CFI FMVA Corporate Finance Final Exam 1 Latest

CFI FMVA Corporate Finance Final Exam 1 Latest Update - Actual Exam with 100 Questions and 100% Verified Correct Answers Guaranteed A+ Approved by the Professor

• years ago a company purchased a machine for 3 years project, the machine is being

depreciated straight line to zero over a 5 year period. Today the project ended and machine was sold which one of the following correctly defines after tax salvage value of that machine

• sale price + (sale price - bv)(T)
• sale price + (sale price - bv)(1-T)
• sale price + (bv - sale price)(T)
• sale price + (bv - sale price)(1-T)

e) sale price(1-T) - CORRECT ANSWER: c) sale price + (bv - sale price)(T)

• year, $1000 future value bond pays semiannual interests on Feb. 1st and Aug. 1st if

today is Oct. 1st what will be the difference if any between clean and dirty prices

• none
• 1 month interest
• 2 months interest
• 4 moths interest

e) 5 months interest - CORRECT ANSWER: c) 2 months interest

7% semiannual coupon bonds are callable in 2 years at $1054 what is the amount of the call premium on $1000 par value

• $52 1 / 4

• $54
• $72
• $84

e) $89 - CORRECT ANSWER: b) $54

1054 - 1000 = 54

A company considering the installation of a new computerized pressure cooker that will cut annual operating cost by $23000 the system will cost $39900 to purchase and install system is expected to have 4 year life and will be depreciated to zero using straight line depreciation what is the amount of the earnings before interest and taxes for this project

• 10525
• 13025
• 15525
• 16900

e) 19400 - CORRECT ANSWER: b) 13025

23000 - (39900/4) = 13025

A company has 950 000 shares of common stock outstanding at a market price of $38 per share. The company also has 40000 bonds outstanding that are quoted at 106% of face value what weight should be given to debt when the company company computes WACC

• 42%
• 46%
• 50%
• 54%

e) 58% - CORRECT ANSWER: d) 54% 2 / 4

E = 950 000 (38) = 36100000

D = 40000(1.06)(1000) = 42400000

V = 42400000 + 36100000 = 78500000

D/V = 424/785 = .54

A company has bonds outstanding that mature in 13 years with a 6% coupon rate paying interest annually. The bonds have a face value of $1000 and the current market price is $1040 what is the company's after tax cost of debt if the tax rate is 32%

• 2.97%
• 3.24%
• 3.78%
• 5.21%

e) 5.53% - CORRECT ANSWER: c) 3.78%

N= 13

PMT = .06(1000) = 60

FV = 1000

PV = -1040

CPT I/Y = 5.559

5.559(1-.32) = 3.78

A company is considering 2 projects, A consists of creating an outdoor eating area on the unused portion of the property, B would use the property for a drive through service.When trying to decide which project to accept the firm should rely most heavily on which of the following

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• profitability index

b) IRR

• payback

d) NPV

e) ARR - CORRECT ANSWER: d) NPV

A computer company has 5.25% coupon bond outstanding with a current market price of $546.19, the yield to maturity is 16.28 and the future value is $1000. If interest is paid semiannually, how many years until the bonds mature

• 6.64
• 7.08
• 12.41
• 14.16

e) 28.32 - CORRECT ANSWER: b) 7.08

PMT = (.0525/2)(1000) = 26.1

FV = 1000

PV = -546.19

I/Y = 16.28/2 = 8.14

CPT N = 14.15

14.15/2 = 7.079

A firms overall cost of equity is

• generally less than WACC given leverage of the firm
• unaffected by changes in the market risk premium
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