**Devry BUSN 379 Week 8 Final Exam**

**(TCO 1)** Likeline, Inc., has sales of $445,000, costs of $173,000, depreciation expense of $72,000, interest expense of $36,000, and a tax rate of 35 percent. What is their net income?

**(TCO 1)** Hamble, Inc., has sales of $19,070, costs of $10,460, depreciation expense of $2,530, and interest expense of $1,600. If the tax rate is 35 percent, what is the operating cash flow, or OCF?

**(TCOs 2 and 3)** Cee Co. issued 20-year, $1,000 bonds at a coupon rate of 7 percent. The bonds make annual payments. If the YTM on these bonds is 4 percent, what is the current bond price?

**(TCO 3)** Sixteenth Bank has an issue of 6% preferred stock with a $100.00 par value that just sold for $89 per share. What is the bank’s cost of preferred stock? (Show your work and round your answer to two decimal places.

**(TCOs 3 and 5)** You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? (Show your work.)

**(TCO 3)** A stock has a beta of 0.75, the expected return on the market is 12 percent, and the risk-free rate is 3 percent. What must the expected return on this stock be? (Show your work.

**(TCO 4)** Suppose Pat, Ltd. just issued a dividend of $2.50 per share on its common stock. The company’s dividends have been growing at a rate of 5%. If the stock currently sells for $65, what is your best estimate of the company’s cost of equity? (Show your work.)

**(TCO 4)** Given the following information, calculate the weighted average cost for the Ban Corp.

**Percent of capital structure:**

Preferred stock 10%

Common equity 70%

Debt 20%

**Additional information:**

Corporate tax rate 34%

Dividend, preferred $8.00

Dividend, expected common $4.00

Price, preferred $80.00

Growth rate 5%

Bond yield 7%

Price, common $80.00

**(TCO 7)** What are some important elements of the collection policy?

**(TCO 1)** Explain the concept of the stakeholder in contemporary finance

**(TCO 6)** What are the factors that make up the capital asset pricing model? Where would you typically find the data for these factors?