STR581 STR/581 Capstone Final Examination, Part 2 -(37/39) - 57093

Solution Posted by
neo_e2e4

neo_e2e4

Rating : (6)C
Solution Detail
Price: $18.00
  • From: Business,
  • Posted on: Wed 09 Apr, 2014
  • Request id: None
  • Purchased: 3 time(s)
  • Average Rating: No rating
Request Description

1. 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 equity to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they use?

2. An unrealistic budget is more likely to result when it:

3. 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.

4. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006.  It also has current liabilities of $1,041,012, common equity of $1,500,000 and retained earnings of $1,468,347. How much long-term debt does the firm have?

5. The most important information needed to determine if companies can pay their current obligations is the:

6. Next year Jenkins Traders will pay a dividend of $3.00.  It expects to increase its dividend by $0.25 in each of the following three years.  If their required rate of return if 14 percent, what is the present value of their dividends over the next four years?

7. Internal reports that review the actual impact of decisions are prepared by:

8. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?

9. Which of the following presents a summary of changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?

10. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28.  Serox pays a $1.10 dividend per year.  What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

11. The group of users of accounting information charged with achieving the goals of the business is its:

12. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called: 

13. 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?

14. When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using:

15.Ajax Corp. is expecting the following cash flows - $79,000, $112,000, $164,000, $84,000, and $242,000 – over the next five years.  If the company’s opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

.

.

.

.

.

Solution Description

1. 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 equity to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they use?

2. An unrealistic budget is more likely to result when it:

3. Turnbull Corp. had an EBIT of $247 million in the last fiscal year.  Its depreciation and a

Attachments
STR-581Capstone Final Examination, Part 2.docx
STR-581Capstone...