Calculate the average collection period for Dotte Inc. if its accounts receivabl
ID: 2699787 • Letter: C
Question
Calculate the average collection period for Dotte Inc. if its accounts receivables were $500 and $600 at the end of each of the last two years, and its revenue over the last year was $3,000:
60 days
61 days
67 days
73 days
What is the "Current Yield" of a bond with a 5% annual coupon, 5 years until maturity, $1,000 face value, and a price of $500?
1.0%
5.0%
10.0%
22.7%
An initial public offering (IPO) would be sold in the ________ market.
primary
secondary
tertiary
after
What is the payback period of the following cash flows: Year 0: -10, Year 1: 12, Year 2: 3, and Year 3: 2? ?
0 years
1 years
2 years
3 years
After analyzing two mutually exclusive projects, you find project A has an IRR=16% and a NPV=$600, while project B has an IRR=19% and a NPV=$560. Based on this information you should choose project A.
True
False
RRR Inc. has $1,000,000 in debt. Using free cash flows and WACC and a estimated growth rate, you calculate the total value of the firm to be $2,000,000. If there are 100,000 common stock shares outstanding, what is RRR's estimated stock price per share?
10
20
40
100
What is the price of a common stock paying $3.50 in annual dividends next year and then are expected to grow at 2% per year forever. Assume a discount rate of 12%?
19
28
29
35
What is the yield to maturity for a bond paying a 5% annual coupon, 1 year until maturity and sells for $800? Assume par = $1,000.
30.50%
31.25%
33.56%
None of the above.
For a company that has $1,000 in taxable income and the tax rates are as follows: For taxable income up to $800 - tax rate = 20% For income above $800 - tax rate = 40% What are the firm's average and marginal tax rates?
24% and 40%
20% and 20%
20% and 40%
40% and 40%
What is the NPV of a project with the following cash flows and a 10% discount rate: Year 0: -10, Year 1: 12, Year 2: 3, and Year 3: 2?
4.6
4.9
5.1
None of the above
What is the yield to maturity for a bond with a 10% annual coupon that has six years until maturity and sells for $900? Assume par = $1,000.
6.0%
8.5%
10.0%
12.5%
60 days
61 days
67 days
73 days
Explanation / Answer
1) Average of accounts receivables = (500+600)/2 = 550 ; Receivable turnover ratio = 3000/550 = 5.4545 ; Average collection period = 365/5.454 = 67 days ; ans is 67 days; 2) 500 = 50/k + 50/k^2 + ....50/k^5 + 1000/k^5 ; k = 1.227 ; 1+r = 1.227 ; r = 0.227 = 22.7 %; 3) An initial public offering (IPO) would be sold in the ________ market ;;;; primary ; 4) What is the payback period of the following cash flows: Year 0: -10, Year 1: 12, Year 2: 3, and Year 3: 2? ? 1 years ; 5) True; 6) 2000000/100000 = $ 20; 7) P = 3.5/1.12 + 3.5*1.02/(0.12-0.02)*1.12^2 = 31.58; 29 is ans ; 8) 800 = 50/k +1000/k ; k = 1.3125 ; 1+r = 1.3125; r = 0.3125 = 31.25 % ; 9) 40% and 40% ; 10 NPV = -10 +12/1.1 +3/1.1^2 +2/1.1^3 = 4.89 ; 11) 900 = 100/(1+r) + 100/(1+r)^2 +...100/(1+r)^6 + 1000/(1+r)^6 ; 1+r=1.125 ; r =0.125 ; r =12.5 % ;
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