Question 40

A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 20% debt and 80% equity, based on market values (debt to equity D/S ratio is 0.25). The risk-free rate (r_RF) is 5% and the market risk premium (r_M - r_RF) is 6%. Currently the company's cost of equity, which is based on the CAPM, is 14% and its tax rate is 20%. Find the firm's current leveraged beta using the CAPM______

1.0

1.5

1.6

1.7

Question 41

Based on the information from Question 40, find the firm's unleveraged beta using the Hamada Equation ______

	0.95
	1.0
	1.25
	1.35

Question 42

Based on the information from Question 40 and 41, what would be the company's new leveraged beta if it were to change its capital structure to 50% debt and 50% equity (D/.0) using the Hamada Equation? ______

	1.25
	1.35
	1.95
	2.25

Question 43

Based on the information from Question 40 ~ 42, what would be the company's new cost of equity if it were to change its capital structure to 50% debt and 50% equity (D/S .0) using the CAPM? ______

	13.8%
	15.6%
	16.8%
	18.5%

Question 44

A firm expects to have net income of $5,000,000 during the next year. The company's target capital structure is 35% debt and 65% equity. The company's director of capital budgeting has determined that the optimal capital budget for the coming year is $6,000,000. If SL Computer follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is the firm's expected dividend payments? ______

	$1,100,000
	$3,900,000
	$5,000,000
	$6,000,000

Question 45

Using the data from Question 44, find the firm's dividend payout ratio ______

	11%
	22%
	35%
	65%

Question 46

A business analysis has recently been hired to improve the performance of a firm, which has been experiencing a severe cash shortage. As one part of your analysis, the analyst wants to determine the firm's cash conversion cycle. Using the following information and a 365-day year: Current inventory = $150,000; Annual sales = $730,000; Accounts receivable = $180,000; Accounts payable = $36,000; Total annual purchases = $365,000. Calculate the firm's inventory conversion cycle. ______

	18 days
	70 days
	75 days
	90 days

Question 47

Based on information from Question 46, Calculate the firm's receivables collection period. ______

	18 days
	70 days
	75 days
	90 days

Question 48

Based on information from Question 46, Calculate the firm's payables deferral period. ______

	18 days
	36 days
	75 days
	90 days

Question 49

Based on information from Question 46~48, Calculate the firm's cash conversion cycle (CCC). ______

	36 days
	129 days
	147 days
	165 days

Question 50

Which of the following methods can be used to improve the firm's cash conversion cycle? ______

	Increase the firm's inventory conversion cycle.
	Increase the firm's receivables collection period.
	Increase the firm's payables deferral period.