Question 1

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 2

How do we know if expansion is a good idea for the firm?

Accepted Answer

We compare a firm's

Question 3

Internal growth rate indicates whether a planned investment will increase or decrease firm value.

Accepted Answer

A) True 
 B)False

Question 4

A firm has $20 million in equity and $20 million of debt,it pays dividends of 20% of net income,and has a net income of $5 million.What is the firm's sustainable growth rate?

Accepted Answer

A) 18% 
B) 19% 
C) 20% 
D) 21% 
E) 22% 
A) 18% 
B) 19% 
C) 20% 
D) 21% 
E) 22%

Question 5

With the proper changes it is believed that Ideko's credit policies will allow for an account receivables days of 60.The forecasted accounts receivable for Ideko in 2016 is closest to:
A)$14,525
B)$19,690
C)$22,710
D)$16,970
E)$24,560

Accepted Answer

D @#IMG-DLM& Income Statement

Question 6

What is net new financing?

Accepted Answer

Net new financing is the amoun

Question 7

Long-term financial planning helps a financial manager in budgeting but has little to do with understanding how the business operates.

Accepted Answer

A) True 
 B)False

Question 8

Pledrea Inc.has EBITDA at the forecast horizon of $10,000.Its EBITDA multiple is 12.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 9

A firm has $50 million in equity and $20 million of debt,it pays dividends of 30% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

Accepted Answer

A) 9% 
B) 10% 
C) 11% 
D) 12% 
E) 13% 
A) 9% 
B) 10% 
C) 11% 
D) 12% 
E) 13%

Question 10

Calgary Doughnuts had sales of $200 million in 2015.Its cost of sales were $160 million.If sales are expected to grow at 10% in 2016,compute the forecasted costs using the percent of sales method.

Accepted Answer

A) $160 million 
B) $170 million 
C) $173 million 
D) $176 million 
E) $180 million 
A) $160 million 
B) $170 million 
C) $173 million 
D) $176 million 
E) $180 million

Question 11

A firm has $70 million in equity and $30 million of debt,it pays dividends of 30% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

Accepted Answer

A) 6% 
B) 7% 
C) 8% 
D) 9% 
E) 10% 
A) 6% 
B) 7% 
C) 8% 
D) 9% 
E) 10%

Question 12

What is the free cash flow to equity holders for a firm with free cash flow of $7000,after-tax interest expense of $1000,and an increase in debt of $3000?

Accepted Answer

A) $6000 
B) $7000 
C) $8000 
D) $9000 
E) $10,000 
A) $6000 
B) $7000 
C) $8000 
D) $9000 
E) $10,000

Question 13

Internal growth rate assumes that the firm can finance investments via sale of debt.

Accepted Answer

A) True 
 B)False

Question 14

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $1000,Interest on Debt = $5000,and a tax rate of 30%.

Accepted Answer

A) $2500 
B) $2800 
C) $3100 
D) $3300 
E) $3500 
A) $2500 
B) $2800 
C) $3100 
D) $3300 
E) $3500

Question 15

A firm plans a new expansion,which will result in free cash flows of $50,000 in year 1,$60,000 in year 2,and $70,000 in year 3.The firm's continuation value after 3 years is $540,000.The expansion requires an investment of $40,000 today,and will be financed entirely with debt,resulting in an interest expense of $8,000 in each of the 3 years.If the firm's unlevered cost of capital is 9%,and its cost of debt is 6%,what is the firm's value?

Accepted Answer

A) $548,788 
B) $527,404 
C) $547,654 
D) $664,087 
E) $416,979 
A) $548,788 
B) $527,404 
C) $547,654 
D) $664,087 
E) $416,979

Question 16

Use the tables for the question(s)below.
Estimated 2010 Income Statement and Balance Sheet Data for Ideko Corporation
   The following are financial ratios for three comparable companies:
  
-Based upon the average EV/Sales ratio of the comparable firms,Ideko's target economic value is closest to:

Accepted Answer

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

Question 17

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 18

Calgary Doughnuts had sales of $100 million in 2015.Its cost of sales were $70 million.If sales are expected to grow at 20% in 2016,compute the forecasted costs using the percent of sales method.

Accepted Answer

A) $80 million 
B) $84 million 
C) $88 million 
D) $96 million 
E) $102 million 
A) $80 million 
B) $84 million 
C) $88 million 
D) $96 million 
E) $102 million

Question 19

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 20

While the assets and accounts payable of a firm may reasonably be expected to grow with sales,________ will not naturally grow with sales.

Accepted Answer

A) cash 
B) supplier credit 
C) long-term debt 
D) cost of sales 
E) income tax 
A) cash 
B) supplier credit 
C) long-term debt 
D) cost of sales 
E) income tax

Exam 18: Financial Modelling and Pro Forma Analysis

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

How do we know if expansion is a good idea for the firm?

Internal growth rate indicates whether a planned investment will increase or decrease firm value.

A firm has $20 million in equity and $20 million of debt,it pays dividends of 20% of net income,and has a net income of $5 million.What is the firm's sustainable growth rate?

With the proper changes it is believed that Ideko's credit policies will allow for an account receivables days of 60.The forecasted accounts receivable for Ideko in 2016 is closest to: A)$14,525 B)$19,690 C)$22,710 D)$16,970 E)$24,560

What is net new financing?

Long-term financial planning helps a financial manager in budgeting but has little to do with understanding how the business operates.

Pledrea Inc.has EBITDA at the forecast horizon of $10,000.Its EBITDA multiple is 12.What is the terminal value of the firm at the forecast horizon?

A firm has $50 million in equity and $20 million of debt,it pays dividends of 30% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

Calgary Doughnuts had sales of $200 million in 2015.Its cost of sales were $160 million.If sales are expected to grow at 10% in 2016,compute the forecasted costs using the percent of sales method.

A firm has $70 million in equity and $30 million of debt,it pays dividends of 30% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

What is the free cash flow to equity holders for a firm with free cash flow of $7000,after-tax interest expense of $1000,and an increase in debt of $3000?

Internal growth rate assumes that the firm can finance investments via sale of debt.

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $1000,Interest on Debt = $5000,and a tax rate of 30%.

Use the tables for the question(s)below. Estimated 2010 Income Statement and Balance Sheet Data for Ideko Corporation The following are financial ratios for three comparable companies: -Based upon the average EV/Sales ratio of the comparable firms,Ideko's target economic value is closest to:

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?

Calgary Doughnuts had sales of $100 million in 2015.Its cost of sales were $70 million.If sales are expected to grow at 20% in 2016,compute the forecasted costs using the percent of sales method.

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%.

While the assets and accounts payable of a firm may reasonably be expected to grow with sales,________ will not naturally grow with sales.

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

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