FIN 571 Week 3 Quiz Questions

FIN 571 W

eek 3 Quiz Questions

1.

You are provided the following working capital information for the Ridge Company:

Ridge Company

Account

$

Inventory

$12,890

Accounts receivable

12,800

Accounts payable

12,670

Net sales

$124,589

Cost of goods sold

99,630

Operating cycle

: What is the operating cycle for Ridge Company?

2.

The operating cycle

3.

Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order

is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ

formula to calculate the optimal order size.

4.

The asset substitution problem occur

s when

5.

Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The

company is currently financed with 75 percent equity and 25 percent debt. Your analysis

tells you that the appropriate discount rates are 10 percent for the cash flows, a

nd 7

percent for the debt. You currently own 10 percent of the stock.

How much are your cash flows today?

6.

Melba's Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of

debt is 6%, and its cost of equity is 10%. The firm's marginal

corporate income tax rate is

35%. What is the appropriate WACC?

7.

According to the text, the financial plan covers a period of

8.

The financing plan of a firm will indicate

9.

Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of

$5

11,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders.

Find the firm's dividend payout ratio and retention ratio.

FIN 571 Week 3 Quiz Questions

1. You are provided the following working capital information for the Ridge Company:

Ridge Company

Account $

Inventory $12,890

Accounts receivable 12,800

Accounts payable 12,670

Net sales $124,589

Cost of goods sold 99,630

Operating cycle: What is the operating cycle for Ridge Company?

2. The operating cycle

3. Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order

is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ

formula to calculate the optimal order size.

4. The asset substitution problem occurs when

5. Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The

company is currently financed with 75 percent equity and 25 percent debt. Your analysis

tells you that the appropriate discount rates are 10 percent for the cash flows, and 7

percent for the debt. You currently own 10 percent of the stock.

How much are your cash flows today?

6. Melba's Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of

debt is 6%, and its cost of equity is 10%. The firm's marginal corporate income tax rate is

35%. What is the appropriate WACC?

7. According to the text, the financial plan covers a period of

8. The financing plan of a firm will indicate

9. Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of

$511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders.

Find the firm's dividend payout ratio and retention ratio.