Question 1

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $5000,Interest on Debt = $8000,and a tax rate of 30%.

Accepted Answer

A)  $2100 
B)  $2200 
C)  $2500 
D)  $2700 
E)  $3100 
A)  $2100 
B)  $2200 
C)  $2500 
D)  $2700 
E)  $3100

Question 2

Based upon the average EV/Sales ratio of the comparable firms,if Ideko holds $6.5 million of cash in excess of its working capital needs,then Ideko's target market value of equity is closest to:

Accepted Answer

A)  $165 million 
B)  $157 million 
C)  $193 million 
D)  $191 million 
E)  $155 million 
A)  $165 million 
B)  $157 million 
C)  $193 million 
D)  $191 million 
E)  $155 million

Question 3

Long-term financial planning allows a financial manager to understand the business by ________ between sales,costs,capital investments,and financing.

Accepted Answer

A)  increasing the spread 
B)  identifying linkages 
C)  decreasing the spread 
D)  identifying wastage 
E)  identifying differences 
A)  increasing the spread 
B)  identifying linkages 
C)  decreasing the spread 
D)  identifying wastage 
E)  identifying differences

Question 4

A firm has ROA of 30%,ROE of 40%,and a payout ratio of 10%.What is the firm's sustainable growth rate?

Accepted Answer

A)  12% 
B)  3% 
C)  4% 
D)  27% 
E)  36% 
A)  12% 
B)  3% 
C)  4% 
D)  27% 
E)  36%

Question 5

________ is the amount of additional external financing needed to fund planned increases in assets.

Accepted Answer

A)  Net new financing 
B)  Equity issuance 
C)  Debt issuance 
D)  Preferred stock issuance 
E)  Net debt 
A)  Net new financing 
B)  Equity issuance 
C)  Debt issuance 
D)  Preferred stock issuance 
E)  Net debt

Question 6

The goal of the financial manager is to maximize the value of the shareholder's stake in the firm.

Accepted Answer

A) True 
 B)False

Question 7

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $100 million.The current liabilities are projected to be $40 million and other long-term liabilities are $30 million.How much net new financing is needed in the following year?

Accepted Answer

A)  $18 million 
B)  $22 million 
C)  $25 million 
D)  $30 million 
E)  $10 million 
A)  $18 million 
B)  $22 million 
C)  $25 million 
D)  $30 million 
E)  $10 million

Question 8

For valuing a planned expansion,in addition to forecasting cash flows we need to estimate the firm's continuation value.

Accepted Answer

A) True 
 B)False

Question 9

Using the percent of sales method,and assuming 20% growth in sales and no change in interest expense,estimate Billy's Burgers' pretax income for 2016.

Accepted Answer

A)  $23.28 million 
B)  $35.76 million 
C)  $24.84 million 
D)  $38.16 million 
E)  $32.35 million 
A)  $23.28 million 
B)  $35.76 million 
C)  $24.84 million 
D)  $38.16 million 
E)  $32.35 million

Question 10

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $200 million.The current liabilities are projected to be $100 million and other long-term liabilities are $70 million.How much net new financing is needed in the following year?

Accepted Answer

A)  $18 million 
B)  $22 million 
C)  $25 million 
D)  $30 million 
E)  $27 million 
A)  $18 million 
B)  $22 million 
C)  $25 million 
D)  $30 million 
E)  $27 million

Question 11

A firm has ROA of 18%,ROE of 25%,and a retention rate of 60%.What is the firm's sustainable growth rate?

Accepted Answer

A)  40% 
B)  7.2% 
C)  10% 
D)  15% 
E)  10.8% 
A)  40% 
B)  7.2% 
C)  10% 
D)  15% 
E)  10.8%

Question 12

Use this information for the following questions:
XYZ Corp has the following financial information:
Net income = $1 million
Debt = $5 million
Cost of debt = 4%
Depreciation = $50,000
Capital Expenditures = $100,000
Increase in NWC = $10,000
-If XYZ has no excess cash and has a corporate tax rate of 25%,what is the free cash flow to the firm?

Accepted Answer

A)  $1.09 million 
B)  $1 million 
C)  $1.59 million 
D)  $1.11 million 
E)  $1.21 million 
A)  $1.09 million 
B)  $1 million 
C)  $1.59 million 
D)  $1.11 million 
E)  $1.21 million

Question 13

Use the table for the question(s) below.
Pro Forma Income Statement for Ideko, 2014-2019
  
-The amount of net working capital for Ideko in 2016 is closest to:

Accepted Answer

The answer of Use the table for the question(s) below.
Pro...

Question 14

A services firm does all its business in cash only.The firm projects a cash balance of of $4000 in its account after all taxes and costs are paid.The owners plan to invest $7000 and pay a dividend of $1000.How much net new financing is needed?

Accepted Answer

A)  $4000 
B)  $5000 
C)  $6000 
D)  $7000 
E)  $8000 
A)  $4000 
B)  $5000 
C)  $6000 
D)  $7000 
E)  $8000

Question 15

A firm has $40 million in equity and $20 million of debt,it pays dividends of 20% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

Accepted Answer

A)  12.2% 
B)  13.3% 
C)  14.1% 
D)  15.2% 
E)  15.7% 
A)  12.2% 
B)  13.3% 
C)  14.1% 
D)  15.2% 
E)  15.7%

Question 16

Stanley Corp.has current sales of $50 million,cost of sales of $40 million and forecasts that next year's sales will grow to $60 million.Using the percent of sales method,compute the forecast for next year's cost of sales.

Accepted Answer

A)  $48 million 
B)  $40 million 
C)  $50 million 
D)  $60 million 
E)  $44 million 
A)  $48 million 
B)  $40 million 
C)  $50 million 
D)  $60 million 
E)  $44 million

Question 17

Pledrea Inc.has EBITDA at the forecast horizon of $10,000.Its EBITDA multiple is 11.What is the terminal value of the firm at the forecast horizon?

Accepted Answer

A)  $100,000 
B)  $110,000 
C)  $120,000 
D)  $130,000 
E)  $140,000 
A)  $100,000 
B)  $110,000 
C)  $120,000 
D)  $130,000 
E)  $140,000

Question 18

Granger Inc.has done the following projections for its balance sheet: total assets of $15 million,current liabilities of $3 million,long-term liabilities of $8 million,and stockholders' equity of $2 million.How much net new financing is needed in the following year?

Accepted Answer

A)  $4 million 
B)  $2 million 
C)  $6 million 
D)  $0 
E)  $1 million 
A)  $4 million 
B)  $2 million 
C)  $6 million 
D)  $0 
E)  $1 million

Question 19

What is the plug?

Accepted Answer

Net new financing is also call

Question 20

Total working capital rather than changes in working capital has implications for cash flows.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Modelling and Pro Forma Analysis

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $5000,Interest on Debt = $8000,and a tax rate of 30%.

Based upon the average EV/Sales ratio of the comparable firms,if Ideko holds $6.5 million of cash in excess of its working capital needs,then Ideko's target market value of equity is closest to:

Long-term financial planning allows a financial manager to understand the business by ________ between sales,costs,capital investments,and financing.

A firm has ROA of 30%,ROE of 40%,and a payout ratio of 10%.What is the firm's sustainable growth rate?

________ is the amount of additional external financing needed to fund planned increases in assets.

The goal of the financial manager is to maximize the value of the shareholder's stake in the firm.

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $100 million.The current liabilities are projected to be $40 million and other long-term liabilities are $30 million.How much net new financing is needed in the following year?

For valuing a planned expansion,in addition to forecasting cash flows we need to estimate the firm's continuation value.

Using the percent of sales method,and assuming 20% growth in sales and no change in interest expense,estimate Billy's Burgers' pretax income for 2016.

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $200 million.The current liabilities are projected to be $100 million and other long-term liabilities are $70 million.How much net new financing is needed in the following year?

A firm has ROA of 18%,ROE of 25%,and a retention rate of 60%.What is the firm's sustainable growth rate?

Use the table for the question(s) below. Pro Forma Income Statement for Ideko, 2014-2019 -The amount of net working capital for Ideko in 2016 is closest to:

A services firm does all its business in cash only.The firm projects a cash balance of of $4000 in its account after all taxes and costs are paid.The owners plan to invest $7000 and pay a dividend of $1000.How much net new financing is needed?

A firm has $40 million in equity and $20 million of debt,it pays dividends of 20% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

Stanley Corp.has current sales of $50 million,cost of sales of $40 million and forecasts that next year's sales will grow to $60 million.Using the percent of sales method,compute the forecast for next year's cost of sales.

Pledrea Inc.has EBITDA at the forecast horizon of $10,000.Its EBITDA multiple is 11.What is the terminal value of the firm at the forecast horizon?

Granger Inc.has done the following projections for its balance sheet: total assets of $15 million,current liabilities of $3 million,long-term liabilities of $8 million,and stockholders' equity of $2 million.How much net new financing is needed in the following year?

What is the plug?

Total working capital rather than changes in working capital has implications for cash flows.

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Working Capital Management

Short Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

Filters