond if the face value is
$1,000?

$1,071.84

$788.73

$1,082.17

$1,019.29

$947.45

1 The next dividend payment by ECY, Inc., will be $1.64 per share. The
dividends are anticipated to maintain a growth rate of 8 percent, forever.
The stock currently sells for $31 per share.
What is the required return? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return

_____ %

1 The Starr Co. just paid a dividend of $1.55 per share on its stock. The
dividends are expected to grow at a constant rate of 6 percent per year,
indefinitely. Investors require a return of 14 percent on the stock.
a. What is the current price? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Current price

$ _____

a What will the price be in three years? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)
Stock price

$ _____

a What will the price be in 7 years? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
Stock price

$ _____

1 The next dividend payment by ECY, Inc., will be $1.64 per share. The
dividends are anticipated to maintain a growth rate of 8 percent, forever.
The stock currently sells for $31 per share.
a. What is the dividend yield? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Dividend yield

_____%

a What is the expected capital gains yield? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
Capital gains yield

______ %

Read More: FIN 571 Week 4 Connect Problems

FIN 571 Week 5 Connect Problems

1. The difference between the present value of an investment?s future cash
ows and its initial cost is the:

net present value.

internal rate of return.

payback period.

protability index.

discounted payback period.

1 Which statement concerning the net present value (NPV) of an investment

or a nancing project is correct?

A nancing project should be accepted if, and only if, the NPV is exactly
equal to zero.

An investment project should be accepted only if the NPV is equal to the

initial cash ow.

Any type of project should be accepted if the NPV is positive and rejected if
it is negative.

Any type of project with greater total cash inows than total cash outows,
should always be accepted.

An investment project that has positive cash ows for every time period
after the initial investment should be accepted.

1 The primary reason that company projects with positive net present values
are considered acceptable is that:

they create value for the owners of the rm.

the project's rate of return exceeds the rate of ination.

they return the initial cash outlay within three years or less.

the required cash inows exceed the actual cash inows.

the investment's cost exceeds the present value of the cash inows.

1 Accepting a positive net present value (NPV) project:

indicates the project will pay back within the required period of time.

means the present value of the expected cash ows is equal to the
projects cost.

ignores the inherent risks within the project.

guarantees all cash ow assumptions will be realized.

is expected to increase the stockholders value by the amount of the NPV.

1 The net present value method of capital budgeting analysis does all of the
following except:

incorporate risk into the analysis.

consider all relevant cash ow information.

use all of a project's cash ows.

discount all future cash ows.

provide a specic anticipated rate of return.

Read More: FIN 571 Week 5 Connect Problems

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