BUSN 379 WEEK 8 FINAL EXAM

BUSN 379 WEEK 8 FINAL EXAM
Question 1.1. (TCO 1) ) Likeline, Inc., has sales of $445,000, costs of $173,000, depreciation expense of $72,000, interest expense of $36,000, and a tax rate of 35 percent. What is their net income? (Points : 20)
      
       


Question 2.2. (TCO 1) Handler, Inc., has sales of $19,430, costs of $9,460, depreciation expense of $2,230, and interest expense of $1,620. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
(Points : 20)
      
       


Question 3.3. (TCOs 2 and 3) App Co. issued 15-year, $1,000 bonds at a coupon rate of 6 percent. The bonds make annual payments. If the YTM on these bonds is 5 percent, what is the current bond price? (Points : 20)
      
       


Question 4.4. (TCO 3) Sixteenth Bank has an issue of 6% preferred stock with a $100.00 par value that just sold for $89 per share. What is the bank- cost of preferred stock? (Show your work and round your answer to two decimal places. (Points : 20)
      
       


Question 5.5. (TCOs 3 and 5) You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? (Show your work.) (Points : 20)
      
       


Question 6.6. (TCO 3)  A stock has a beta of 0.75, the expected return on the market is 12 percent, and the risk-free rate is 3 percent. What must the expected return on this stock be? (Show your work.) (Points : 20)
      
       


Question 7.7. (TCO 4) Suppose Tom, Ltd. just issued a dividend of $2.00 per share on its common stock. The company- dividends have been growing at a rate of 7%. If the stock currently sells for $50.00, what is your best estimate of the company- cost of equity? (Show your work.) (Points : 20)
      
       


Question 8.8. (TCO 4) Given the following information, calculate the weighted average cost for the Han Corp.  
Percent of capital structure:
Preferred stock                                                      10%
Common equity                                                     60%
Debt                                                                      30%
 
Additional information:
Corporate tax rate                                                  34%
Dividend, preferred                                                $9.00
Dividend, expected common                                  $3.50
Price, preferred                                                      $102.00
Growth rate                                                            6%
Bond yield                                                                10%
Flotation cost, preferred                                           $3.20
Price, common                                                         $70.00 (Points : 40)
      
       


Question 9.9. (TCO 7) What are some important factors to consider when conducting a credit evaluation and scoring? (Points : 20)
      
       


Question 10.10. (TCO 1) Provide three examples of situations in which business ethics play a role in the financial management process. Explain your rationale, and how these situations may affect the value of the firm. (Points : 20)
      
       


Question 11.11. (TCO 6) What are the factors that make up the capital asset pricing model? Where would you typically find the data for these factors? (Points : 20)