B. 25%C. 50%TEST NUMBER: ________________FI 3300 – CORPORATION FINANCEFINAL EXAMSummer 2008NAME _____________________________________________STUDENT NUMBER _________________________________CLASS DAYS/TIME _______________ INSTRUCTOR _________________________READ THE FOLLOWING DIRECTIONS VERY CAREFULLY. FAILURE TO FOLLOWTHESE INSTRUCTIONS WILL ALMOST CERTAINLY RESULT IN YOUR EXAM BEING MISGRADED WHICH WILL ADVERSELY AFFECT YOUR GRADE. IF THERE IS ANYTHING ABOUT THE DIRECTIONS THAT YOU DO NOT UNDERSTAND, ASK YOUR INSTRUCTOR IMMEDIATELY. 1. Fill in your name, student number, and the days and time of the class for which you are registered (for example, T/TH at 5:00pm) on the Answer Sheet as well as on the lines above.2. In the box on the Answer sheet titled “TEST NUMBER” record the number that appears in the upper right hand corner of this sheet on the line “TEST NUMBER” – since there are multiple versions of the exam, failure to do so may result in your exam being graded with the wrong answer key!!! DO NOT COPY FROM SOMEONE ELSE’S EXAM – YOUR NEIGHBOR MAY HAVE ADIFFERENT VERSION OF THE EXAM!!!3. Read each question very carefully. Consider all of the answer choices and then select the best correct answer – there is only one best answer per question. Circle the letter answer on the exam and record your answers on the Answer Sheet.NOTE WELL: ONLY THE ANSWER KEY WILL BE GRADED!!!4. You may use a financial calculator. No notes, formula sheets, scratch paper (use back pages of exam if necessary), or stored formulae allowed.The exam consists of 25 questions each worth 4.0 points. Choose the BEST ANSWER for each question. Your score will be computed as:[100 – (number missed x 4.0)].You will have 120 minutes to complete the exam. Do not leave any answers blank – an unanswered question will be graded as a wrong answer. Good luck.1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to:A. Maximize expected total corporate profit.B. Maximize expected EPS.C. Minimize the chances of losses.D. Maximize the stock price per share.E. Maximize expected net income.2. Venuava, Inc. reported net income of $4,211,600 for the fiscal year ending December 31,2006 and Venuava paid total dividends of $3,218,400 in 2006. If Venuava reported Retainedearnings of $43,886,600 on its December 31, 2005 balance sheet, what did Venuava report asRetained earnings on its December 31, 2006 balance sheet?A. $42,893,400B. $46,379,100C. $44,879,800D. $44,215,100E. None of the above are within $1,000 of the correct answer3. The financial ratio measured as total assets minus total equity, divided by total assets, is the: A. Total debt ratio B. Equity multiplier C. Debt-equity ratio D. Current ratio E. Times interest earned ratio 4. You are given the following information for a certain company:Return on Equity 40%Return on Assets 30%Net Profit Margin 8%Determine the company’s Debt Ratio.A. 0%B. 25%C. 50%D. 75%E. None of the above.Use the following information about the Iraga Company to answer question 5:Iraga CompanyBalance SheetsFor the Year Ending December 31, 2004 and 2005 2004 2005 Cash 1,800 900Accounts receivable 3,000 2,100Inventories 7,200 8,900 Total current assets 12,000 11,900Net fixed assets 65,000 75,100 Total assets 77,000 87,000Notes payable 300 900Accounts payable 3,200 4,700Accrued expenses 500 200 Total current liabilities 4,000 5,800Long-term debt 39,300 44,000Common stock ($0.20 par value) 13,700 11,700Retained earnings 20,000 25,500 Total liab. & equity 77,000 87,000Additional Data from 2005 Income Statement (in thousands):Depreciation $ 6,600Net income $ 11,000Net sales $290,0005. Net cash flow from operating activities for 2005 A. $17,200B. $19,500C. $7,000D. $18,300E. $18,0006. Suppose there is a financial security that promises to give you $5,000 eight years from today.All else constant, for a given nominal interest rate, a change from monthly compounding toannual compounding will cause the current price of this security to ___________________ .A. Increase.B. Decrease.C. Remain the same.D. Either increase or decrease depending on the number of years until the money is to bereceived.E. None of the above.7. The Adam Smith family just purchased a $350,000 house with an $110,000 down paymentand a 30-year mortgage loan at 6.50% per annum with monthly compounding. Payments aremade monthly. What is the remaining balance on the mortgage after 15 years?A. 236,619.21B. 174,141.94C. 217,677.42D. 172,807.76E. 216,009.708. Assume that the stated interest rate is 7.5% compounded continuously. What is the effectiverate?A. 7.50%B. 7.79%C. 7.82%D. 0.075%E. 0.079%9. Kerri deposits $8,000 in a bank account today. She makes another deposit of $14,000 into theaccount at the end of year one and she makes a third deposit of $10,000 at the end of yeartwo. If the bank pays interest at 8 percent compounded annually, how much will she have inher account at the end of three years?A. $37,207.30B. $40,183.88C. $34,451.20D. $28,591.20E. None of the above is within $100 of the correct answer.10. Harriet wishes to save money to provide for her retirement. Beginning one year from nowshe will begin depositing the same fixed amount each year for the next 20 years into aretirement savings account. In exactly seven years from now she will withdraw $10,000.Starting one year after making her final deposit, she will withdraw $135,000 annually foreach of the following 15 years (i.e. he will make 15 withdrawals in all). Assume that theinterest rate is 9% p.a. over both the depositing period and the withdrawal period. In order forLydia to have sufficient funds in her account to fund her retirement, how much should shedeposit annually (rounded to the nearest dollar)? A. $97,368B. $20,064C. $21,870D. $23,838E. $31,02011. Consider three investment alternatives: a perpetuity, an ordinary annuity and an annuity due.All three have the SAME payment amount. The annuity due and the ordinary annuity havethe same number of payments (e.g., 6 payments). The interest rate is positive and the samefor all three investments. Given this information, which of the following statements iscorrect?A. The present value of the ordinary annuity is greater than the present value of the annuitydue.B. The perpetuity and the annuity due have the same present value.C. The future value of the ordinary annuity is less than