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FIN 515 FINAL EXAM solved solution newly updated docs

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FIN 515 FINAL EXAM solved solution newly updated docs 1. TCO A) In the United States, which of the following types of organization has the greatest revenue in total? (Points : 5) 2. TCO A) A sole proprietorship is owned by (Points : 5) 3. TCO B) Which of the following would cause the present value of an annuity to increase? (Points : 5) 4. TCO B) Which of the following is an annuity due? (Points : 5) 5. TCO G) If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the three. (Points : 20) 6. TCO D) A stock has just paid a dividend and will pay a dividend of $3.00 in a year. The dividend will stay constant for the rest of time. The return on equity for similar stocks is 14%. What is P0? (Points : 20) A stock has just paid a dividend and will pay a dividend of $3.00 in a year, so Dividend for Year 0 and coming years will be $3 7. TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20) 8. (TCO D) A particular bond has 8 years to maturity. It has a face value of $1,000. It has a YTM of 7% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? (Points : 10) 9. (TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10) 10. (TCO D) What is β and why is it important to investors and issuers of stock? Describe the behavior of stocks with βs of greater than one, less than one, and less than zero. (Points : 30) 11. TCO E) A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30) 12. TCO A) What is the difference between capital structure and capital budgeting? Explain and give an example of a capital structure decision and an example of a capital budgeting decision. (Points : 25) 13. TCO H) What is the difference between the cash cycle and the operating cycle? Under what condition would they be the same? (Points : 30)

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