AaBbCCDc AaBbCcDc AaBbCc AaBbCcC Find - 1 Normal T No Spac... Heading 1 Heading 2 Go Replace Paragraph Select ~ ctate Sensit Styles Editing Voice Sensit 1 14 15 + 16 1 17 1 1 . Mass Co. has a beta of 1.20. The firm currently has 30% debt, but is considering changing its capital structure to be 20% debt and 80% equity. If its corporate tax rate is 40%, what is its levered beta at 20% debt level? Hint: First calculate unlevered beta using old capital structure and then calculate levered beta using the new capital structure. C a. 1.10 ~ b. 0.91 C c. 1.19 ~ d. 1.01 ~ e. 1.75 3.5 points QUESTION 2 Which of the following events is likely to encourage a company to raise its target debt ratio? An increase in the corporate tax rate An increase in the personal tax rate Focus 26"CFind AaBbCCDc AaBbCcDc AaBbCc AaBbCcC 4 Replace 1 Normal No Spac... Heading 1 Heading 2 Dictate Sensitivity Editor Select ~ Paragraph Styles Editing Voice Sensitivity Editor QUESTION 13 Lowell Company is considering adding a robotic paint sprayer to the production line. The prayer's base price is $100,000, and it would cost another $10,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $66,000. The MACRS rates for the first three years are 33%, 45%, and 15%. The machine would require and, increase in net working capital of $5,000. The sprayer would not change revenues, but it is expected to save the firm $40,000 per year in before tax operating costs, mainly labor. Lowell's marginal tax rate (federal plus state) is 25%. If the project's cost of capital is 12%, What is the TOTAL FREE CASH FLOW FOR YEAR 3? -+. Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value $64,986 $90,550 ET $86,050 $75,600 3.5 points QUESTION 14 Lowell Inc. has $2 million in inventory and $5 million in accounts receivable. Its average daily sales are $100,000 and daily purchases are $50,000. The company's payables deferral period (accounts payable divided by daily purchases) is 40 days. What is the length of the company's cash conversion cycle? 50 days 30 days 40 days 60 days Focus Text Prediction 165 12 Accessibility Investigate ENG 26"C 07/QUESTION 9 3.5 points 1. Lowell Inc wants to sharply reduce its cash conversion cycle. Which of the following steps would reduce its cash conversion cycle? Everything else being same, the company decreases its average inventory. Everything else being same, the company increases the credit period provided to customers. " Everything else being same, the company pays faster to its suppliers. All of the statements above are correct. 3.5 points QUESTION 10 1. Lowell Inc. is analyzing its cost structure. Its fixed operating costs are D Focus Accessibil 4x ates 26 C Oimarly Table Design Layout E AaBbCCDc Find AaBbCcDC AaBbCc AaBbCcC A Replace 1 Normal No Spac.. Heading 1 Heading 2 Dictate Select - Sensitiv Paragraph Styles Editing Voice Sensitive 14 . 1 . 15 . F . 16 1 1 17 3.5 points QUESTION 2 Which of the following events is likely to encourage a company to raise its target debt ratio? C An increase in the corporate tax rate C An increase in the personal tax rate C An increase in the company's operating leverage Statements a and c are correct 3.5 points QUESTION 3 On average, a firm purchases $2.000,000 in merchandise a month. It has inventories equal to two months purchases on hand at all times! If the firm analyzes its accounts using a 365-day year, what is the firm's inventory conversion period? Note: IC = Inv/Avg. daily purchases ROUND THE ANSWER TO THE NEAREST FULL DAY 22 3.5 points Focus BE\fYears 2 4 Depreciation rate 20% 32% 19% 12% In FOUR years, this equipment can be sold for about 19 percent of its acquisition cost. Lowell is in the 25 percent marginal tax bracket and has a required return on all its projects of 18 percent. Based on these preliminary project estimates, what is the Free Cash Flow for the Year 0 of the project? Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value -2.300,000 -2.240,000 -2,330.000 -2,360,000 D FOCUS E (United States) Text Predictions: On 56 XX Accessibility Investigate O W 26 C cher MAaBbCcDc|AaBbCcDc AaBbCc AaBbCcC 1 Normal No Spac... Heading 1 Heading 2 Paragraph lace rate 1 1.Z Styles Suppliers. 10 . 11. All of the statements above are correct. QUESTION 10 3.5 points 1. Lowell Inc. is analyzing its cost structure. Its fixed operating costs are $300,000, its variable costs of $3.00 per unit produced, and it's products sell for $4.00 per unit. What is the company's breakeven point, i.e., at what unit sales volume would income equal costs? C 750,000 453,403 C 300,000 428,571 3.5 points QUESTION 11 Lowell Corporation buys on terms of 2/8, net 30 days, it does not take discounts, and it actually pays after 30 days. What is the effective annual percentage cost of its non-free trade credit? (Use a 365-day year.) 39.82% 25.92% 16.69% 19.19% D Focus essibility Investigate 26'CLayout AaBbCcDc = AaBbCcD