1- Which one of the following statements would not be TRUE for a zero-leveraged firm?

a)There would be no tax shield.

b)L would be equal to U.

c)Firm value would be maximized.

d)WACC would be the cost of equity.

e)Other:

2- A company went public by issuing 500.000 shares of common stock at 10 TL per share. The shares are currently traded with a 40% premium. Current benchmark government bond rate is 8%, market return is 20% and the company has an unlevered beta coefficient of 0.26. At the beginning of the year, it issued 50,000 bonds of 1,000 TL par paying 10% coupon annually maturing in 20 years. The yield to maturity is always 10,61%. The bonds are currently trading with 80 TL discount. If the tax rate is 20%, what would be the approximate weighted average cost of capital (WACC) using the market values of debt and equity?

a)11,00%

b)8,84%

c)10.58%

d)9.28%

e)Other:

3- Suppose that a company's most recent dividends per share paid upon the last year's net income was 1,6 TL. The share price of the company is fairly valued in the market at 10 TL. The expected dividend growth rate is 2% in perpetuity. Given that the risk-free rate is 3% and market risk premium is 10%, what happens to the share prices when the whole market increases by 10%?

a)increase by 15,32%

b)increase by 11,79%

c)increase by 21,89%

d)increase by 15,00%

e)Other:

4- A manufacturer currently prices its product at 10 TL per unit. Last year, the manufacturer sold 60.000 units. The variable cost per unit is 6 TL. Total fixed costs are 120.000 TL. The manufacturer intends to increase sales by 5%. Current accounts receivable collection period is 30 days. If the manufacturer wants to relax its credit standards, the expectation is that bad debt expenses will increase from 1% of sales to 2% of sales. The opportunity cost of investing in accounts receivables is 15%. In order to benefit from relaxing its credit standards, what would be the expected maximum accounts receivable collection period? (Assume that existing customers are not expected to alter their payment habits. 1 year = 365 days)

a)82,38 days

b)63,33 days

c)105,82 days

d)63,73 days

e)Other:

5- A company has an annual demand of 16,000 products. The products cost 2 TL each. Ordering and transport costs amount to 200 TL per order. The annual cost of holding one product in stock is estimated to be 1.20 TL. Assume that the company adopts the EOQ as its order quantity and it has to have half of the EOQ as inventory on hand when an order is placed. How many weeks does it take for an order to be delivered to the company? (1 year = 52 weeks)

a)2

b)3

c)4

d)5

e)Other:

6- Refer to Question 6. What is the cash conversion cycle in year 2017? (1 year = 360 days)

a)342 days

b)162 days

c)198 days

d)18 days

e)Other:

7- Refer to Question 6 and 7. Suppose that the company wants to double each turnover rates in year 2018. With this improvement, the company would like to pay some of its short-term and long-term debts. Assuming that all main assumptions are still valid in 2018 except for the fund raising activities (the last two bullets), what would be the total debt in the 2018 balance sheet?

a)604,99 TL

b)1297,01 TL

c)501,24 TL

d)417,49 TL

8- Suppose that a company is about to decide on a replacement investment. The old machine on hand was purchased two years ago for 65,000 TL. Straight-line depreciation is employed for the old machine where useful life is 5 years. The current market value of the old machine is determined as 23,000 TL. The new machine that will replace the old one would cost 140,000 TL excluding 4,000 TL shipping and 2,000 TL installation costs. The acquisition of the new machine will increase accounts receivable by 9,000 TL, the inventory by 13,000 TL, and accounts payable by 15,000 TL. The corporate tax rate is 30%. What would be the initial investment outlay?

a)125.200 TL

b)118.200 TL

c)123.000 TL

d)134.200 TL

e)Other:

9- In a capital project, an old machine, which was purchased at a cost of 600.000 TL 3 years ago and had a useful life of 5 years will be sold now at a price of 300.000 TL. The machine also had a salvage value of X. The company applies accelerated depreciation method. Tax rate is 40%. In order to produce a net disposal cash inflow of 269.472 TL, what should be the X?

a)60.000 TL

b)80.000 TL

c)100.000 TL

1d)20.000 TL

e)Other:

Answer rating: 100% (QA)

1 Which one of the following statements would not be TRUE for a zeroleveraged firm e Other The statement WACC would be the cost of equity would not be true for a zeroleveraged firm 2 A company went pu... View the full answer