Final Exam Managerial Finance Devry University

1. (TCO A) Which of the following statements is false? (Points : 5)

Question 3.

a. $41.58
b. $42.64
c. $43.71
d. $44.80
e. $45.92

4. (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in January, $35,000 in February, and $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, which are the expected cash receipts for March?

a. $24,057
b. $26,730
c. $29,700
d. $33,000
e. $36,300

(Points : 20)

5. (TCO G)

Consider the information for the following four firms.

Firm	Cash	Debt	Equity	rD	rE	τc
Eenie	0	150	150	5%	10%	40%
Meenie	0	250	750	6%	12%	35%
Minie	25	175	325	6%	11%	35%
Moe	50	350	150	7.50%	15%	30%

Which is the weighted average cost of capital for Meenie closest to?

A) 10.5%

B) 7.4%

C) 10.0%

D) 8.8%

(Points : 30)

1. (TCO H) Desai Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?

Annual sales =
Annual cost of goods sold =
Inventory =
Accounts receivable =
Accounts payable =

$45,000
$30,000
$4,500
$1,800
$2,500

a. 28 days
b. 32 days
c. 35 days
d. 39 days
e. 43 days (Points : 30)

2. (TCO C) A firm buys on terms of 2/8, net 45 days, it does not take discounts, and it actually pays after 58 days. What is the effective annual percentage cost of its nonfree trade credit? (Use a 365-day year.)

a. 14.34%
b. 15.10%
c. 15.89%
d. 16.69%
e. 17.52%

(Points : 30)

3. (TCO E)

Division	Asset Beta	Next Period's Expected Free Cash Flow ($mm)	Expected Growth Rate
Oil Exploration	1.4	450	4.0%
Oil Refining	1.1	525	2.5%
Gas and Convenience Stores	0.8	600	3.0%

The risk-free rate of interest is 3% and the market risk premium is 5%.

Which is the cost of capital for the oil refining division closest to?

A) 6.5%

B) 7.0%

C) 8.5%

D) 10.0%

(Points : 30)

You expect CCM Corporation to generate the following free cash flows over the next 5 years.

Year	1	2	3	4	5
FCF ($ millions)	25	28	32	37	40

If CCM has $200 million of debt and 8 million shares of stock outstanding, then which is the share price for CCM closest to?

A) $49.50

B) $12.50

C) $19.35

D) $24.50

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5. (TCO D)

Which is the standard deviation of the returns on Stock A from 2000 to 2009 closest to?

Year End	Stock A Realized Return	(R - R)	(R - R)2
2000	46.3%	29.85%	0.0891023
2001	26.7%	10.25%	0.0105063
2002	86.9%	70.45%	0.4963203
2003	23.1%	6.65%	0.0044223
2004	0.2%	-16.25%	0.0264063
2005	-3.2%	-19.65%	0.0386123
2006	-27.0%	-43.45%	0.1887903
2007	27.9%	11.45%	0.0131103
2008	-5.1%	-21.55%	0.0464403
2009	-11.3%	-27.75%	0.0770063

A) 33.2%

B) 16.4%

C) 31.5%

D) 11.0%

(Points : 35)

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