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Certified Treasury Professional Questions 51–55 (page: 12)

If a company has $126 million in debt at an average cost of 7% and $234 million in equity at a cost of 11%, what is its weighted average cost of capital, assuming a marginal tax rate of 35% and a risk- adjusted rate of 13%?

A cash manager has determined that the break-even amount for justifying a wire transfer over an ACH for concentration of funds is $145,000. Using a wire instead of an ACH gives the company use of the funds two days earlier to make overnight investments. Based on a wire transfer cost of
$10.00 and an ACH transaction cost of $0.70, what is the company’s overnight investment interest rate on a 365-day year basis?

Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT:

At the end of the year, ABC Company’s actual revenue is $85,000,000 versus budget revenue of $90,000,000. Actual operating expenses are $20,000,000 versus budget operating expenses of $22,000,000. Budget variance analysis would indicate a(n):

Which of the following is NOT a drawback to using ROI as a performance measure?