1. A company’s book-value based debt ratio (defined here as total liabilities divided by total assets) is 67.4% which strikes me as being a little too high relative to the competition. I decide to recalculate the debt ratio using market-value based information. From the notes to the financials the company has revealed that the total market value of their interest-bearing debt currently totals $1.9 Billion and from the balance sheet I determine that all other non interest-bearing debt and liabilities total $4.6 billion. I determine the price of the company’s stock as of the date of the balance sheet to be $32/share and the company currently has 203,125,000 shares of stock outstanding. Identify the true statement:
a. The market-value based total equity value is approximately $6.5 billion
b. Total market-value based assets equal approximately $13.0 billion
c. The market-value based debt ratio is approximately 50.0%
d. All of the statements above are true
e. All of the statements above are false
2. A U.S. corporation that operates internationally looks to project sales for the coming year based on previous results. The U.S. dollar is projected to be strong and grow stronger relative to the foreign currencies in which the company operates. If you are making the projections for the company’s sales in the future, generally speaking what is the impact a strong U.S. dollar will have on the projected foreign sales for this international company?
a. A negative (downward) impact as we convert the foreign currency to domestic (U.S. ) currency
b. A positive (upward) impact as we convert the foreign currency to domestic (U.S. ) currency
c. Not enough information to speculate
d. No impact
3. am looking at a balance sheet for a company and I encounter a line that looks as follows:
PPE (net of accumulated depreciation totaling $ 1.65 million) $ 8.76 million
Identify the true statement regarding this company’s PPE:
a. The Book Value (or Net Book Value – same thing) of this company’s PPE is $ 7.11 million
b. The historic purchase price of this PPE in total was $ 10.41 million
c. Gross PPE for this company would be $ 7.11 million
d. The historic purchase price of the PPE is $ 8.76 million
e. All of the statements shown are false
4. am considering buying a preferred stock that pays a fixed dividend of $2.00 per share. The dividend has stayed constant (no increases) for the past 15 years and is projected to do so by me going forward as far out as I can tell. I desire a return on all of my equity investments of 8.0% per year. What should I be willing to pay for one share of this preferred stock?
a. $30/share
b. $25/share
c. $16/share
d. $20/share but only if I hold the stock for ten years
e. insufficient information to answer this question
5. Identify the false statement:
a. Stock prices generally move in tandem with Free Cash Flow to Equity Investors
b. Stock prices tend to rise with increases in dividends
c. The Capital Asset Pricing Model is a "single factor" model
d. All of the above are true
e. All of the above are false