Fin 300 Mid Term

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Ryerson University
CFIN300 – Sections 6J0 & 6K0

Mid-Term Test – Version 1
Winter 2008
There are 2 hours in this exam.

Student Name

____________________________
(Please Print)

Student Number

_________________________________

Notes:
1. This is a closed book exam. You may only have pens, pencils and a calculator at your desk. 2. A formula sheet is attached to the end of the exam. You may detach the formula sheet from the exam.

3. Please fill out the scanner sheet as you go along in the exam. You will not be given extra time at the end of the exam to fill it out.
4. Select the best possible answer for each multiple-choice question

There are 14 pages in this test (including Formula Sheet).

Page 1

CFIN300 – Sections 6J0, & 6K0 – Winter 2008

Mid-Term Test

Multiple Choice Questions:
Please answer the 35 multiple choice questions on the scanner sheet provided. Choose the best answer from the set given for each question. Note, only the scanner sheet will be marked, and anything written on the test paper will be completely disregarded.

1. Which one of the following actions best meets the goal of financial management? A) Accepting a project that enhances the current market value of the firm's stock B) Issuing additional shares of stock to increase the total cash on hand C) Delaying cash payments in order to increase the total cash on hand D) Easing the accounts receivable policies in order to increase current sales E) Deciding a firm should be 100% equity financed

2. The current yield on Zeta's common stock is 5.6 percent. The company pays a constant dividend of $1.80. What is the required rate of return on Zeta's stock? A) 5.88 percent
B) 7.40 percent
C) 7.65 percent
D) 3.80 percent
E) 5.60 percent

3. The semi-annual, ten-year bonds of Adep, Inc. are selling at par and have an effective annual yield of 4.295 percent. What is the amount of each interest payment on a $1,000 Adep bond?
A) $42.95
B) $42.50
C) $21.25
D) $21.50
E) $21.48

4. Zane Industrial Products wants to raise $22 million to expand their business. To accomplish this, they plan to sell 30-year, $1,000 face value, zero coupon bonds. The bonds will be priced to yield 7.25 percent. What is the approximate minimum number of bonds the company must sell to raise the money they need?

A) 174,198
B) 179,615
C) 161,333
D) 168,242
E) 155,400

VERSION 1

Page 2

CFIN300 – Sections 6J0, & 6K0 – Winter 2008

Mid-Term Test

5. The bonds of B.F. Fabricators pay a 10 percent coupon, have a 9.64 percent yield to maturity, and have a face value of $1,000. The current rate of inflation is 3.2 percent. What is the actual real rate of return on these bonds?

A) 6.41 percent
B) 6.44 percent
C) 6.18 percent
D) 6.20 percent
E) 6.24 percent

Use the following to answer questions 6-8:
Wintergreen, Inc.
Income Statement for the Present Year
Net sales
Costs
Taxable income
Taxes
Net income

$14,650
$12,103
$2,547
$866
$1,681
Wintergreen, Inc.
Balance Sheet for the Present Year

Cash
Accounts receivable
Inventory
Total
Net fixed assets

$525
$3,135
$976
$4,636
$23,770

Total assets

$28,406

Accounts payable
Notes payable
Total
Long-term debt
Common stock
Retained earnings
Total liabilities and equity

$1,963
$2,618
$4,581
$6,600
$7,500
$9,725
$28,406

Assets, accounts payable and costs are proportional to sales. Debt and equity are not.

6. Sales of Wintergreen, Inc. are expected to increase by 12% next year. Wintergreen is currently operating at 85% of capacity. The plowback ratio is 60%. What is the external financing need?
A) $1,290
B) $1,563
C) $2,043
D) -$809
E) -$433

VERSION 1

Page 3

CFIN300 – Sections 6J0, & 6K0 – Winter 2008

Mid-Term Test

7. Wintergreen, Inc. is producing at 82% of capacity. What is the capital intensity ratio at maximum capacity?
A) .63
B) 1.44
C) .53
D) 1.59
E) 1.22

8. Sales of Wintergreen, Inc. are expected to...
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