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Question 1.1. (TCO A) Double taxation is a drawback for which of the following types of business organization except? (Points : 5)

S corporation C corporation Limited partnership Limited liability company

Question 2.2. (TCO A) Sole proprietorships have all of the following advantages except (Points : 5)

easy to set up. single taxation of income. limited liability. ownership and control are not separated.

Question 3.3. (TCO B) Which of the following would cause the future value of an annuity to decrease? (Points : 5)

Reducing the number of payments. Increasing the number of payments. Increasing the interest rate. Decreasing the liquidity of the payments.

Question 4.4. (TCO B) In a TVM calculation, if the interest rate is 10% per year and payments are monthly, the interest rate should be entered as (Points : 5)

10 .10 .833 or .00833, depending on the method being used. 120 or 1.20 depending on the method being used.

Question 5.5. (TCO G) If net income, total assets, and book value of equity stayed the same, what would be the effect on the DuPont Identity of an increase in sales? (Points : 20)

Question 6.6. (TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is not expected to grow. The return on equity for similar stocks is 12%. What is P₀? (Points : 20)

Question 7.7. (TCO D) A stock has just declared an annual dividend of $2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P₀? (Points : 20)

Question 8.8. (TCO D) A bond has 5 years to maturity and has a YTM of 8%. Its par value is $1,000. Its semiannual coupons are $50. What is the bonds current market price? (Points : 10)

Question 9.9. (TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)

Question 10.10. (TCO D) What is and why is it important to investors and issuers of stock? Describe the behavior of stocks with s of greater than one, less than one, and less than zero.(Points : 30)

Question 11.11. (TCO E) A company has 30 million shares outstanding trading for $8 per share. It also has $90 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)

Question 12.12. (TCO A) Name and describe the three functions of managerial finance. For each, give an example other than those used in the text and lecture. (Points : 25)

Question 13.13. (TCO H) What is the Cash Conversion Cycle (CCC)? Name the components of the CCC and explain why the CCC is important to business. (Points : 30)

Question 14.14. (TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.

Year	A	B	C
0	-350	-250	-250
1	100	-50	100
2	100	100	100
3	100	100	100
4	100	100	100
5	100	100	100
6	50	100	100
7	-200	-200	0

(Points : 40)