# BUSN 379 BUSN379 Week 8 Final Exam with Answers (DeVry)

BUSN 379 BUSN379 Final Exam (DEVRY)

- (TCO 1) Lifeline, Inc., has sales of $685,000, costs of $273,000, depreciation expense of $51,000, interest expense of $60,000, and a tax rate of 35 percent. What is their net INCOME?
- (TCO 1) Handler, Inc., has sales of $19,430, costs of $9,460, depreciation expense of $2,230, and interest expense of $1,620. If the tax rate is 35 percent, what is the operating cash flow, or OCF?
- (TCOs 2 and 3) Bey Co. issued 20-year, $1,000 bonds at a coupon rate of 7 percent. The bonds make annual payments. If the YTM on these bonds is 5 percent, what is the current bond price?

(TCO 3) Seventeenth Bank has an issue of 9% preferred stock with a $100.00 par value that just sold for $119 per share. What is the bank’s cost of preferred stock? (Show your work and round your answer to two decimal places.

(TCOs 3 and 5) You own a portfolio that has $1,500 invested in Stock A and $2,600 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the

portfolio? (Show your work.)

TCO 3) A stock has a beta of 1.25, the expected return on the market is 12 percent, and the risk-free rate is 2 percent. What must the expected return on this stock be? (Show your work.)

(TCO 4) Suppose Pat, Ltd. just issued a dividend of $2.40 per share on its common stock. The company’s dividends have been growing at a rate of 5%. If the stock currently sells for $80.00, what is your best estimate of the company’s cost of equity? (Show your work.)

(TCO 4) Given the following information, calculate the weighted average cost for the Ban Corp.

Percent of capital structure:

Preferred stock 10%

Common equity 70% Debt 20%

Additional information:

Corporate tax rate 34%

Dividend, preferred Dividend, expected common Price, preferred

Growth rate

Bond yield

Price, common

$8.00 $4.00

$80.00

5% 7%

$80.00

(TCO 6) What is the relationship between risk and return? What are some mathematical ways to measure risk?

What are some of the advantages and disadvantages of the Internal Rate of Return methodology?