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Finance 3101 Final Keen Exam with A+ Graded Answers., Exams of Finance

Finance 3101 Final Keen Exam with Question and A+ Graded and Verified Answers.

Typology: Exams

2024/2025

Available from 11/19/2024

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Finance 3101 Final Keen Exam with A+
Graded Answers.
1. What does the equity multiplier represent - Correct Ans: ✔✔Use
of Debt
2. What is the relationship between the 3 principal total debt ratios -
Correct Ans: ✔✔Positive or direct
3. What is the DuPont framework used for - Correct Ans: ✔✔To
compare why different firms have different ROE
4. How does increased use of debt affect the cash coverage ratio
and ceteris paribus, a firms ROE (through the DuPont Framework)
- Correct Ans: ✔✔Increased use of debt lowers cash coverage
ratio and increases a firms ROE
5. What are the 4 basic components used to estimate a projects cash
flows - Correct Ans: ✔✔Initial capital investment; change in
NWC; OCF; and cash flow from salvage
6. What is meant by the cost of capital and why is the cost of capital
important - Correct Ans: ✔✔The require rate of return by
investors and cost of capital is the discount rate we use to
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Finance 3101 Final Keen Exam with A+

Graded Answers.

  1. What does the equity multiplier represent - Correct Ans: ✔✔Use of Debt
  2. What is the relationship between the 3 principal total debt ratios - Correct Ans: ✔✔Positive or direct
  3. What is the DuPont framework used for - Correct Ans: ✔✔To compare why different firms have different ROE
  4. How does increased use of debt affect the cash coverage ratio and ceteris paribus, a firms ROE (through the DuPont Framework)
    • Correct Ans: ✔✔Increased use of debt lowers cash coverage ratio and increases a firms ROE
  5. What are the 4 basic components used to estimate a projects cash flows - Correct Ans: ✔✔Initial capital investment; change in NWC; OCF; and cash flow from salvage
  6. What is meant by the cost of capital and why is the cost of capital important - Correct Ans: ✔✔The require rate of return by investors and cost of capital is the discount rate we use to

calculate the NPV of the project (make capital budgeting decisions)

  1. What is a firms WACC used for and by what other name is it sometimes known - Correct Ans: ✔✔The discount rate for the firms future cash flows
  2. Hurdle Rate
  3. What is the difference between book values and market values - Correct Ans: ✔✔Book: from Balance sheet.
  4. Market: amount of cash someone is willing to pay for an item
  5. From where do we get the capital structure weights and component costs for the WACC - Correct Ans: ✔✔From Market Values or from Book Values
  6. What is the relationship between the risk of a proposed project and its WACC - Correct Ans: ✔✔Positively Related
  7. What are the WACC weights for Debt and Equity for an unilevered firm - Correct Ans: ✔✔D/V = 0, E/V = 1