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15 Fin571 Final Exam 30 Question Ver 2
15 Fin571 Final Exam 30 Question Ver 2
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Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start
saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years
in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45
years? (Round to the nearest dollar.)
o $1,745,600
o $3,594,524
o $5,233,442
o $2,667,904
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Capital rationing. TuleTime Comics is considering a new show that will generate annual cash
flows of $100,000 into the infinite future. If the initial outlay for such a production is
$1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the
profitability index for the project?
o 0.11
o 1.90
o 1.11
o 0.90
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If a company's weighted average cost of capital is less than the required return on equity, then
the firm:
o Is perceived to be safe
o Has debt in its capital structure
o Must have preferred stock in its capital structure
o Is financed with more than 50% debt
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External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it
will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no
external financing, what is the growth rate it can support?
o 30.3%
o 25.1%
o 27.3%
o 32.9%
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Payout and retention ratio: Drekker, Inc., has revenues of $312,766, costs of $220,222, interest
payment of $31,477, and a tax rate of 34 percent. It paid dividends of $34,125 to shareholders.
Find the firm's dividend payout ratio and retention ratio.
o 85%, 15%
o 55%, 45%
o 15%, 85%
o 45%, 55%
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$12,890
12,800
12,670
$124,589
99,630
Cash conversion cycle: What is the cash conversion cycle for Ridge Company?
o 38.3 days
o 46.4 days
o 83.5 days
o 129.9 days