Mock test Flashcards
The two basic measures of liquidity are
A. Inventory turnover and current ratio
B. Current ratio and quick ratio
C. Gross profit margin and operating ratios
D. Current ratio and average collection period
B
B
Which of the following measure gives some indication of how quickly the firm payoff its creditors or suppliers?
A. Quick ratio
B. Inventory turnover
C. Trade payable turnover
D. Gross profit margin
C
If you have to estimate a regression beta for a publicly traded US technology company, listed on the NASDAQ, whose largest stockholders are global mutual funds, which of the following will yield your best estimate of the regression beta?
A. A regression of the stock returns against a technology stock index
B. A regression of the stock returns against the NASDAQ
C. A regression of the stock returns against the S&P 500
D. A regression of the stock returns against a global equity index
D
Under priced
Arnold Entertainment owns movie complexes and has 10 million shares trading at $10/share and $40 million in debt. Its current equity beta is 0.93 and it plans to raise fresh equity and retire all of its debt. If it does so and the marginal tax rate is 40%, what will its beta be after the transaction?
0.75
Firm A and Firm B have total debt to total asset ratios of 70 per cent and 30 per cent and returns on total assets (ROA) of 20 per cent and 30 per cent, respectively. Which firm has a greater
return on equity (Hint: Total assets= Total debt + Shareholders’ equity)?
Firm A
You have been asked to use discounted cash flow model to value a small publicly traded coffee company. The company earned $ 2 million in after-tax operating income and reported net operating assets of $ 10 million in the most recent year. Assuming that the after-tax operating
income and net operating assets will grow at 10% for the next 4 years, and then free cash flows to firm grow at a constant rate of 4% from year 5. The weighted average cost of capital is 8%.
Estimate the present value of terminal value at the end of year 4.
$30.52 million
