FIN 172 | Course Paper

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1) narrbegin: exhibit 22-1 liquidation

exhibit 23-1

narrend

if the company has $3,000,000 in funds to distribute to unsecured creditors, what is the

settlement that is received by the holders of the notes payable in case i?

a.$1,764,706

b.$2,500,000

c.$735,250

d.$1,326,690

2) you are considering buying carpet for your university; grade a carpet costs $25.25 a

square yard and lasts 5 years and grade b costs $18.25 a square yard and lasts 3 years;

grade c costs $12.10 a yard and lasts 2 years; which carpet should be chosen if the

discount rate is 5%? assume that due to a large endowment given by the state’s”carpet

king” the university is committed to continued carpet use. what is the eac of grade b

carpet?

a. $ (4.44)

b. $ (4.36)

c. $ (4.22)

d.none of the above

3) narrbegin: bavarian merger

bavarian merger

bavarian brew is planning on acquiring bavarian sausage in a pure exchange merger.

bavarian brews stock is currently trading at $35 and they set the exchange ratio at 0.80.

bavarian sausage has 75 million shares outstanding which are currently trading at $18 a

share.

narrend

refer to bavarian merger. what is the transaction value of the merger?

a.$1.5 billion

b.$2.1 billion

c.$750 million

d.$500 million

4) narrbegin: cash budget

bavarian brews schedule of projected cash disbursement

all of bavarian brews sales are credit sales. the company collects 60% of its sales in the

next month and the remainder in the month after that.

narrend

what are bavarian brews cash collections in march?

a.$726

b.$654

c.$324

d.$522

5) smith enterprises stock currently sells for $17.50. a put option on the stock has a

strike price of $20 and currently sells at $4.50. what is the time value of the option?

a.$0

b.$2.50

c.$2

d.$4.50

6) the percentage-of-sales method for forecasting pro forma financial statements

assumes

a.that all income statement and balance sheet items grow in proportion to sales

b.that all income statement and balance sheet items grow at a growing proportion to

sales

c.that all income statement and balance sheet items grow at a decreasing proportion to

sales

d.none of the above

7) you will be receiving $204,000.00 at the end of each year for the next 20 years. if the

correct discount rate for such a stream of cash flows is 10% then what is the present

value of the cash flows?

a.$1,736,767.00

b.$4,080,000.00

c.$185,454.55

d.none of the above

8) a portfolio consists 20% of a risk-free asset and 80% of a stock. the risk-free return is

4%. the stock has an expected return of 15% and a standard deviation of 30%. whats the

expected return

a.12.8%

b.9.5%

c.15.0%

d.4.0%

9) the globe incorporated has ebit of $30 million for the current year. on the firm

balance sheet, there is $90 million of debt outstanding that carries a coupon rate of 9

percent. investors seek a return of 12 percent on the firm, and the firm has a corporate

tax rate of 40%. what is the value of the firm?

a.$152,000,000

b.$160,000,000

c.$174,000,000

d.$186,000,000

10) narrbegin: exhibit 7-6

exhibit 7-6

narrend

given exhibit 7-6, what is the portfolio beta?

a.0.4987

b.0.9273

c.0.3791

d.1.2367

11) venture capitalists have many opportunities to expropriate the limited partners’

wealth. this can be controlled by:

a.having a positive reputation

b.having contractual covenants

c.requiring that the general partner have limited liability

d.all of the above

e.both (a) and (b)