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# Fin 486 Strategic Financial Management Final Exam Answer

FIN 486 Strategic Financial Management Final Exam Answer

FIN 486 Strategic Financial Management Final Exam Answer

FIN 486 Strategic Financial Management Final Exam Answer

FIN 486 Strategic Financial Management Final Exam Answer

1. Income Statement Preparation – 25 points

a. Prepare an income statement for Cathy Chen, CPA, for the year ended December 31, 2009
Cathy Chen, CPA

b. In the first year of practise, Cathy Chen will have met her operating expense of \$290K,…………………………….

2. Pro Forma Income Statement – Scenario analysis – 15 points

a. Pro Forma Table for Percentage of Sales Statement
Pro Forma Income Statement Allen Products, Inc. for the Year Ended December 31, 2010 |
Pessimistic |

b. Percent of Sales is a simple method that accepts all costs to the company is variable and shown as a percentage to sales. …………………………….

3. Payback Period – 1

a. Determine the payback period for this project.

b. Should the company accept the project? Why or why not?

4. NPV – 15 points
Calculate the net present value (NPV) for the following 20 year projects. Comment on the acceptability of each. Assume that the firm has an opportunity cost of 14%.
a. Initial investment is \$10,000; cash inflows are \$2,000 per year

b. Initial investment is \$25,000; cash inflows are \$3,000 per year

c. Initial investment is \$30,000 ; cash inflows are \$5,000 per year

5. WACC – Book weights – 15 points
Ridge Tool has on its books the amounts and specific (after-tax) costs shown in the following table for each source of capital.
a. Calculate the firm’s weighted average cost of capital using book value weights.

b. Explain how the firm can use this cost in the investment decision-making process.

6. Cash conversion cycle – 10 points
American Products is concerned about managing cash efficiently. On the average, the inventories have an age of 90 days, and accounts receivable are collected in 60 days. Accounts payable are paid …………………………………………………

7. Cost of giving up cash discounts – 10 points
Determine the cost of giving up cash discounts under each of the following terms of sale. (Note: Assume a 365 day year)
a. 2/10 net 30

b. 1/10 net 30

c. 2/10 net 45

d. 3/10 net 45

e. 1/10 net 60

f. 3/10 net 30

g. 4/10 net 180