Financial Management
Which of the following is NOT one of the steps taken in the financial planning process?
Answer
Monitor operations after implementing the plan to spot any deviations and then take corrective actions.
Determine the amount of capital that will be needed to support the plan.
Develop a set of forecasted financial statements under alternative versions of the operating plan in order to analyze the effects of different operating procedures on projected profits and financial ratios.
Consult with key competitors about the optimal set of prices to charge, i.e., the prices that will maximize profits for our firm and its competitors.
4.167 points
Question 2
 
Scott Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that if a project’s expected NPV is negative, it should be rejected.
WACC:
11.00%
 
 
 
 
Year
0
1
2
3
4
Cash flows
-$1,000
$350
$350
$350
$350
Answer
$81.56
$85.86
$90.15
$94.66
4.167 points
Question 3
 
With its current financial policies, Flagstaff Inc. will have to issue new common stock to fund its capital budget. Since new stock has a higher cost than reinvested earnings, Flagstaff would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock?
Answer
Increase the percentage of debt in the target capital structure.
Increase the proposed capital budget.
Reduce the amount of short-term bank debt in order to increase the current ratio.
Reduce the percentage of debt in the target capital structure.
4.167 points
Question 4
 
Jill’s Wigs, inc. had the following balance sheet last year:

Cash                               $800
Accounts payable                   $350
Accounts receivable         450
Accrued wages    150
 Inventory    950
Notes payable          2,000
Net fixed assets       34,000  
Mortgage                               26,500
Common…