FIN 534 Final Part 2 (SUMMER 2016)

FIN 534 Final Part 2 (SUMMER 2016)
BUY HERE⬊
http://www.homeworkmade.com/fin-
534-final-part-2-summer-2016/
FIN 534 Final Part 2 (SUMMER 2016)
1. Which of the following is NOT normally regarded as being a good reason to establish an ESOP?
2. Which of the following is NOT normally regarded as being a barrier to hostile takeovers?
3. Consider two very different firms, M and N. Firm M is a mature firm in a mature industry. Its annual net
income and net cash flows are both consistently high and stable. However, M's growth prospects are
quite limited, so its capital budget is small relative to its net income. Firm N is a relatively new firm in a
new and growing industry. Its markets and products have not stabilized, so its annual operating income
fluctuates considerably. However, N has substantial growth opportunities, and its capital budget is
expected to be large relative to its net income for the foreseeable future. Which of the following
statements is correct?
4. Which of the following statements is correct?
5. Poff Industries' stock currently sells for $120 a share. You own 100 shares of the stock. The company
is contemplating a 2-for-1 stock split. Which of the following best describes what your position will be after
such a split takes place?
6. Which of the following statements is NOT correct?
7. Which of the following statements is correct?
8. Grandin Inc. is evaluating its dividend policy. It has a capital budget of $625,000, and it wants to
maintain a target capital structure of 60% debt and 40% equity. The company forecasts a net income of
$475,000. If it follows the residual dividend policy, what is its forecasted dividend payout ratio?
9. Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of $3,000,000.
The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company
forecasts that its net income this year will be $3,500,000. If the company follows a residual dividend
policy, what will be its total dividend payment?
10. Other things held constant, which of the following events is most likely to encourage a firm to
increase the amount of debt in its capital structure?
11. Which of the following statements is CORRECT?
12. Which of the following statements is CORRECT?
13. Barette Consulting currently has no debt in its capital structure, has $500 million of total
assets, and its basic earning power is 15%. The CFO is contemplating a recapitalization where it will
issue debt at a cost of 10% and use the proceeds to buy back shares of the company's common stock,
paying book value. If the company proceeds with the recapitalization, its operating income, total assets,
and tax rate will remain unchanged. Which of the following is most likely to occur as a result of the
recapitalization?
14. Which of the following events is likely to encourage a company to raise its target debt ratio,
other things held constant?
15. Which of the following would increase the likelihood that a company would increase its debt
ratio, other things held constant?
16. Which of the following statements is CORRECT?
17. Other things held constant, which of the following would tend to reduce the cash conversion
cycle?
18. Which of the following actions should Reece Windows take if it wants to reduce its cash
conversion cycle?
19. Which of the following actions would be likely to shorten the cash conversion cycle?
20. Which of the following items should a company report directly in its monthly cash budget?
21. A lockbox plan is

22. Firms generally choose to finance temporary current operating assets with short-term debt
because
23. If 1.64 Canadian dollars can purchase one U.S. dollar, how many U.S. dollars can you
purchase for one Canadian dollar?
24. A U.S.-based importer, Zarb Inc., makes a purchase of crystal glassware from a firm in
Switzerland for 39,960 Swiss francs, or $24,000, at the spot rate of 1.665 francs per dollar. The terms of
the purchase are net 90 days, and the U.S. firm wants to cover this trade payable with a forward market
hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90-day
forward rate of 1.682 francs. If the spot rate in 90 days is actually 1.638 francs, how much will the U.S.
firm have saved or lost in U.S. dollars by hedging its exchange rate exposure?
25. In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5%
annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day
securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are
denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which
of the following statements is most CORRECT?
26. Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-
day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1%
quarterly (90-day) return. In the 90-day forward market, 1 British pound equals $1.65. If interest rate parity
holds, what is the spot exchange rate?
27. If the inflation rate in the United States is greater than the inflation rate in Britain, other things
held constant, the British pound will
28. Which of the following is NOT a reason why companies move into international operations?
29. In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car
still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what
would the car be selling for today in U.S. dollars?
30. Suppose 1 U.S. dollar equals 1.60 Canadian dollars in the spot market. 6-month Canadian
securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S.
securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity holds,
what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market?