About QuickHelper

Levels Tought:
Elementary,High School,College,University,PHD

Expertise:

Accounting,Applied Sciences See all

Accounting,Applied Sciences,Business & Finance,Chemistry,Engineering,Health & Medical Hide all

Teaching Since:	May 2017
Last Sign in:	356 Weeks Ago, 5 Days Ago
Questions Answered:	20103
Tutorials Posted:	20155

Education

MBA, PHD
Phoniex
Jul-2007 - Jun-2012

Experience

Corportae Manager
ChevronTexaco Corporation
Feb-2009 - Nov-2016

Category > Accounting Posted 31 May 2017 My Price 15.00

multiple choice question

Mark the correct answers only need 100%

Question 1 (3 points)

A firm has assets valued at $950M, liabilities properly valued at $760M. What is the maximum percentage drop in asset prices a firm can withstand before becoming insolvent?

Question 1 options:

	20.0%
	80.0%
	25.0%
	44.4%

Question 2 (3 points)

Which of the following is not true of WACC?

	a.) WACC costs are not always shown on the financial statements
	b.) The optimal WACC maximizes firm value
	c.) Higher tax rates increase WACC
	d.) Firms attempt to earn returns on capital greater than WACC

Question 3 (3 points)

Which statement is incorrect regarding illiquidity and/or insolvency?

	a. The further a company is from being insolvent, the better able it is to handle declines in asset values
	b. Different industries have different norms regarding liquidity and leverage
	c. Bankruptcy occurs when you are deemed illiquid or insolvent
	d. Illiquidity can cause a solvent company to become insolvent

Question 4 (3 points)

In which scenario should a company be most inclined to issue additional debt?

	a. The company has many investment opportunities, little debt, and an undervalued stock price
	b. Interest rates have tripled in the last 3 months to a 20-year high
	c. The company is illiquid with an overvalued stock price and high leverage
	d. The company’s stock price has just doubled as they completed a 2-1 stock split

Question 5 (3 points)

Assume a business can receive a guaranteed annual payment of $5M forever. If the appropriate discount rate 10.0%, how much should the business be willing to pay today for these future payments (hint: is this an annuity, annuity due, or perpetuity)?

	a. $25.0M
	b. $100.0M
	c. $10.0M
	d. $50.0M

Question 6 (3 points)

If you were using the Gordon Growth Model to value a company, which of the following variables would not help you value the company?

	a. Dividend Growth Rate
	b. Debt/Equity Ratio and ROE
	c. Next Year’s Net Income and Retention Rate
	d. Required Return on the Stock

Question 7 (3 points)

Cash Conversion Cycle is influenced by how well a company does the following:

	a. Marks up the price it charges customers from the price it pays suppliers
	b. Rolls over its short-term debt to stay liquid
	c. Converts inventory into sales into cash
	d. Gets paid in cash on its stock investments

Question 8 (3 points)

Which of the following is a key assumption of the Internal Growth Rate?

	a. Return on assets changes with leverage
	b. The company’s retention rate is constant over time
	c. The company’s net income is constant over time
	d. The company’s leverage is constant over time

Question 9 (3 points)

Which of the following cannot be found if you know a company’s most recent year’s dividend, retention rate, dividend growth rate and stock price?

	a. Dividend yield
	b. Sustainable growth rate
	c. Dividend paid two years from now
	Required return on the stock

Question 10 (3 points)

A company’s bond is most likely said to be trading at a discount in which scenario?

	a. The bond is overvalued
	b. The bond is undervalued
	c. The bond’s yield to maturity is lower than its coupon rate
	d. The bond’s yield to maturity is higher than its coupon rate

Question 11 (3 points)

Which of the following is a benefit of the Sharpe ratio?

	a. The Sharpe ratio enables a comparison of investments of different risk levels
	b. The Sharpe ratio tells you the return an investment will earn
	c. The Sharpe ratio tells you how efficient the market is
	d. The Sharpe ratio is a way of hedging different risks

Question 12 (6 points)

Calculate the Days Payables Outstanding in 2014 for a company with the following financial measures:

YE 2012 Accounts Payable = $375M

YE 2013 AP = $385M YE 2014 AP = $345M

2013 Sales = $1.3B

2013 Gross Margin % = 60.0%

2014 Sales = $1.6B 2014 GM % = 55%

	a. 185 days
	b. 175 days
	c. 215 days
	d. 150 days

Question 13 (3 points)

Which describes the results of a company with the following ratios regarding its Cash Conversion Cycle?

2014 DIO = 15 2014 DSO = 19

2014 DPO = 27 2015 DIO = 15

2015 = 22 2015 DPO = 27

	a. The company increased its CCC by 3 days because it sold its inventory more quickly
	b. The company increased its CCC by 3 days because it held its inventory longer
	c. The company increased its CCC by 3 days because it collected its receivables more quickly
	d. The company increased its CCC by 3 days because it took longer to collect its receivables

Question 14 (3 points)

Which of the following describes a common feature of ordinary annuities and annuities due?

	a. Cash flows occur at the same dates
	b. Constant payments are made indefinitely
	c. The amount paid for given payments over time implies a rate of interest
	d. The value of the remaining cash flows remains constant over time

Question 15 (6 points)

Calculate the sustainable AND internal growth rate for a company with the following financial information. Assume all ratios are constant.

2014 Company Data

Sales = $200M

Average Assets = $270M

Dividends Paid = $15M Net Income = $20M

Average Equity = $220M

	a. SGR = 1.9% and IGR = 2.3%
	b. SGR = 5.9% and IGR = 7.3%
	c. SGR = 7.3% and IGR = 5.9%
	d. SGR = 2.3% and IGR = 1.9%

Question 16 (6 points)

Calculate the value of the following bond that was just issued, rounded to the nearest dollar (no payments made yet):

A 30-year bond has an 6% coupon rate, with payments made semi-annually and a par value of $1,000. Similar bonds have a YTM of 8%.

	a. $1,000
	b. $1,277
	c. $900
	d. $774

Question 17 (6 points)

Calculate the Cost of Common Equity for a company with the following data and estimates:

Today’s stock price: $73.00

Constant Retention Rate = 40%

Estimated T+1 Earnings = $5.00/share

Estimated Earnings Growth Rate = 8%

	a. 13.0%
	b. 12.1%
	c. 10.7%
	d. 14.8%

Question 18 (6 points)

A money manager requires all stocks in his or her portfolio to have, at worst, a Sharpe Ratio of 2.0. Currently, the market risk premium is estimated to be 6.5%. If a stock has a standard deviation of 7% and a Beta of 1.25, will it meet this criteria? (Hint: will require algebra to combine the Sharpe Ratio formula and the CAPM formula)

	a. This stock meets the criteria because the Sharpe Ratio is greater than 2.0
	b. This stock doesn’t meet the criteria because the Sharpe Ratio is less than 2.0
	c. This stock meets the criteria because the Sharpe Ratio is less than 2.0
	d. This stock doesn’t meet the criteria because the Sharpe Ratio is greater than 2.0

Question 19 (6 points)

Calculate the WACC of the company with the characteristics below:

Common Equity: $125M in common equity trading at $15/share with most recent year’s dividend of $0.75/share and a dividend growth rate of 10% per year

Preferred Equity: $25M in preferred equity trading at $25/share with a constant $2.75/share dividend

Debt: $100M in bonds with a YTM and coupon rate of 7.5%

Marginal Tax Rate = 25%

Risk-Free Rate = 3%

Market Risk Premium = 7%

	a. 10.9%
	b. 11.1%
	c. 10.5%
	d. 9.6%

Question 20 (3 points

Which of the following is a true statement about diversification?

	a. The more correlated the stocks in your portfolio are, the less diversified you are
	b. The diversification benefits of adding a stock to your portfolio are the same if you own 2 stocks or 100 stocks
	c. The more correlated the stocks in your portfolio are, the more diversified you are
	d. Diversification allows you to eliminate all risks when investing in stocks

Answers

QuickHelper

(10)

Status NEW Posted 31 May 2017 03:05 PM My Price 15.00

Hel-----------lo -----------Sir-----------/Ma-----------dam----------- T-----------han-----------k Y-----------ou -----------for----------- us-----------ing----------- ou-----------r w-----------ebs-----------ite----------- an-----------d a-----------cqu-----------isi-----------tio-----------n o-----------f m-----------y p-----------ost-----------ed -----------sol-----------uti-----------on.----------- Pl-----------eas-----------e p-----------ing----------- me----------- on----------- ch-----------at -----------I a-----------m o-----------nli-----------ne -----------or -----------inb-----------ox -----------me -----------a m-----------ess-----------age----------- I -----------wil-----------l

Not Rated(0)

Buy Answer

Relevent Questions

Hire Dedicated Virtual Team / Business Solution for SMEs.