DeVry BUSN 379 Final Exam – Updated

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1.(TCO 1) ) Likeline, Inc., has sales of $445,000, costs of $173,000, depreciation expense of $72,000, interest expense of $36,000, and a tax rate of 35 percent. What is their net income?(Points : 20)

Question 2.2.(TCO 1) Hammett, Inc. has sales of $19,570, costs of $9,460, depreciation expense of $2,130, and interest expense of $1,620. If the tax rate is 35 percent, what is the operating cash flow, or OCF? (Points : 20)

Question 3.3.(TCOs 2 and 3) App Co. issued 15-year, $1,000 bonds at a coupon rate of 6 percent. The bonds make annual payments. If the YTM on these bonds is 5 percent, what is the current bond price?(Points : 20)

Question 4.4.(TCO 3) Sixteenth Bank has an issue of preferred stock with a $10 stated dividend that just sold for $70 per share. What is the bank’s cost of preferred stock? (Show your work and round your answer to two decimal places.(Points : 20)

Question 5.5.(TCOs 3 and 5) You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? (Show your work.)(Points : 20)

Question 6.6.(TCO 3) A stock has a beta of 1.25, the expected return on the market is 12 percent, and the risk-free rate is 2 percent. What must the expected return on this stock be? (Show your work and express your percentage in two decimal places).(Points : 20)

Question 7.7.(TCO 4) Suppose Tom, Ltd. just issued a dividend of $2.00 per share on its common stock. The company’s dividends have been growing at a rate of 7%. If the stock currently sells for $50.00, what is your best estimate of the company’s cost of equity? (Show your work.)(Points : 20)

Question 8.8.(TCO 4) Given the following information, calculate the weighted average cost for the Han Corp. Percent of capital structure: Preferred stock 15% Common equity 60% Debt 25% Additional information: Corporate tax rate 34% Dividend, preferred $9.50 Dividend, expected common $1.50 Price, preferred $100.00 Growth rate 9% Bond yield 6% Price, common $75.00(Points : 40)

Question 9.9.(TCO 7) What are some important factors to consider when conducting a credit evaluation and scoring?(Points : 20)

Question 10.10.(TCO 1) Explain the concept of the stakeholder in contemporary finance.(Points : 20)

Question 11.11.(TCO 6) What are the factors that make up the capital asset pricing model? Where would you typically find the data for these factors?(Points : 20)