1. (TCO 8) Company insiders cannot earn excess profits based on the knowledge they have related to their employer if the financial markets are: (Points : 4)
2. (TCO 5) Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at a cost of 9 percent (after-tax) and common equity at a cost of 16 percent. Assume debt and common equity each represent 50 percent of the firm’s capital structure. What is the weighted average cost of capital? (Points : 4)
3. (TCO 5, 6 and 7) An issue of common stock is expected to pay a dividend of $4.80 at the end of the year. Its growth rate is equal to eight percent. If the required rate of return is 13 percent, what is its current price? (Points : 4)
4. (TCO 5, 6 and 7) Which of the following is true regarding the cost of debt? (Points : 4)

5. (TCO 5) Retained earnings has a cost associated with it because: (Points : 4)
6. (TCO 4) A project has the following cash flows. What is the internal rate of return?
7. (TCO 5, 6 and 7) Which one of the following is a correct statement? (Points : 4)

8. (TCO 5, 6 and 7) The six percent preferred stock of FKH Manufacturing is selling for $62 a share. What is the firm’s cost of preferred stock, if the tax rate is 34 percent and the par value per share is $100? (Points : 4)


15. The maximinzation of the current value per share a more appropriate financial management goal than the profit maximization?

14. (TCO 2) Delphinia’s has the following estimated quarterly sales for next year. The accounts receivable period is 30 days. What is the expected accounts receivable balance at the end of the second quarter? Assume each month has 30 days.
13. (TCO 2) Which one of the following credit terms is most apt to produce the shortest accounts receivable period?

12. (TCO 2) Which of the following statements is true? (Points : 4)

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