28 May Question Question 1. 1. (TCO H) Desai Inc. has the following d
Question
Question 1. 1. (TCO H) Desai Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm’s cash conversion cycle?
Annual sales =
Annual cost of goods sold =
Inventory =
Accounts receivable =
Accounts payable = $45,000
$30,000
$4,500
$1,800
$2,500
a. 28 days
b. 32 days
c. 35 days
d. 39 days
e. 43 days (Points : 30)
Question 2. 2. (TCO C) Your company has been offered credit terms of 4/30, net 90 days. What will be the nominal annual percentage cost of its nonfree trade credit if it pays 120 days after the purchase? (Assume a 365-day year.)
a. 16.05%
b. 16.90%
c. 17.74%
d. 18.63%
e. 19.56%
(Points : 30)
Question 3. 3. (TCO E)
Division
Asset
Beta
Next Period’s Expected Free Cash
Flow ($mm)
Expected
Growth
Rate
Oil Exploration
1.4
450
4.0%
Oil Refining
1.1
525
2.5%
Gas and Convenience Stores
0.8
600
3.0%
The risk-free rate of interest is 3% and the market risk premium is 5%.
1) Which is the cost of capital for the oil exploration division closest to?
A) 6.0%
B) 7.0%
C) 8.5%
(Points : 30)
Question 4. 4. (TCO B)
You expect CCM Corporation to generate the following free cash flows over the next 5 years.
Year
1
2
3
4
5
FCF ($ millions)
25
28
32
37
40
If CCM has $150 million of debt and 12 million shares of stock outstanding, then which is the share price for CCM closest to?
A) $49.50
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