Name: __________________________

Student Number: ___________________

) Instructions:)Please)be$sure$to$show$your$work)when)performing)calculations)for)the)problems) section;)you)must)do)so)to)receive)full)marks.)You)must)hand$in$everything,)upon)completion)of) the)exam.)You)have)two$hours)to)complete)the)exam.)) 1. Suppose a firm uses a constant WACC in determining the value of capital budgeting projects rather than using the security market line. The firm will tend to _____________________. A) accept profitable, low risk projects and reject unprofitable, high risk projects B) accept profitable, low risk projects and accept unprofitable, high risk projects C) reject unprofitable, high risk projects D) become more risky over time E) accept profitable, low risk projects 2. Delta, Inc. follows a flexible short-term financing policy. The firm produces educational toys, which is a cyclical business. When the firm needs to pay for large inventories in advance of peak sales, the firm will: A) Sell marketable securities. B) Negotiate a bankers acceptance. C) Arrange for a field warehouse loan. D) Issue a trust receipt to the bank in exchange for funding. E) Issue commercial paper with a maturity of 270 days or less. 3. The present value of eliminating float is equal to the amount of ______________. A) mail float B) collection float C) processing float D) total float E) availability float

St.$Francis$Xavier$University$ Department)of)Business)Administration) BSAD)342:)Cases)in)Financial)Management) ) Final$Examination$ Winter)2010) ) Prof.)Kirk)Collins)

4. The theory that a change in the capital structure weights is exactly offset by the change in the cost of equity is known as: A) Homemade leverage. B) Financial leverage. C) The targeted capital structure theory. D) M&M Proposition I. E) M&M Proposition II. 5. BDJ, Inc. has 31,000 shares of stock outstanding with