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<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 <strong>WileyPLUS</strong> <strong>Practice</strong> <strong>Quiz</strong> <strong>NEW</strong><br />
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<strong>NEW</strong>/<strong>FIN</strong>-<strong>571</strong>-<strong>Week</strong>-3-<strong>WileyPLUS</strong>-<strong>Practice</strong>-<strong>Quiz</strong>-<strong>NEW</strong><br />
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<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 <strong>WileyPLUS</strong> <strong>Practice</strong> <strong>Quiz</strong> <strong>NEW</strong><br />
Multiple Choice Question 32<br />
The operating cycle<br />
ends not with the finished goods being sold to customers and the cash collected on the sales; but when you<br />
take into account the time taken by the firm to pay for its purchases.<br />
To measure operating cycle we need another measure called the days' payables outstanding.<br />
begins when the firm receives the raw materials it purchased that would be used to produce the goods that<br />
the firm manufactures.<br />
begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash<br />
payments on its credit sales.<br />
Multiple Choice Question 57<br />
You are provided the following working capital information for the Ridge Company:<br />
Ridge Company<br />
Account $
Inventory $12,890<br />
Accounts receivable 12,800<br />
Accounts payable 12,670<br />
Net sales $124,589<br />
Cost of goods sold 99,630<br />
Operating cycle: What is the operating cycle for Ridge Company?<br />
51 days<br />
47 days<br />
85 days<br />
36 days<br />
Multiple Choice Question 80<br />
Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs<br />
$85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size.<br />
26,154 clocks<br />
24 clocks<br />
15,294 clocks<br />
161 clocks<br />
Multiple Choice Question 49<br />
The asset substitution problem occurs when<br />
managers substitute less risky assets for riskier ones to the detriment of equity holders.
managers substitute riskier assets for less risky ones to the detriment of bondholders.<br />
managers substitute less risky assets for riskier ones to the detriment of bondholders.<br />
managers substitute riskier assets for less risky ones to the detriment of equity holders.<br />
Multiple Choice Question 53<br />
M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The<br />
company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the<br />
appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10<br />
percent of the stock.<br />
How much are your cash flows today?<br />
$4.50<br />
$12.38<br />
$150<br />
$15<br />
Multiple Choice Question 62<br />
M&M Proposition 2: Melba's Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of<br />
debt is 6%, and its cost of equity is 10%. The firm's marginal corporate income tax rate is 35%. What is the<br />
appropriate WACC?<br />
6.35%<br />
7.44%<br />
8.80%<br />
8.17%<br />
Multiple Choice Question 39<br />
According to the text, the financial plan covers a period of<br />
ten years.<br />
none of these.<br />
one year.
three to five years.<br />
Multiple Choice Question 45<br />
The financing plan of a firm will indicate<br />
the firm's dividend policy, the desired capital structure for the firm, and the firm's working capital policy.<br />
the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the<br />
desired capital structure for the firm, and the firm's dividend policy.<br />
the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the<br />
desired capital structure for the firm, and the firm's working capital policy.<br />
the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the<br />
firm's dividend policy, and the firm's working capital policy.<br />
Multiple Choice Question 74<br />
Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest<br />
payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the<br />
firm's dividend payout ratio and retention ratio.<br />
25%, 75%<br />
66%, 34%<br />
34%, 66%<br />
69%, 31%