07 Apr 1. TCO A) In the United States, which of the follo
1. TCO A) In the United States, which of the following types of organization has the greatest revenue in total? (Points : 5)Sole proprietorshipC corporationS corporationLimited partnership2. TCO A) A sole proprietorship is owned by (Points : 5)one person.one or two people, but if there are two owners, they must be married to each other.up to 100 owners.up to 64 owners.3. TCO B) Which of the following would cause the present value of an annuity to increase? (Points : 5)Reducing the number of payments.Increasing the interest rate.Decreasing the interest rate.Decreasing the liquidity of the payments.4. TCO B) Which of the following is an annuity due? (Points : 5)A typical car loan.A typical mortgage.A typical apartment rental agreement.A credit card balance.5. TCO G) If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the three. (Points : 20)6. TCO D) A stock has just paid a dividend and will pay a dividend of $3.00 in a year. The dividend will stay constant for the rest of time. The return on equity for similar stocks is 14%. What is P0? (Points : 20)A stock has just paid a dividend and will pay a dividend of $3.00 in a year, so Dividend for Year 0 and coming years will be $37. 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 expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)8. (TCO D) A particular bond has 8 years to maturity. It has a face value of $1,000. It has a YTM of 7% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? (Points : 10)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)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)11. TCO E) A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)12. TCO A) What is the difference between capital structure and capital budgeting? Explain and give an example of a capital structure decision and an example of a capital budgeting decision. (Points : 25)13. TCO H) What is the difference between the cash cycle and the operating cycle? Under what condition would they be the same? (Points : 30)14. (TCO F) A company has the opportunity to do any of the projects for which thenet 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 budgetingmethods. Show your workYear A B C0 -300 -100 -3001 100 -50 1002 100 100 1003 100 100 1004 100 100 1005 100 100 1006 100 100 1007 -100 -200 0 (Points : 40)
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