20. A firm's capital structure is the mix of financial securities used to finance its activities and can include all of the following except
stock.
bonds.
equity options.
preferred stock.
21.M&M Proposition 1: 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.
If Dynamo wishes to change its capital structure from 75 percent to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they issue?
$321
$375
$225
$600
22. Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.
$1,334 million
$1,787 million
$453.6 million
$1,315 million
23. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?
25.1%
32.9%
27.3%
30.3%
24. Which of the following cannot be engaged in managing the business?
none of these
a sole proprietor
a general partner
a limited partner
25. Which of the following does maximizing shareholder wealth not usually account for?
Amount of Cash flows.
Risk.
The timing of cash flows.
Government regulation
26. The strategic plan does NOT identify
future mergers, alliances, and divestitures.
working capital strategies.
the lines of business a firm will compete in.
major areas of investment in real assets.
27. Firms that achieve higher growth rates without seeking external financing
have a low plowback ratio.
have less equity and/or are able to generate high net income leading to a high ROE.
none of these.
are highly leveraged.
29. Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders. Find the firm's dividend payout ratio and retention ratio.
15%, 85%
55%, 45%
45%, 55%
85%, 15%
30. The cash conversion cycle
shows how long the firm keeps its inventory before selling it.
begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures
begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.
estimates how long it takes on average for the firm to collect its outstanding accounts receivable balance.
password: shiv
stock.
bonds.
equity options.
preferred stock.
21.M&M Proposition 1: 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.
If Dynamo wishes to change its capital structure from 75 percent to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they issue?
$321
$375
$225
$600
22. Multiple Analysis: Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.
$1,334 million
$1,787 million
$453.6 million
$1,315 million
23. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?
25.1%
32.9%
27.3%
30.3%
24. Which of the following cannot be engaged in managing the business?
none of these
a sole proprietor
a general partner
a limited partner
25. Which of the following does maximizing shareholder wealth not usually account for?
Amount of Cash flows.
Risk.
The timing of cash flows.
Government regulation
26. The strategic plan does NOT identify
future mergers, alliances, and divestitures.
working capital strategies.
the lines of business a firm will compete in.
major areas of investment in real assets.
27. Firms that achieve higher growth rates without seeking external financing
have a low plowback ratio.
have less equity and/or are able to generate high net income leading to a high ROE.
none of these.
are highly leveraged.
29. Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders. Find the firm's dividend payout ratio and retention ratio.
15%, 85%
55%, 45%
45%, 55%
85%, 15%
30. The cash conversion cycle
shows how long the firm keeps its inventory before selling it.
begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures
begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.
estimates how long it takes on average for the firm to collect its outstanding accounts receivable balance.
password: shiv
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