FIN 515 FINAL EXAM 3 LATEST 2023 WITH
CORRECT ANSWERS
Final Exam Page 1
1. (TCO A) Which of the following does NOT always increase a company's market value? (Points :
5) Increasing the expected growth rate of sales
Increasing the expected operating profitability (NOPAT/Sales)
Decreasing the capital requirements (Capital/Sales)
Decreasing the weighted average cost of capital
Increasing the expected rate of return on invested
capital
2. (TCO F) Which of the following statements is correct? (Points : 5)
The NPV, IRR, MIRR, & discounted payback (using a payback requirement of 3 years or less)
methods always lead to the same accept/reject decisions for independent projects.
For mutually exclusive projects with normal cash flows, the NPV & MIRR methods can never
conflict, but their results could conflict with the discounted payback & the regular IRR methods.
Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR
over the regular IRR.
If a firm uses the discounted payback method with a required payback of 4 years, then it will accept
more projects than if it used a regular payback of 4 years.
The percentage difference between the MIRR & the IRR is equal to the project’s WACC.
3. (TCO D) Church Inc. is presently enjoying relatively high growth because of a surge in the demand for
its new product. Management expects earnings & dividends to grow at a rate of 25% for the next 4
years, after which competition will probably reduce the growth rate in earnings & dividends to zero,
i.e., g = 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is
5.50%, & the risk-free rate is 3.00%. What is the current price of the common stock?
a. $26.77
. $27.89
. $29.05
. $30.21
. $31.42
Points : 20)
4. (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in January,
35,000 in February, & $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the
month after the sale, & another 40% are credit sales paid 2 months after the sale, what are the
expecte cash receipts for March? a. $24,057
b. $26,730c. $29,700
d. $33,000e. $36,300
(Points : 2)
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, FIN 515 FINAL EXAM 3 LATEST 2023 WITH
CORRECT ANSWERS
Final ExamPage 2
1. (TCO H) ervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an
improved inventory management system could lower the average inventory by $4,000, (b) that
improvements in the credit department could reduce receivables by $2,000, & (c) that the
purchasing
This study source was downloaded by 100000815611969 from CourseHero.com on 01-12-2023 00:35:37 GMT -06:00
https://www.coursehero.com/file/42289289/FIN-515-Week-8-Final-Exam-1docx/
CORRECT ANSWERS
Final Exam Page 1
1. (TCO A) Which of the following does NOT always increase a company's market value? (Points :
5) Increasing the expected growth rate of sales
Increasing the expected operating profitability (NOPAT/Sales)
Decreasing the capital requirements (Capital/Sales)
Decreasing the weighted average cost of capital
Increasing the expected rate of return on invested
capital
2. (TCO F) Which of the following statements is correct? (Points : 5)
The NPV, IRR, MIRR, & discounted payback (using a payback requirement of 3 years or less)
methods always lead to the same accept/reject decisions for independent projects.
For mutually exclusive projects with normal cash flows, the NPV & MIRR methods can never
conflict, but their results could conflict with the discounted payback & the regular IRR methods.
Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR
over the regular IRR.
If a firm uses the discounted payback method with a required payback of 4 years, then it will accept
more projects than if it used a regular payback of 4 years.
The percentage difference between the MIRR & the IRR is equal to the project’s WACC.
3. (TCO D) Church Inc. is presently enjoying relatively high growth because of a surge in the demand for
its new product. Management expects earnings & dividends to grow at a rate of 25% for the next 4
years, after which competition will probably reduce the growth rate in earnings & dividends to zero,
i.e., g = 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is
5.50%, & the risk-free rate is 3.00%. What is the current price of the common stock?
a. $26.77
. $27.89
. $29.05
. $30.21
. $31.42
Points : 20)
4. (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in January,
35,000 in February, & $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the
month after the sale, & another 40% are credit sales paid 2 months after the sale, what are the
expecte cash receipts for March? a. $24,057
b. $26,730c. $29,700
d. $33,000e. $36,300
(Points : 2)
This study source was downloaded by 100000815611969 from CourseHero.com on 01-12-2023 00:35:37 GMT -06:00
https://www.coursehero.com/file/42289289/FIN-515-Week-8-Final-Exam-1docx/
, FIN 515 FINAL EXAM 3 LATEST 2023 WITH
CORRECT ANSWERS
Final ExamPage 2
1. (TCO H) ervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an
improved inventory management system could lower the average inventory by $4,000, (b) that
improvements in the credit department could reduce receivables by $2,000, & (c) that the
purchasing
This study source was downloaded by 100000815611969 from CourseHero.com on 01-12-2023 00:35:37 GMT -06:00
https://www.coursehero.com/file/42289289/FIN-515-Week-8-Final-Exam-1docx/
