FIN 650 GC WEEK 6 EXAM 2 LATEST

The amount of assets required per dollar of sales, or A0*/S0.
Question 18. Suppose Acme Industries correctly estimates its WACC at a given point in time and then
uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely
become riskier over time, but its intrinsic value will be maximized.
become less risky over time, and this will maximize its intrinsic value.
accept too many low-risk projects and too few high-risk projects.
become more risky and also have an increasing WACC.
Its intrinsic value will not be maximized.
continue as before, because there is no reason to expect its risk position or value to change over time as
a result of its use of a single cost of capital.
Question 19. A lockbox plan is most beneficial to firms that
have suppliers who operate in many different parts of the country.
have widely dispersed manufacturing facilities.
have a large marketable securities portfolio and cash to protect.
receive payments in the form of currency, such as fast food restaurants, rather than in the form of checks.
have customers who operate in many different parts of the country.
Question 20. The value of Broadway-Brooks Inc.’s operations is $900 million, based on the corporate
valuation model. Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30
million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110
million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in
retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock
outstanding, what is the best estimate of the stock’s price per share?
$23.00
$25.56
$28.40
$31.24