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and the appropriate discount rate is 6 percent for the cash flows, then what is the
profitability index for the project?
12. How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You
know that the firm’s cost of debt capital is 10 percent and the cost of equity capital is
20% What proportion of the firm is financed with debt?
13. The most important information needed to determine if companies can pay their
current obligations is the:
14. Process costing is used when:
15. A cost which remains constant per unit at various levels of activity is a:
16.The group of users of accounting information charged with achieving the goals of the
business is its:
17. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for the
year ending September 30, 2006. It also has current liabilities of $1,041,012, common
equity of $1,500,000 and retained earnings of $1,468,347. How much long-term debt
does the firm have?
18. The cash conversion cycle?
19. Ajax Corp. is expecting the following cash flows – $79,000, $112,000, $164,000,
$84,000, and $242,000 – over the next five years. If the company’s opportunity cost is 15
percent, what is the present value of these cash flows? (Round to the nearest dollar.)
20. Jack Robbins is saving for a new car. He needs to have $21,000 for the car in three
years. How much will he have to invest today in an account paying 8 percent annually to
achieve his target? (Round to nearest dollar)
21. Which of the following presents a summary of changes in a firm’s balance sheet from
the beginning of an accounting period to the end of that accounting period?
22. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is
expected to exist forever. The company is currently financed with 75 percent equity and
25 percent debt. Your analysis tells you that the appropriate discount rates are 10
percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of
the stock.