Corporate Finance: Quiz

Grading Summary
These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below.
Date Taken:
11/22/2014
Time Spent:
1 h , 36 min , 44 secs
Points Received:
100 / 100 (100%)

Question Type:
# Of Questions:
# Correct:
Short
6
N/A

Grade Details - All Questions

Question 1.
Question :
(TCO C) Blease Inc. has a capital budget of $625,000, and it wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts a net income of $475,000. If it follows the residual dividend policy, what is its forecasted dividend payout ratio?

(a) 40.61%
(b) 42.75%
(c) 45.00%
(d) 47.37%
(e) 49.74%

Student Answer: Answer: d. 47.37% Dividends paid = $475,000 - (40%)($625,000) = $225,000 Dividend payout ratio = $225,000/$475,000 = 47.37% Instructor Explanation:
Answer is: d
Chapter 17
Capital budget $625,000
Equity ratio 40%
Net income (NI) $475,000
Dividends paid = NI - (Equity ratio)(Capital budget) $225,000
Dividend payout ratio = Dividends paid/NI 47.37%

Points Received:
10 of 10 Comments:

Question 2.
Question :
(TCO F) The following data applies to Saunders Corporation's convertible bonds.
Maturity: 10
Stock price: $30.00
Par value: $1,000.00
Conversion price: $35.00
Annual coupon: 5.00%
Straight-debt yield: 8.00%
What is the bond's straight-debt value?

(a) $684.78
(b) $720.82
(c) $758.76
(d) $798.70
(e) $838.63

Student Answer: Answer: d. $798.70 Straight debt value=(N= 10, I/YR = 8, PMT = 50, FV = 1,000) = $798.70 Instructor Explanation:
Answer is: d
Chapters 23 and 24
Inputs to find the straight-debt value: N = 10; I/YR = 8; PMT = 50; FV = 1,000. $798.70

Points Received:
10 of 10 Comments:

Question 3.
Question :
(TCO B) Vu Enterprises expects to have the following data during the coming year. What is Vu's expected ROE?
Assets $200,000 Interest rate 8%
D/A 65% Tax rate 40%
EBIT $25,000

(a) 12.51%
(b)