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<strong>FIN</strong> <strong>571</strong> <strong>Complete</strong> <strong>Week</strong> 5 <strong>NEW</strong><br />
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<strong>NEW</strong>/<strong>FIN</strong>-<strong>571</strong>-<strong>Complete</strong>-<strong>Week</strong>-5-<strong>NEW</strong><br />
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<strong>FIN</strong> <strong>571</strong> <strong>Complete</strong> <strong>Week</strong> 5 <strong>NEW</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 DQ 1 <strong>NEW</strong><br />
A postaudit review enables managers to determine whether a project's goals were met and to quantify the<br />
actual benefits or costs of the project.<br />
What are some other benefits of a post audit and ongoing reviews of capital projects?<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 DQ 2 <strong>NEW</strong><br />
Discuss why capital budgeting decisions are the most important investment decisions made by a firm's<br />
management.<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 DQ 3 <strong>NEW</strong><br />
The text discusses general rules for estimating incremental after-tax free cash flows. One rule is to include<br />
cash flows and only cash flows in your calculations. In other words, do not include allocated costs or<br />
overhead unless they reflect cash flows.<br />
What are some other rules to ensure the proper estimation of after-tax cash flows?<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 DQ 4 <strong>NEW</strong>
Describe how distinguishing between variable and fixed costs can be useful in forecasting operating<br />
expenses.<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 Learning Team Reflection <strong>NEW</strong><br />
Watch the "Concept Review Video: Cost of Capital" video located in the WileyPLUS Assignment: <strong>Week</strong> 5<br />
Videos Activity.<br />
Discuss some of the corporate finance challenges faced by this company.<br />
Write a 350-700 word summary of your discussion.<br />
Click the Assignment Files tab to submit your assignment.<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 WileyPLUS Assignment <strong>NEW</strong><br />
<strong>Complete</strong> the following in WileyPLUS:<br />
•Problem 5.17<br />
•Problem 5.21<br />
•Problem 6.19<br />
•Problem 6.27<br />
•Problem 7.16<br />
•Problem 8.24<br />
•Problem 9.15<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 WileyPLUS Practice Quiz <strong>NEW</strong><br />
Multiple Choice Question 55<br />
Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he<br />
can sell the property at the end of the year for $150,000 and that the property will provide him with rental<br />
income of $25,000. What is the maximum amount that Genaro should be willing to pay for the property?<br />
$137,500<br />
$125,000<br />
$112,500
$150,000<br />
Multiple Choice Question 54<br />
The process of identifying the bundle of projects that creates the greatest total value and allocating the<br />
available capital to the projects is known as<br />
risk analysis.<br />
rationing.<br />
capital rationing.<br />
budgeting.<br />
Multiple Choice Question 78<br />
Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it<br />
will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the<br />
project is 10 percent, what is the profitability index of the project?<br />
2.09<br />
0.09<br />
1.09<br />
2.18<br />
Multiple Choice Question 89<br />
What might cause a firm to face capital rationing?<br />
If a firm rejects some capital investments that are expected to generate positive NPV’s.<br />
If investors require returns for their capital that are too high.<br />
If a firm has more than one project with a positive NPV.<br />
If a firm has several projects that are expected to generate negative IRR’s.<br />
Multiple Choice Question 59
How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is<br />
financed with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the<br />
cost of equity for the firm?<br />
19.75%<br />
32.50%<br />
24.00%<br />
58.00%<br />
Multiple Choice Question 61<br />
The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are<br />
priced at $920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?<br />
4.5%<br />
9.0%<br />
7.0%<br />
9.2%<br />
Multiple Choice Question 63<br />
The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are<br />
currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of<br />
debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street<br />
8.125%<br />
12.890%<br />
6.250%<br />
12.500%<br />
Multiple Choice Question 67<br />
The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate<br />
of return is 10 percent and the expected return on the market is 18 percent, then what is the firm's beta if the<br />
firm's marginal tax rate is 35 percent?<br />
4.10
1.0<br />
1.28<br />
1.60<br />
Multiple Choice Question 83<br />
Which type of project do financial managers typically use the highest cost of capital when evaluating?<br />
New product projects<br />
Efficiency projects<br />
Market expansion projects<br />
Extension projects
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