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FIN 370 Final Exam Guide

FIN 370 Final Exam Guide

Study Unit: FIN 370
University of Phoenix Final Exam Guide with Answers

TUTORIAL: Includes study guide with answers for final exam.

Sample exam questions:
1. In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost?

2. The true owners of the corporation are the

3. __________ refer to all institutions and procedures that facilitate transactions in long-term financial securities.

4. __________ is a method of offering securities to a limited number of investors.

5. When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored?

6. Which of the following would increase the need for external equity?

7. Money market instruments include

8. Difficulty in finding profitable projects is due to

9. Which of the following statements is true?

10. You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years?

11. Which of the following statements about the percent-of-sales method of financial forecasting is true?

12. A plant can remain operating when sales are depressed

13. How long will it take $750 to double at 8% compounded annually?

14. A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with

15. Your company is considering a project with the following cash flows: Initial outlay = $1,748.80 Cash flows Years 1–6 = $500. Compute the internal rate of return on the project.

16. You compute the profitability index of a capital-budgeting proposal by

17. Which of the following is considered to be a benefit of using the payback period as a method of capital budgeting?

18. ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for 5 years. Calculate the net present value of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

19. The net present value assumes cash flows are reinvested at the

20. Cost of capital is

21. The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%?

22. J & B, Inc., has $5 million of debt outstanding with a coupon rate of 12%. Currently, the yield to maturity on these bonds is 14%. If the firm’s tax rate is 40%, what is the cost of debt to J & B?

23. Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brothers’ present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in earnings per share at a debt ratio of 40% versus 20%?

24. A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n)

25. Assume that a firm purchases foreign currency to complete the purchase of raw material from an overseas supplier. The currency is purchased today at an exchange rate that is good only for today. This transaction is referred to as a(n) ___________ transaction.

26. The international currency system that presently exists is the _________ exchange rate currency system.

27. A multinational corporation exposes the firm to the least amount of political risk with the use of

28. A spot transaction occurs when one currency is

29. An important (additional) consideration for a direct foreign investment is