**Break-even analysis**

**Break-even analysis. **IronVerks Ribshack has total fixed costs of $8,500 per month. It sells rib plates for $15 each, and the variable cost of providing each plate is $10. What is the pretax operating cash flow break-even point for IronVerks?

[removed] | 8,500 plates. |

[removed] | 567 plates. |

[removed] | 1,700 plates. |

[removed] | None of these |

**Break-even analysis. **Monochrome Sun Glasses has found that its pretax operating cash flow basis break-even number of glasses sold is 770,000 pairs. If each pair is sold for $25 and the variable cost per unit is $15, then what is the amount of Monochrome’s fixed costs?

[removed] | $11,550,000 |

[removed] | $77,000 |

[removed] | $7,700,000 |

[removed] | $1,155,000 |

**Capital rationing. **You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project?

[removed] | 2.18 |

[removed] | 1.09 |

[removed] | 2.09 |

[removed] | 0.09 |

**Overall cost of capital:** If the market risk premium is currently 6 percent and the risk-free rate of return is 4 percent, then what is the expected return on a common share with a beta equal to 2?

[removed] | 8.0% |

[removed] | 10.0% |

[removed] | 12.0% |

[removed] | 16.0% |

**How firms estimate their cost of capital**: The Diverse Co. has invested 40 percent of the firm’s assets in a project with a beta of 0.4 and the remaining assets in a project with a beta of 1.8. What is the beta of the firm?

[removed] | None of these |

[removed] | 1.28 |

[removed] | 1.24 |

[removed] | 0.96 |

**The cost of equity**: Oasis, Inc., has common shares with a price of $21.12 per share. The firm is expected to pay a dividend of $1.75 one year from today, and dividends are expected to grow at 10 percent for two years after that and then at 5 percent thereafter. What is the implied cost of common equity capital for Oasis?

[removed] | 15% |

[removed] | 14% |

[removed] | 16% |

[removed] | 13% |

**The cost of preferred equity**: Billy’s Goat Coats has a preferred share issue outstanding with a current price of $38.89. The firm last paid a dividend on the issue of $3.50 per share. What is the firm’s cost of preferred equity?

[removed] | 7% |

[removed] | 10% |

[removed] | 8% |

[removed] | 9% |

**M&M Proposition 1:** Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

How much is Dynamo worth today?

[removed] | $2,143 |

[removed] | None of these. |

[removed] | $1,765 |

[removed] | $1,500 |

**M&M Proposition 2:** Swirlpool, Inc., has a WACC of 11%, a cost of debt of 8%, and a cost of equity of 12%. What must the debt-to-equity ratio be?

[removed] | None of these. |

[removed] | 1/4 |

[removed] | 1/6 |

[removed] | 1/2 |

**M&M Proposition 2:** Melba’s Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm’s marginal corporate income tax rate is 35%. What is the appropriate WACC?

[removed] | 7.44% |

[removed] | 8.17% |

[removed] | 8.80% |

[removed] | 6.35% |

**The pecking order theory:** A firm wishes to undertake a project that costs $150mm. It currently has $10mm in cash on hand and believes that it can raise $75mm in debt and $100mm in equity if needed. According to the pecking order theory of the capital structure, what percent of the project will be financed by debt?

[removed] | 50% |

[removed] | 26.67% |

[removed] | 0% |

[removed] | None of these |

**Break-even analysis:** Jackson Electronics makes circuit boards and markets them to electronic goods manufacturers. The firm has nonsalary fixed costs of $212,000 and salary costs of $134,250. Each circuit board is sold at a price of $111.50 and involves variable costs of $81.73 per unit. What is the break-even point for Jackson?

[removed] | 4,237 |

[removed] | 3,714 |

[removed] | 3,105 |

[removed] | 11,631 |

**Multiple Analysis: **Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.

[removed] | $453.6 million |

[removed] | $1,334 million |

[removed] | $1,787 million |

[removed] | $1,315 million |

**Multiple Analysis: **Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the value of Turnbull Corp’s debt? Round to the nearest million dollars.

[removed] | $121 million |

[removed] | $165 million |

[removed] | $59 million |

[removed] | $97 million |

**Income approaches:** Quicksilver Software Co. is expected to grow rapidly in the next three years and then have no growth for the foreseeable future. The firm expects free cash flows of $9.1 million, $11.4 million, and $17.7 million over the next three years, and thereafter its cash flows will stay constant. The company has no nonoperating assets. If the appropriate WACC is 12 percent and debt of 44.5 million, what is the equity value of this business? Round to the nearest million.

[removed] | $135 million |

[removed] | $105 million |

[removed] | $45 million |

[removed] | $90 million |

**Spot rate:** Tantrix, Inc., purchased its inventory from an Indian manufacturer at a cost of Rs.5,325,000. The dollar cost of this payable is $125,634.07 at today’s spot rate. What is the spot rate today?

[removed] | Rs. 4.2385/$ |

[removed] | $4.2385/Rs |

[removed] | Rs.42.3850/$ |

[removed] | $42.3850/Rs |

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