Oil Exploration

1. (TCO A) Which of the following statements is false? (Points : 5)

 

Question 3.
a. $41.58
b. $42.64
c. $43.71
d. $44.80
e. $45.92

4. (TCO G) Singal Inc. is preparing its cash budget. It expects to have sales of $30,000 in January, $35,000 in February, and $35,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, which are the expected cash receipts for March?
a. $24,057
b. $26,730
c. $29,700
d. $33,000
e. $36,300

(Points : 20)

5. (TCO G)
Consider the information for the following four firms.

Firm

Cash

Debt

Equity

rD

rE

τc

Eenie

0

150

150

5%

10%

40%

Meenie

0

250

750

6%

12%

35%

Minie

25

175

325

6%

11%

35%

Moe

50

350

150

7.50%

15%

30%

Which is the weighted average cost of capital for Meenie closest to?

A) 10.5%

B) 7.4%

C) 10.0%

D) 8.8%

(Points : 30)

1. (TCO H) Desai Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm’s cash conversion cycle?

Annual sales =
Annual cost of goods sold =
Inventory =
Accounts receivable =
Accounts payable = $45,000
$30,000
$4,500
$1,800
$2,500

a. 28 days
b. 32 days
c. 35 days
d. 39 days
e. 43 days (Points : 30)

2. (TCO C) A firm buys on terms of 2/8, net 45 days, it does not take discounts, and it actually pays after 58 days. What is the effective annual percentage cost of its nonfree trade credit? (Use a 365-day year.)
a. 14.34%
b. 15.10%
c. 15.89%
d. 16.69%
e. 17.52%

(Points : 30)

3. (TCO E)

Division

Asset

Beta

Next Period’s Expected Free Cash

Flow ($mm)

Expected

Growth

Rate

Oil Exploration

1.4

450

4.0%

Oil Refining

1.1

525

2.5%

Gas and Convenience Stores

0.8

600

3.0%

The risk-free rate of interest is 3% and the market risk premium is 5%.

Which is the cost of capital for the oil refining division closest to?

A) 6.5%

B) 7.0%

C) 8.5%

D) 10.0%

(Points : 30)

You expect CCM Corporation to generate the following free cash flows over the next 5 years.

Year

1

2

3

4

5

FCF ($ millions)

25

28

32

37

40

If CCM has $200 million of debt and 8 million shares of stock outstanding, then which is the share price for CCM closest to?

A) $49.50

B) $12.50

C) $19.35

D) $24.50

[removed]

5. (TCO D)
Which is the standard deviation of the returns on Stock A from 2000 to 2009 closest to?

Year End

Stock A Realized Return

(R – R)

(R – R)2

2000

46.3%

29.85%

0.0891023

2001

26.7%

10.25%

0.0105063

2002

86.9%

70.45%

0.4963203

2003

23.1%

6.65%

0.0044223

2004

0.2%

-16.25%

0.0264063

2005

-3.2%

-19.65%

0.0386123

2006

-27.0%

-43.45%

0.1887903

2007

27.9%

11.45%

0.0131103

2008

-5.1%

-21.55%

0.0464403

2009

-11.3%

-27.75%

0.0770063

A) 33.2%

B) 16.4%

C) 31.5%

D) 11.0%

(Points : 35)

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Oil Exploration was first posted on November 5, 2019 at 6:59 am.
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