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Tasks include computing weighted average cost of capital under changes in leverage and credit rating, estimating new stock price after additional debt and repurchase, and projecting future debt/equity ratio using dividends, capital expenditures, and leverage assumptions. Additional questions address cash balance evolution for an equity-funded firm, incorporating working capital, depreciation, capital spending, and financing mix, plus an ex-dividend stock price reaction under dividend taxation.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":20,"@type":76,"position":81},"https://docshare.wps.com/document/exam/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/corporate-finance-final-exam-fall-1992-practice-finals/393641/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/corporate-finance-final-exam-fall-1992-practice-finals/393641.png","ImageObject",300,407,{"name":92,"@type":93},"Franzy","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-11-09","2026-09-26",true,{"@type":102,"interactionType":103,"userInteractionCount":56},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"How do you compute a firm's current weighted average cost of capital (WACC) in the Fall 1992 questions?","Question",{"text":112,"@type":113},"Use the firm’s capital structure inputs (debt-equity in market value terms), equity beta with the risk-free rate and market risk premium, and after-tax cost of debt based on the stated market interest rate and tax rate, then weight equity and debt accordingly.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"What changes the WACC when the firm borrows additional debt and repurchases stock?",{"text":117,"@type":113},"The leverage increases and the credit rating declines, which raises the market interest rate on the new debt. Equity and debt weights also shift to the new capital structure, so the weighted average of equity cost and after-tax debt cost changes.",{"name":119,"@type":110,"acceptedAnswer":120},"How is the next-year debt/equity ratio expected to be determined under the alternative plan using capital expenditures and dividend yield doubling?",{"text":121,"@type":113},"The question links new financing of the planned capital expenditures with debt and uses the current per-share dividend and stock price to infer an increased dividend yield for next year, then infers the implied leverage (debt/equity) consistent with that financing and payout setup.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},393641,1790508555,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":19,"category_name":20,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":56,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":139,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":145,"preview_page_count":4},2336478945519,"https://ap-avatar.wpscdn.com/davatar_085a072bc5b1113ac321206ff7593b45","Practice finals Name:  \nCORPORATE FINANCE  \nFINAL EXAM: FALL 1992  \n1. You have been asked to analyze the capital structure of DASA Inc, and make recommendations on a future course of action. DASA Inc. has 40 million shares outstanding, selling at $20 per share and a debt-equity ratio (in market value terms) of 0.25. The beta of the stock is 1.15, and the firm currently has a AA rating, with a corresponding market interest rate of 10% . The firm's income statement is as follows:  \nEBIT $150 million  \nInterest Exp. $ 20 million  \nTaxable Inc. $130 million  \nTaxes $ 52 million  \nNet Income $ 78 million  \nThe current riskfree rate is 8% and the market risk premium is 5.5% .  \na. What is the firm's current weighted average cost of capital? (1 point)  \nb. The firm is proposing borrowing an additional $200 million in debt and repurchasing stock. If it does so its rating will decline to A, with a market interest rate of 11% . What will the Weighted average cost of capital be if they make this move? (1 point)  \nc. What will the new stock price be if they borrow $200 million and repurchase stock (assuming rational investors)? (1 point)  \nd. Now assume that the firm has another option to raise its debt/equity ratio (instead of borrowing money and repurchasing stock). It has considerable capital expenditures planned for the next year ($150 million) . The company also pays $1 in dividends per share currently (Current Stock Price=$20) . If the company finances all its capital expenditures with debt and doubles its  dividend yield from the current level for the next year, what would you expect the debt/equity ratio to be at the end of the next year. (3 points)  \nPractice finals Name:  \n2a. RYBR Inc., an all-equity firm, has net income of $100 million currently and expects this number to grow at 10% a year for the next three years. The firm's working capital increased by $10 million this year and is expected to increase by the same dollar amount each of the next three years. The depreciation is $50 million and is expected to grow 8% a year for the next three years. Finally, the firm plans to invest $60 million in capital expenditure for each of the next three years. The firm pays 60% of its earnings as dividends each year. RYBR has a cash balance currently of $50. Assuming that the cash does not earn any interest, how much would you expect to have as a cash balance at the end of the third year? (2 points)  \nb. Assume that RYBR had financed 20% of its reinvestment needs with debt, estimate the cash balance at the end of the third year. ( 2 points)  \nc. Now assume that stockholders in RYBR are primarily corporations. They are exempt from ordinary taxes on 85% of the dividends that they receive (Ordinary tax rate=30%), and pay capital gains on price appreciation at a 20% rate. If RYBR pays a dividend of $2 per share, how much would you expect the stock price change to be on the ex-dividend date? (2 points)  \n3. LOB Inc. is a firm with the following characteristics:  \nYear 1 2 3 After year 3  \nGrowth rate in EPS 20% 16% 12% 6%  \nROC 20% 20% 16% 12%  \nD/E 0% 10% 25% 50%  \ni NA 8% 8% 8%  \nBeta 1.40 1.25 1.15 1.00  \nThe firm has EPS currently of $2.00. The tax rate is 40% . The current riskfree rate is 6.5% . The tax rate is 40% . (The market risk premium is 5.5%)  \na. What would you project the EPS and DPS to be for the next three years? (2 points)  \nb. What is the terminal price (at the end of the third year)? (2 points)  \nc. What is your best estimate for the DDM Value per share? (2 points)  \nPractice finals Name:  \nCorporate Finance: Final Exam: Fall 1993  \n1. You are a corporate finance analyst at a management consulting firm, which has been approached by a company for advice on its capital structure decisions. The company, Boston Turkey Inc., has been in existence for only two years, and its stock is currently trading at $20 per share (There are 100,000 shares outstanding.) The following are the most recent financial statements ofthe company:","cbCaibCZP2KfoASq","https://ap.wps.com/l/cbCaibCZP2KfoASq","pdf",2764880,94,"English","# CORPORATE FINANCE\n## FINAL EXAM: FALL 1992\n## Practice finals\n## CORPORATE FINANCE: Final Exam: Fall 1993","[{\"question\":\"How do you compute a firm's current weighted average cost of capital (WACC) in the Fall 1992 questions?\",\"answer\":\"Use the firm’s capital structure inputs (debt-equity in market value terms), equity beta with the risk-free rate and market risk premium, and after-tax cost of debt based on the stated market interest rate and tax rate, then weight equity and debt accordingly.\"},{\"question\":\"What changes the WACC when the firm borrows additional debt and repurchases stock?\",\"answer\":\"The leverage increases and the credit rating declines, which raises the market interest rate on the new debt. Equity and debt weights also shift to the new capital structure, so the weighted average of equity cost and after-tax debt cost changes.\"},{\"question\":\"How is the next-year debt/equity ratio expected to be determined under the alternative plan using capital expenditures and dividend yield doubling?\",\"answer\":\"The question links new financing of the planned capital expenditures with debt and uses the current per-share dividend and stock price to infer an increased dividend yield for next year, then infers the implied leverage (debt/equity) consistent with that financing and payout setup.\"}]","Corporate Finance - Final Exam - Fall 1992 - Practice Finals | PDF",1790391304,237]