FIN202-FE KEY KỲ 3
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1
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QN\=1 (3772)
(20256) Cash dividends are paid out of
a.
residual cash.
b.
liquidated assets.
c.
long-term debt.
d.
all of these.
(20256) Cash dividends are paid out of
a.
residual cash.
b.
liquidated assets.
c.
long-term debt.
d.
all of these.
A
2
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QN\=2 (3780)
(20251) If you have loaned capital to a firm, then you could be
a.
a shareholder.
b.
a stakeholder.
c.
a partner.
d.
all of these.
(20251) If you have loaned capital to a firm, then you could be
a.
a shareholder.
b.
a stakeholder.
c.
a partner.
d.
all of these.
B
3
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QN\=3 (3767)
(20275) Which of the following is a principal within the agency relationship?
a.
a company engineer
b.
the CEO of the firm
c.
a shareholder
d.
the board of directors
(20275) Which of the following is a principal within the agency relationship?
a.
a company engineer
b.
the CEO of the firm
c.
a shareholder
d.
the board of directors
C
4
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QN\=4 (3773)
(20264) Which of the following business organizational forms subjects the owner(s) to unlimited liability?
a.
(i) sole proprietorship
b.
(ii) partnership
c.
(iii) corporation
d.
(i) and (ii)
(20264) Which of the following business organizational forms subjects the owner(s) to unlimited liability?
a.
(i) sole proprietorship
b.
(ii) partnership
c.
(iii) corporation
d.
(i) and (ii)
D
5
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QN\=5 (3820)
(20327) One of the following statements is NOT true of asset turnover ratios.
a.
Asset turnover ratios measure the level of sales per dollar of assets that the firm has.
b.
The fixed assets turnover ratio is less significant for equipment-intensive manufacturing industry firms than the total assets turnover ratio.
c.
The higher the total asset turnover, the more efficiently management is using total assets.
d.
All of these are true.
(20327) One of the following statements is NOT true of asset turnover ratios.
a.
Asset turnover ratios measure the level of sales per dollar of assets that the firm has.
b.
The fixed assets turnover ratio is less significant for equipment-intensive manufacturing industry firms than the total assets turnover ratio.
c.
The higher the total asset turnover, the more efficiently management is using total assets.
d.
All of these are true.
B
6
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QN\=6 (3836)
(20333) For a firm that has both debt and equity,
a.
ROE \> ROA.
b.
ROE < ROA.
c.
ROE \= ROA
d.
None of these.
(20333) For a firm that has both debt and equity,
a.
ROE \> ROA.
b.
ROE < ROA.
c.
ROE \= ROA
d.
None of these.
A
7
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QN\=7 (3813)
(20288) The assumption of arm's-length transaction states that
a.
both parties to a transaction can act independently of each other and make economically rational decisions.
b.
both parties to a transaction must have had previous transactions.
c.
one of the parties to the transaction is a bank that has full knowledge of the firm's creditworthiness.
d.
none of these
(20288) The assumption of arm's-length transaction states that
a.
both parties to a transaction can act independently of each other and make economically rational decisions.
b.
both parties to a transaction must have had previous transactions.
c.
one of the parties to the transaction is a bank that has full knowledge of the firm's creditworthiness.
d.
none of these
A
8
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QN\=8 (3805)
(20310) The present value of multiple cash flows is \______
a.
greater than the sum of the cash flows.
b.
equal to the sum of all the cash flows.
c.
less than the sum of the cash flows.
d.
none of these.
(20310) The present value of multiple cash flows is \______
a.
greater than the sum of the cash flows.
b.
equal to the sum of all the cash flows.
c.
less than the sum of the cash flows.
d.
none of these.
C
9
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QN\=9 (3876)
(20376) The annuity transformation method is used to transform
a.
a present value annuity to a future value annuity.
b.
a present value annuity to an annuity due.
c.
an ordinary annuity to an annuity due.
d.
a perpetuity to an annuity.
(20376) The annuity transformation method is used to transform
a.
a present value annuity to a future value annuity.
b.
a present value annuity to an annuity due.
c.
an ordinary annuity to an annuity due.
d.
a perpetuity to an annuity.
C
10
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QN\=10 (3847)
(20336) Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth?
a.
ROE is based on after-tax earnings, not cash flows.
b.
ROE does not consider risk.
c.
ROE ignores the size of the initial investment as well as future cash flows.
d.
All of these are criticisms of ROE as a goal.
(20336) Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth?
a.
ROE is based on after-tax earnings, not cash flows.
b.
ROE does not consider risk.
c.
ROE ignores the size of the initial investment as well as future cash flows.
d.
All of these are criticisms of ROE as a goal.
D
11
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QN\=11 (3877)
(20374) Which one of the following statements is NOT true about amortization?
a.
Amortization refers to the way the borrowed amount (principal) is paid down over the life of the loan.
b.
With an amortized loan, each loan payment contains some payment of principal and an interest payment.
c.
With an amortized loan, a smaller proportion of each month's payment goes toward interest in the early periods.
d.
A loan amortization schedule is just a table that shows the loan balance at the beginning and end of each period, the payment made during that period, and how much of that payment represents interest and how much represents repayment of principal.
(20374) Which one of the following statements is NOT true about amortization?
a.
Amortization refers to the way the borrowed amount (principal) is paid down over the life of the loan.
b.
With an amortized loan, each loan payment contains some payment of principal and an interest payment.
c.
With an amortized loan, a smaller proportion of each month's payment goes toward interest in the early periods.
d.
A loan amortization schedule is just a table that shows the loan balance at the beginning and end of each period, the payment made during that period, and how much of that payment represents interest and how much represents repayment of principal.
C
12
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QN\=12 (3857)
(20358) Which of the following statements is true?
a.
A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation.
b.
A dollar to be received in the future is worth more than a dollar received today because of the positive impact of rates of return.
c.
A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return.
d.
A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it.
(20358) Which of the following statements is true?
a.
A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation.
b.
A dollar to be received in the future is worth more than a dollar received today because of the positive impact of rates of return.
c.
A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return.
d.
A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it.
C
13
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QN\=13 (3888)
(20379) Which one of the following statements is TRUE about the effective annual rate (EAR)?
a.
The effective annual interest rate (EAR) is defined as the annual growth rate that takes compounding into account.
b.
The EAR conversion formula accounts for the number of compounding periods and, thus, effectively adjusts the annualized interest rate for the time value of money.
c.
The EAR is the true cost of borrowing and lending.
d.
All of these are true.
(20379) Which one of the following statements is TRUE about the effective annual rate (EAR)?
a.
The effective annual interest rate (EAR) is defined as the annual growth rate that takes compounding into account.
b.
The EAR conversion formula accounts for the number of compounding periods and, thus, effectively adjusts the annualized interest rate for the time value of money.
c.
The EAR is the true cost of borrowing and lending.
d.
All of these are true.
D
14
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QN\=14 (3903)
(20398) With strong-form market efficiency,
a.
the price of a security in the market reflects all public information only.
b.
it would not be possible to earn abnormally high returns by trading on private information.
c.
investors who have access to inside or private information will be able to earn abnormal returns.
d.
None of these.
(20398) With strong-form market efficiency,
a.
the price of a security in the market reflects all public information only.
b.
it would not be possible to earn abnormally high returns by trading on private information.
c.
investors who have access to inside or private information will be able to earn abnormal returns.
d.
None of these.
B
15
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QN\=15 (3887)
(20364) Which one of the following steps is NOT involved in solving present value problems?
a.
First, draw a time line to make sure that each cash flow is placed in the correct time period.
b.
Second, compound each cash flow for its time period.
c.
Third, add up the values.
d.
All of these are necessary steps.
(20364) Which one of the following steps is NOT involved in solving present value problems?
a.
First, draw a time line to make sure that each cash flow is placed in the correct time period.
b.
Second, compound each cash flow for its time period.
c.
Third, add up the values.
d.
All of these are necessary steps.
B
16
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QN\=16 (3899)
(20393) Which of the following statements is most correct?
a.
The greater the risk associated with an investment, the lower the return investors expect from it.
b.
When choosing between two investments that have the same level of risk, investors prefer the investment with the higher return.
c.
If two investments have the same expected return, investors prefer the riskiest alternative.
d.
When choosing between two investments that have the same level of risk, investors prefer the investment with the lower return.
(20393) Which of the following statements is most correct?
a.
The greater the risk associated with an investment, the lower the return investors expect from it.
b.
When choosing between two investments that have the same level of risk, investors prefer the investment with the higher return.
c.
If two investments have the same expected return, investors prefer the riskiest alternative.
d.
When choosing between two investments that have the same level of risk, investors prefer the investment with the lower return.
B
17
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QN\=17 (3950)
(20442) Which one of the following statements is NOT true about common stock?
a.
Common-stock holders have the right to vote on the selection of the board of directors for the firm.
b.
Common stock is considered to have no fixed maturity.
c.
Owners of common stock are guaranteed dividend payments by the firm.
d.
Common-stock holders have limited liability.
(20442) Which one of the following statements is NOT true about common stock?
a.
Common-stock holders have the right to vote on the selection of the board of directors for the firm.
b.
Common stock is considered to have no fixed maturity.
c.
Owners of common stock are guaranteed dividend payments by the firm.
d.
Common-stock holders have limited liability.
C
18
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QN\=18 (3922)
(20416) Which one of the following statements is NOT true?
a.
Interest rate risk is the risk that bond prices will change as interest rates change.
b.
Interest rate changes and bond prices are inversely related.
c.
As interest rates increase, bond prices increase.
d.
Long-term bonds are more price volatile than short-term bonds of similar risk.
(20416) Which one of the following statements is NOT true?
a.
Interest rate risk is the risk that bond prices will change as interest rates change.
b.
Interest rate changes and bond prices are inversely related.
c.
As interest rates increase, bond prices increase.
d.
Long-term bonds are more price volatile than short-term bonds of similar risk.
C
19
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QN\=19 (3948)
(20444) Which one of the following statements is NOT true about preferred stock?
a.
Preferred stock represents ownership in the firm.
b.
Owners of preferred stock are not guaranteed dividend payments by the firm.
c.
Preferred stock dividends are fixed financial amounts paid regularly by the firm just like bond coupon payments.
d.
Preferred stock holders have limited voting privileges relative to common-stock owners.
(20444) Which one of the following statements is NOT true about preferred stock?
a.
Preferred stock represents ownership in the firm.
b.
Owners of preferred stock are not guaranteed dividend payments by the firm.
c.
Preferred stock dividends are fixed financial amounts paid regularly by the firm just like bond coupon payments.
d.
Preferred stock holders have limited voting privileges relative to common-stock owners.
B
20
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QN\=20 (3926)
(20406) Which ONE of the following statements is true?
a.
To secure the conversion option on a bond, bondholders would be willing to pay a premium.
b.
The conversion ratio is set so that the firm's stock price must appreciate 15 to 20 percent before it is profitable to convert bonds into equity.
c.
Convertible bonds can be converted into shares of common stock at some predetermined ratio at the discretion of the bondholder.
d.
All of these are true.
(20406) Which ONE of the following statements is true?
a.
To secure the conversion option on a bond, bondholders would be willing to pay a premium.
b.
The conversion ratio is set so that the firm's stock price must appreciate 15 to 20 percent before it is profitable to convert bonds into equity.
c.
Convertible bonds can be converted into shares of common stock at some predetermined ratio at the discretion of the bondholder.
d.
All of these are true.
D
21
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QN\=21 (3982)
(20461) Which of the following is NOT true about capital budgeting.
a.
It involves identifying projects that will add to the firm's value.
b.
It involves large capital investments.
c.
The large capital investments can be reversed at any time.
d.
It allows the firm's management to analyze potential business opportunities and decide on which ones to undertake.
(20461) Which of the following is NOT true about capital budgeting.
a.
It involves identifying projects that will add to the firm's value.
b.
It involves large capital investments.
c.
The large capital investments can be reversed at any time.
d.
It allows the firm's management to analyze potential business opportunities and decide on which ones to undertake.
C
22
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QN\=22 (3965)
(20430) The largest holders of equity securities are
a.
mutual funds.
b.
pension funds.
c.
foreign investors.
d.
households.
(20430) The largest holders of equity securities are
a.
mutual funds.
b.
pension funds.
c.
foreign investors.
d.
households.
D
23
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QN\=23 (3971)
(20468) Capital rationing implies that
a.
the firm does not have enough resources to fund all of the available projects.
b.
funding needs equal funding resources.
c.
the available capital will be allocated equally to all available projects.
d.
none of these.
(20468) Capital rationing implies that
a.
the firm does not have enough resources to fund all of the available projects.
b.
funding needs equal funding resources.
c.
the available capital will be allocated equally to all available projects.
d.
none of these.
A
24
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QN\=24 (3987)
(20469) Capital rationing implies that
a.
funding resources exceed funding needs.
b.
funding needs exceed funding resources.
c.
funding needs equal funding resources.
d.
none of these.
(20469) Capital rationing implies that
a.
funding resources exceed funding needs.
b.
funding needs exceed funding resources.
c.
funding needs equal funding resources.
d.
none of these.
B
25
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QN\=25 (3993)
(20502) In order for a project to generate a positive net working capital cash flow at the conclusion of a project,
a.
the project must have generated a cumulative negative cash flow during the life of the project.
b.
the project must have generated a cumulative positive cash flow during the life of the project.
c.
the project must have generated a cumulative negative cash flow at the conclusion of the project.
d.
the project could not have generated a positive cash flow at the opening of the project.
(20502) In order for a project to generate a positive net working capital cash flow at the conclusion of a project,
a.
the project must have generated a cumulative negative cash flow during the life of the project.
b.
the project must have generated a cumulative positive cash flow during the life of the project.
c.
the project must have generated a cumulative negative cash flow at the conclusion of the project.
d.
the project could not have generated a positive cash flow at the opening of the project.
A
26
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QN\=26 (4020)
(20515) An analysis in which each of the inputs and assumptions for a project takes on a separate assumed distribution whereby a computer draws on each of those input and assumption distributions to create a distribution for the NPV of the entire project is called
a.
a sensitivity analysis.
b.
a scenario analysis.
c.
a simulation analysis.
d.
none of these.
(20515) An analysis in which each of the inputs and assumptions for a project takes on a separate assumed distribution whereby a computer draws on each of those input and assumption distributions to create a distribution for the NPV of the entire project is called
a.
a sensitivity analysis.
b.
a scenario analysis.
c.
a simulation analysis.
d.
none of these.
C
27
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QN\=27 (4276)
(20778) Computing the terminal-year FCF: Babaloo Nightclubs. purchased a disco mirror that currently has a book value of $10,000. If Babaloo sells the disco mirror for $500 today, then what is the amount of cash that it will net after taxes if the firm is subject to a 39 percent marginal tax rate?
a.
$500
b.
$3,705
c.
$4,205
d.
$9,500
(20778) Computing the terminal-year FCF: Babaloo Nightclubs. purchased a disco mirror that currently has a book value of $10,000. If Babaloo sells the disco mirror for $500 today, then what is the amount of cash that it will net after taxes if the firm is subject to a 39 percent marginal tax rate?
a.
$500
b.
$3,705
c.
$4,205
d.
$9,500
C
28
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QN\=28 (4243)
(20746) Nonconstant growth: Stag Corp. will pay dividends of $4.75, $5.25, $5.75, and $7 for the next four years. Thereafter, the company expects its growth rate to be at a constant rate of 7 percent. If the required rate of return is 15 percent, what is the current market price of the stock?
a.
$69.41
b.
$93.63
c.
$57.54
d.
$80.29
(20746) Nonconstant growth: Stag Corp. will pay dividends of $4.75, $5.25, $5.75, and $7 for the next four years. Thereafter, the company expects its growth rate to be at a constant rate of 7 percent. If the required rate of return is 15 percent, what is the current market price of the stock?
a.
$69.41
b.
$93.63
c.
$57.54
d.
$80.29
A
29
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QN\=29 (4031)
(20510) If a firm wanted to find the effect of a change in the variable cost per unit of production on the net present value of a project, then the firm might perform
a.
a sensitivity analysis.
b.
a scenario analysis.
c.
a Monte Carlo simulation.
d.
none of these.
(20510) If a firm wanted to find the effect of a change in the variable cost per unit of production on the net present value of a project, then the firm might perform
a.
a sensitivity analysis.
b.
a scenario analysis.
c.
a Monte Carlo simulation.
d.
none of these.
A
30
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QN\=30 (4228)
(20713) Yield to maturity: Jane Almeda is interested in a 10-year bond issued by Roberts Corp. that pays a coupon of 10 percent annually. The current price of this bond is $1,174.45. What is the yield that Jane would earn by buying it at this price and holding it to maturity? (Round to the closest answer.)
a.
7%
b.
7.5%
c.
8%
d.
8.5%
(20713) Yield to maturity: Jane Almeda is interested in a 10-year bond issued by Roberts Corp. that pays a coupon of 10 percent annually. The current price of this bond is $1,174.45. What is the yield that Jane would earn by buying it at this price and holding it to maturity? (Round to the closest answer.)
a.
7%
b.
7.5%
c.
8%
d.
8.5%
B
31
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QN\=31 (4067)
(20554) Efficiency ratio: Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days' sales outstanding?
a.
0.24 times; 78.5 days
b.
4.26 times; 85.7 days
c.
5.2 times; 61.3 days
d.
None of these
(20554) Efficiency ratio: Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days' sales outstanding?
a.
0.24 times; 78.5 days
b.
4.26 times; 85.7 days
c.
5.2 times; 61.3 days
d.
None of these
B
32
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QN\=32 (4043)
(20542) Triumph Trading Company provided the following information to its auditors. For the year ended March 31, 2008, the company had revenues of $1,122,878, operating expenses (excluding depreciation and leasing expenses) of $612,663, depreciation expenses of $231,415, leasing expenses of $126,193, and interest expenses equal to $87,125. If the company's tax rate was average 34 percent, what is its net income after taxes?
a.
$43,218
b.
$65,482
c.
$152,607
d.
none of these
(20542) Triumph Trading Company provided the following information to its auditors. For the year ended March 31, 2008, the company had revenues of $1,122,878, operating expenses (excluding depreciation and leasing expenses) of $612,663, depreciation expenses of $231,415, leasing expenses of $126,193, and interest expenses equal to $87,125. If the company's tax rate was average 34 percent, what is its net income after taxes?
a.
$43,218
b.
$65,482
c.
$152,607
d.
none of these
A
33
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QN\=33 (4077)
(20566) DuPont equation: GenTech Pharma has reported the following information:
Sales/Total assets \= 2.89; ROA \= 10.74%; ROE \= 20.36%
What are the firm's profit margin and equity multiplier?
a.
7.1%; 0.53
b.
7.1%; 1.90
c.
3.7%; 0.53
d.
3.7%; 1.90
(20566) DuPont equation: GenTech Pharma has reported the following information:
Sales/Total assets \= 2.89; ROA \= 10.74%; ROE \= 20.36%
What are the firm's profit margin and equity multiplier?
a.
7.1%; 0.53
b.
7.1%; 1.90
c.
3.7%; 0.53
d.
3.7%; 1.90
D
34
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QN\=34 (4046)
(20545) Trident Manufacturing Company's treasurer identified the following cash flows during this year as significant. It had repaid existing debt to the tune of $425,110, while raising additional debt capital of $750,000. It also repurchased stock in the open markets for a total of $63,250. It paid $233,144 in dividends to its shareholders. What is the net cash provided (used) by financing activities?
a.
$28,496
b.
$91,746
c.
-$28,496
d.
-$91,746
(20545) Trident Manufacturing Company's treasurer identified the following cash flows during this year as significant. It had repaid existing debt to the tune of $425,110, while raising additional debt capital of $750,000. It also repurchased stock in the open markets for a total of $63,250. It paid $233,144 in dividends to its shareholders. What is the net cash provided (used) by financing activities?
a.
$28,496
b.
$91,746
c.
-$28,496
d.
-$91,746
A
35
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QN\=35 (4064)
(20571) Return on Equity: In the latest year, Photon, Inc. reported $276,000 in net income. The firm maintains a debt ratio of 30% and has total assets of $3,000,000. What is Photon's return on equity? (Round off to the nearest 0.1%)
a.
13.1%
b.
14.6%
c.
22.5%
d.
18.7%
(20571) Return on Equity: In the latest year, Photon, Inc. reported $276,000 in net income. The firm maintains a debt ratio of 30% and has total assets of $3,000,000. What is Photon's return on equity? (Round off to the nearest 0.1%)
a.
13.1%
b.
14.6%
c.
22.5%
d.
18.7%
A
36
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QN\=36 (4078)
(20562) Leverage ratio: Dreisen Traders has total debt of $1,233,837 and total assets of $2,178,990. What are the firm's equity multiplier and debt-to-equity ratio?(Round to nearest whole percent)
a.
2.31; 1.31
b.
1.75; 0.75
c.
0.75; 1.75
d.
1.31; 2.31
(20562) Leverage ratio: Dreisen Traders has total debt of $1,233,837 and total assets of $2,178,990. What are the firm's equity multiplier and debt-to-equity ratio?(Round to nearest whole percent)
a.
2.31; 1.31
b.
1.75; 0.75
c.
0.75; 1.75
d.
1.31; 2.31
A
37
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QN\=37 (4084)
(20606) Growth rate: Peterson Electrical Supplies has generated a net income of $161,424 this year. The firm expects to see an annual growth of 30 percent for the next five years, followed by a growth rate of 15 percent for each of the next three years. What will be the firm's expected net income in eight years? (Round to the nearest dollar.)
a.
$319,157
b.
$241,329
c.
$911,546
d.
$689,259
(20606) Growth rate: Peterson Electrical Supplies has generated a net income of $161,424 this year. The firm expects to see an annual growth of 30 percent for the next five years, followed by a growth rate of 15 percent for each of the next three years. What will be the firm's expected net income in eight years? (Round to the nearest dollar.)
a.
$319,157
b.
$241,329
c.
$911,546
d.
$689,259
C
38
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QN\=38 (4113)
(20595) Multiple compounding (PV): Marcie Witter is saving for her daughter's college education. She wants to have $50,000 available when her daughter graduates from high school in four years. If the investment she is considering will pay 8.25 percent compounded monthly, how much will she have to invest today to reach her target? (Round to the nearest dollar.)
a.
$35,987
b.
$49,659
c.
$41,275
d.
$36,450
(20595) Multiple compounding (PV): Marcie Witter is saving for her daughter's college education. She wants to have $50,000 available when her daughter graduates from high school in four years. If the investment she is considering will pay 8.25 percent compounded monthly, how much will she have to invest today to reach her target? (Round to the nearest dollar.)
a.
$35,987
b.
$49,659
c.
$41,275
d.
$36,450
A
39
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QN\=39 (4096)
(20607) Growth rate: Vidmar Agencies is a fast-growing advertising agency. Currently, their sales are at $700,000. They expect their sales to grow at an annual rate of 35 percent in the next two years, followed by an annual rate of 25 percent in years 3 through 7. Finally, their growth rate would slow down to 10 percent in years 8-10. What will be their sales as of year 10? (Round to the nearest dollar.)
a.
$1,698,023
b.
$2,843,323
c.
$3,893,280
d.
$5,181,956
(20607) Growth rate: Vidmar Agencies is a fast-growing advertising agency. Currently, their sales are at $700,000. They expect their sales to grow at an annual rate of 35 percent in the next two years, followed by an annual rate of 25 percent in years 3 through 7. Finally, their growth rate would slow down to 10 percent in years 8-10. What will be their sales as of year 10? (Round to the nearest dollar.)
a.
$1,698,023
b.
$2,843,323
c.
$3,893,280
d.
$5,181,956
D
40
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QN\=40 (4100)
(20585) Compounding: Chung Lee wants to invest $3,000 in an account paying 5.25 percent compounded quarterly. What is the interest on interest after four years?
a.
$695.98
b.
$65.98
c.
$630.00
d.
None of these
(20585) Compounding: Chung Lee wants to invest $3,000 in an account paying 5.25 percent compounded quarterly. What is the interest on interest after four years?
a.
$695.98
b.
$65.98
c.
$630.00
d.
None of these
B
41
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QN\=41 (4121)
(20603) Growth rate: Trojan Traps manufactures an innovative mouse trap. Sales this year are $325,000. The company expects its sales to go up to $500,000 in five years. What is the expected growth rate in sales for this firm? (Round to the nearest percent.)
a.
9%
b.
11%
c.
6%
d.
12%
(20603) Growth rate: Trojan Traps manufactures an innovative mouse trap. Sales this year are $325,000. The company expects its sales to go up to $500,000 in five years. What is the expected growth rate in sales for this firm? (Round to the nearest percent.)
a.
9%
b.
11%
c.
6%
d.
12%
A
42
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QN\=42 (4136)
(20632) Computing annuity payment: Jackson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5 percent. It plans to repay the loan in eight equal installments, beginning in a year. What is its annual loan payment? (Round to the nearest dollar.)
a.
$4,708
b.
$5,134
c.
$4,939
d.
$4,748
(20632) Computing annuity payment: Jackson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5 percent. It plans to repay the loan in eight equal installments, beginning in a year. What is its annual loan payment? (Round to the nearest dollar.)
a.
$4,708
b.
$5,134
c.
$4,939
d.
$4,748
C
43
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QN\=43 (4147)
(20625) Future value of an annuity: Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment paying 12 percent annually. What will be the amount he will have at the end of the six years? (Round to the nearest dollar.)
a.
$21,000
b.
$28,403
c.
$24,670
d.
$26,124
(20625) Future value of an annuity: Carlos Menendez is planning to invest $3,500 every year for the next six years in an investment paying 12 percent annually. What will be the amount he will have at the end of the six years? (Round to the nearest dollar.)
a.
$21,000
b.
$28,403
c.
$24,670
d.
$26,124
B
44
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QN\=44 (4122)
(20589) Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
a.
$22,680
b.
$26,454
c.
$16,670
d.
$19,444
(20589) Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
a.
$22,680
b.
$26,454
c.
$16,670
d.
$19,444
C
45
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QN\=45 (4120)
(20597) Multiple compounding (PV): Joan Alexander wants to go on a cruise in three years. She could earn 8.2 percent compounded monthly in an account if she were to deposit the money today. She needs to have $10,000 in three years. How much will she have to deposit today? (Round to the nearest dollar.)
a.
$6,432
b.
$7,826
c.
$8,148
d.
$7,763
(20597) Multiple compounding (PV): Joan Alexander wants to go on a cruise in three years. She could earn 8.2 percent compounded monthly in an account if she were to deposit the money today. She needs to have $10,000 in three years. How much will she have to deposit today? (Round to the nearest dollar.)
a.
$6,432
b.
$7,826
c.
$8,148
d.
$7,763
B
46
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QN\=46 (4162)
(20695) The expected return on KarolCo. stock is 16.5 percent. If the risk-free rate is 5 percent and the beta of KarolCo is 2.3, then what is the risk premium on the market?
a.
2.5%
b.
5.0%
c.
7.5%
d.
10.0%
(20695) The expected return on KarolCo. stock is 16.5 percent. If the risk-free rate is 5 percent and the beta of KarolCo is 2.3, then what is the risk premium on the market?
a.
2.5%
b.
5.0%
c.
7.5%
d.
10.0%
B
47
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QN\=47 (4179)
(20655) The expected return for the asset shown in the following table is 18.75 percent. If the return distribution for the asset is described as below, what is the standard deviation for the asset's returns?
Return Probability
0.1 0.25
0.2 0.5
0.25 0.25
a.
0.002969
b.
0.000613
c.
0.015195
d.
0.054486
(20655) The expected return for the asset shown in the following table is 18.75 percent. If the return distribution for the asset is described as below, what is the standard deviation for the asset's returns?
Return Probability
0.1 0.25
0.2 0.5
0.25 0.25
a.
0.002969
b.
0.000613
c.
0.015195
d.
0.054486
D
48
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QN\=48 (4160)
(20685) The covariance of the returns between Einstein Stock and Bohr Stock is 0.0087. The standard deviation of Einstein is 0.26, and the standard deviation of Bohr is 0.37. What is the correlation coefficient between the returns of the two stocks?
a.
0.090437
b.
0.096200
c.
0.90437
d.
0.96200
(20685) The covariance of the returns between Einstein Stock and Bohr Stock is 0.0087. The standard deviation of Einstein is 0.26, and the standard deviation of Bohr is 0.37. What is the correlation coefficient between the returns of the two stocks?
a.
0.090437
b.
0.096200
c.
0.90437
d.
0.96200
A
49
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QN\=49 (4195)
(20657) The expected return for Stock Z is 30 percent. If we know the following information about Stock Z, then what return will it produce in the Lukewarm state of the world?
Return Probability
Poor 0.2 0.25
Lukewarm ? 0.5
Dynamite! 0.4 0.25
a.
20%
b.
30%
c.
40%
d.
It is impossible to determine.
(20657) The expected return for Stock Z is 30 percent. If we know the following information about Stock Z, then what return will it produce in the Lukewarm state of the world?
Return Probability
Poor 0.2 0.25
Lukewarm ? 0.5
Dynamite! 0.4 0.25
a.
20%
b.
30%
c.
40%
d.
It is impossible to determine.
B
50
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QN\=50 (4190)
(20662) Gwen purchased a stock one year ago for $25, and it is now worth $31. The stock paid a dividend of $1.50 during the year. What was the stock's rate of return income during the year? (Round your answer to the nearest percent.)
a.
6%
b.
15%
c.
24%
d.
26%
(20662) Gwen purchased a stock one year ago for $25, and it is now worth $31. The stock paid a dividend of $1.50 during the year. What was the stock's rate of return income during the year? (Round your answer to the nearest percent.)
a.
6%
b.
15%
c.
24%
d.
26%
A
51
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QN\=1 (3770)
(20283) Which of the following does maximizing shareholder wealth not usually account for?
a.
Risk.
b.
Government regulation.
c.
The timing of cash flows.
d.
Amount of cash flows.
(20283) Which of the following does maximizing shareholder wealth not usually account for?
a.
Risk.
b.
Government regulation.
c.
The timing of cash flows.
d.
Amount of cash flows.
B
52
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QN\=2 (3796)
(20284) Which of the following sections do annual reports typically contain?
a.
financial summary related to the past year's performance
b.
information about the company, its products, and its activities
c.
audited financial statements, including limited historical financial data
d.
All of these sections are included in the annual report.
(20284) Which of the following sections do annual reports typically contain?
a.
financial summary related to the past year's performance
b.
information about the company, its products, and its activities
c.
audited financial statements, including limited historical financial data
d.
All of these sections are included in the annual report.
D
53
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QN\=3 (3773)
(20264) Which of the following business organizational forms subjects the owner(s) to unlimited liability?
a.
(i) sole proprietorship
b.
(ii) partnership
c.
(iii) corporation
d.
(i) and (ii)
(20264) Which of the following business organizational forms subjects the owner(s) to unlimited liability?
a.
(i) sole proprietorship
b.
(ii) partnership
c.
(iii) corporation
d.
(i) and (ii)
D
54
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QN\=4 (3776)
(20279) Executives that repeatedly put their own interests before that of the firm may find that they have difficulty finding another job after their current one. This is an example of
a.
the managerial labor market disciplining managers.
b.
the market for corporate control.
c.
the board of directors affecting the prospects of a manager.
d.
none of these.
(20279) Executives that repeatedly put their own interests before that of the firm may find that they have difficulty finding another job after their current one. This is an example of
a.
the managerial labor market disciplining managers.
b.
the market for corporate control.
c.
the board of directors affecting the prospects of a manager.
d.
none of these.
A
55
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QN\=5 (3799)
(20286) The generally accepted accounting principles (GAAP) are
a.
rules that outline how a firm can operate ethically.
b.
rules on how the firm will be valued in the event of a merger.
c.
rules and procedures that define how companies are to maintain financial records and prepare financial reports.
d.
rules for how a company can issue stock to raise money.
(20286) The generally accepted accounting principles (GAAP) are
a.
rules that outline how a firm can operate ethically.
b.
rules on how the firm will be valued in the event of a merger.
c.
rules and procedures that define how companies are to maintain financial records and prepare financial reports.
d.
rules for how a company can issue stock to raise money.
C
56
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QN\=6 (3804)
(20303) Which one of the following is NOT a cash flow from investing activities?
a.
buying and selling bonds or stock of other firms
b.
buying or selling of land, buildings, and plant and equipment
c.
cash payments of dividends to shareholders
d.
issuing and paying out on insurance contracts
(20303) Which one of the following is NOT a cash flow from investing activities?
a.
buying and selling bonds or stock of other firms
b.
buying or selling of land, buildings, and plant and equipment
c.
cash payments of dividends to shareholders
d.
issuing and paying out on insurance contracts
C
57
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QN\=7 (3829)
(20317) All but one of the following is true of common-size balance sheets.
a.
Each asset and liability item on the balance sheet is standardized by dividing it by total assets.
b.
Balance sheet accounts are represented as percentages of total assets.
c.
Each asset and liability item on the balance sheet is standardized by dividing it by sales.
d.
Common-size financial statements allow us to make meaningful comparisons between the financial statements of two firms that are different in size.
(20317) All but one of the following is true of common-size balance sheets.
a.
Each asset and liability item on the balance sheet is standardized by dividing it by total assets.
b.
Balance sheet accounts are represented as percentages of total assets.
c.
Each asset and liability item on the balance sheet is standardized by dividing it by sales.
d.
Common-size financial statements allow us to make meaningful comparisons between the financial statements of two firms that are different in size.
C
58
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QN\=8 (3820)
(20327) One of the following statements is NOT true of asset turnover ratios.
a.
Asset turnover ratios measure the level of sales per dollar of assets that the firm has.
b.
The fixed assets turnover ratio is less significant for equipment-intensive manufacturing industry firms than the total assets turnover ratio.
c.
The higher the total asset turnover, the more efficiently management is using total assets.
d.
All of these are true.
(20327) One of the following statements is NOT true of asset turnover ratios.
a.
Asset turnover ratios measure the level of sales per dollar of assets that the firm has.
b.
The fixed assets turnover ratio is less significant for equipment-intensive manufacturing industry firms than the total assets turnover ratio.
c.
The higher the total asset turnover, the more efficiently management is using total assets.
d.
All of these are true.
B
59
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QN\=9 (3846)
(20320) Which of the following is true of ratio analysis?
a.
A ratio is computed by dividing one balance sheet or income statement by another.
b.
The choice of the scale determines the story that can be garnered from the ratio.
c.
Ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed.
d.
All of these are true.
(20320) Which of the following is true of ratio analysis?
a.
A ratio is computed by dividing one balance sheet or income statement by another.
b.
The choice of the scale determines the story that can be garnered from the ratio.
c.
Ratios can be calculated based on the type of firm being analyzed or the kind of analysis being performed.
d.
All of these are true.
D
60
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QN\=10 (3859)
(20352) Which one of the following statements is NOT true?
a.
Present value calculations involve bringing a future amount back to the present.
b.
The future value is often called the discounted value of future cash payments.
c.
The present value factor is more commonly called the discount factor.
d.
The higher the discount rate, the lower the present value of a dollar.
(20352) Which one of the following statements is NOT true?
a.
Present value calculations involve bringing a future amount back to the present.
b.
The future value is often called the discounted value of future cash payments.
c.
The present value factor is more commonly called the discount factor.
d.
The higher the discount rate, the lower the present value of a dollar.
B
61
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QN\=11 (3860)
(20353) The Rule of 72
a.
can be used to determine the amount of time it takes to double an investment.
b.
is fairly accurate for interest rates between 25 and 50 percent.
c.
states that the time to double your money (TDM) approximately equals 72/i, where 72 represents the years it takes to double your investment.
d.
None of these describe the Rule of 72.
(20353) The Rule of 72
a.
can be used to determine the amount of time it takes to double an investment.
b.
is fairly accurate for interest rates between 25 and 50 percent.
c.
states that the time to double your money (TDM) approximately equals 72/i, where 72 represents the years it takes to double your investment.
d.
None of these describe the Rule of 72.
A
62
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QN\=12 (3866)
(20345) Which one of the following statements is NOT true?
a.
The time value money refers to what the value of the stream of future cash flows today is.
b.
A dollar received today is worth more than a dollar received tomorrow.
c.
A dollar received tomorrow is worth less than a dollar received today.
d.
A dollar received today is worth less than a dollar received tomorrow.
(20345) Which one of the following statements is NOT true?
a.
The time value money refers to what the value of the stream of future cash flows today is.
b.
A dollar received today is worth more than a dollar received tomorrow.
c.
A dollar received tomorrow is worth less than a dollar received today.
d.
A dollar received today is worth less than a dollar received tomorrow.
D
63
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QN\=13 (3908)
(20408) If a bond's coupon rate is equal to the market rate, then the bond will sell
a.
at a price equal to its face value.
b.
at a price greater than its face value.
c.
at a price less than its face value.
d.
None of these are true.
(20408) If a bond's coupon rate is equal to the market rate, then the bond will sell
a.
at a price equal to its face value.
b.
at a price greater than its face value.
c.
at a price less than its face value.
d.
None of these are true.
A
64
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QN\=14 (3910)
(20403) It is easy for individuals to trade in the corporate bond market because
a.
the corporate bond market is considered to be very transparent.
b.
prices in the corporate bond market tend to be more stable.
c.
centralized reporting of deals between buyers and sellers take place.
d.
None of these statements are true.
(20403) It is easy for individuals to trade in the corporate bond market because
a.
the corporate bond market is considered to be very transparent.
b.
prices in the corporate bond market tend to be more stable.
c.
centralized reporting of deals between buyers and sellers take place.
d.
None of these statements are true.
D
65
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QN\=15 (3881)
(20363) To solve present value problems with multiple cash flows involves which of the following steps?
a.
First, draw a time line to make sure that each cash flow is placed in the correct time period.
b.
Second, calculate the present value of each cash flow for its time period.
c.
Third, add up the present values.
d.
All of these are necessary steps.
(20363) To solve present value problems with multiple cash flows involves which of the following steps?
a.
First, draw a time line to make sure that each cash flow is placed in the correct time period.
b.
Second, calculate the present value of each cash flow for its time period.
c.
Third, add up the present values.
d.
All of these are necessary steps.
D
66
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QN\=16 (3885)
(20381) The true cost of lending is the
a.
annual percentage rate.
b.
effective annual rate.
c.
quoted interest rate.
d.
none of these.
(20381) The true cost of lending is the
a.
annual percentage rate.
b.
effective annual rate.
c.
quoted interest rate.
d.
none of these.
B
67
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QN\=17 (3950)
(20442) Which one of the following statements is NOT true about common stock?
a.
Common-stock holders have the right to vote on the selection of the board of directors for the firm.
b.
Common stock is considered to have no fixed maturity.
c.
Owners of common stock are guaranteed dividend payments by the firm.
d.
Common-stock holders have limited liability.
(20442) Which one of the following statements is NOT true about common stock?
a.
Common-stock holders have the right to vote on the selection of the board of directors for the firm.
b.
Common stock is considered to have no fixed maturity.
c.
Owners of common stock are guaranteed dividend payments by the firm.
d.
Common-stock holders have limited liability.
C
68
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QN\=18 (3923)
(20418) Marketability is the ability of an investor
a.
to sell a security quickly, at a low transaction cost, and at a price close to its fair market value.
b.
to sell at a profit under all circumstances.
c.
to sell the security above its par value.
d.
None of these.
(20418) Marketability is the ability of an investor
a.
to sell a security quickly, at a low transaction cost, and at a price close to its fair market value.
b.
to sell at a profit under all circumstances.
c.
to sell the security above its par value.
d.
None of these.
A
69
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QN\=19 (3922)
(20416) Which one of the following statements is NOT true?
a.
Interest rate risk is the risk that bond prices will change as interest rates change.
b.
Interest rate changes and bond prices are inversely related.
c.
As interest rates increase, bond prices increase.
d.
Long-term bonds are more price volatile than short-term bonds of similar risk.
(20416) Which one of the following statements is NOT true?
a.
Interest rate risk is the risk that bond prices will change as interest rates change.
b.
Interest rate changes and bond prices are inversely related.
c.
As interest rates increase, bond prices increase.
d.
Long-term bonds are more price volatile than short-term bonds of similar risk.
C
70
New cards
QN\=20 (3919)
(20419) Which ONE of the following statements is true?
a.
The lower the transaction costs are, the greater a security's marketability.
b.
The interest rate, or yield, on a security varies inversely with its degree of marketability.
c.
U.S. Treasury bills have the largest and most active secondary market and are considered to be the most marketable of all securities.
d.
All of these are true.
(20419) Which ONE of the following statements is true?
a.
The lower the transaction costs are, the greater a security's marketability.
b.
The interest rate, or yield, on a security varies inversely with its degree of marketability.
c.
U.S. Treasury bills have the largest and most active secondary market and are considered to be the most marketable of all securities.
d.
All of these are true.
D
71
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QN\=21 (3991)
(20476) Which one of the following statements about the discounted payback method is NOT true?
a.
The discounted payback method represents the number of years it takes a project to recover its initial investment.
b.
The discounted payback method calls for the project to be accepted if the payback period is greater than a target period.
c.
The discount payback method is a risk indicator.
d.
The expected cash flows from the project are discounted at the cost of capital.
(20476) Which one of the following statements about the discounted payback method is NOT true?
a.
The discounted payback method represents the number of years it takes a project to recover its initial investment.
b.
The discounted payback method calls for the project to be accepted if the payback period is greater than a target period.
c.
The discount payback method is a risk indicator.
d.
The expected cash flows from the project are discounted at the cost of capital.
B
72
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QN\=22 (3992)
(20504) Which of the following statements is true?
a.
The calculation of free cash flow does not include the impact of income taxes.
b.
Accounting earnings are an unreliable measure of the costs and benefits of a project.
c.
The idea that we can evaluate the cash flows from a project independently of the cash flows for the firm is known as the incremental principle.
d.
Depreciation expense should not be included in the calculation of incremental net operating profits after-tax.
(20504) Which of the following statements is true?
a.
The calculation of free cash flow does not include the impact of income taxes.
b.
Accounting earnings are an unreliable measure of the costs and benefits of a project.
c.
The idea that we can evaluate the cash flows from a project independently of the cash flows for the firm is known as the incremental principle.
d.
Depreciation expense should not be included in the calculation of incremental net operating profits after-tax.
B
73
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QN\=23 (3985)
(20463) Two projects are considered to be independent if
a.
(i) selecting one would have no bearing on accepting the other.
b.
(ii) their cash flows are unrelated.
c.
Both (i) and (ii).
d.
None of these.
(20463) Two projects are considered to be independent if
a.
(i) selecting one would have no bearing on accepting the other.
b.
(ii) their cash flows are unrelated.
c.
Both (i) and (ii).
d.
None of these.
C
74
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QN\=24 (3969)
(20479) Which one of the following statements about IRR is NOT true?
a.
The IRR is the discount rate that makes the NPV greater than zero.
b.
The IRR is a discounted cash flow method.
c.
The IRR is an expected rate of return.
d.
None of these.
(20479) Which one of the following statements about IRR is NOT true?
a.
The IRR is the discount rate that makes the NPV greater than zero.
b.
The IRR is a discounted cash flow method.
c.
The IRR is an expected rate of return.
d.
None of these.
A
75
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QN\=25 (3961)
(20445) Which ONE of the following statements is NOT true about preferred stock?
a.
Preferred dividend payments are fixed amounts paid regularly by the firm, similar to the interest payments on corporate bonds.
b.
Preferred dividends are deductable from taxable income just like the interest on bonds.
c.
Preferred stock holders have limited voting privileges relative to common-stock owners.
d.
While preferred stock is legally classified as perpetuities, some issues do have a fixed maturity.
(20445) Which ONE of the following statements is NOT true about preferred stock?
a.
Preferred dividend payments are fixed amounts paid regularly by the firm, similar to the interest payments on corporate bonds.
b.
Preferred dividends are deductable from taxable income just like the interest on bonds.
c.
Preferred stock holders have limited voting privileges relative to common-stock owners.
d.
While preferred stock is legally classified as perpetuities, some issues do have a fixed maturity.
B
76
New cards
QN\=26 (4290)
(20769) Brown Mack, Inc., currently has two large manufacturing divisions that share a single plant. Brown Mack owns the plant but has calculated that $6 million of overhead expenses should be allocated to the two equal-sized divisions. If Brown Mack starts a third manufacturing division, of equal size to the other two divisions, then what overhead cost should the new division take into account on its capital budgeting cash flow analysis?
a.
$0
b.
$2 million
c.
$3 million
d.
$6 million
(20769) Brown Mack, Inc., currently has two large manufacturing divisions that share a single plant. Brown Mack owns the plant but has calculated that $6 million of overhead expenses should be allocated to the two equal-sized divisions. If Brown Mack starts a third manufacturing division, of equal size to the other two divisions, then what overhead cost should the new division take into account on its capital budgeting cash flow analysis?
a.
$0
b.
$2 million
c.
$3 million
d.
$6 million
A
77
New cards
QN\=27 (4210)
(20720) Realized yield: Jorge Cabrera paid $980 for a 15-year bond 10 years ago. The bond pays a coupon of 10 percent semiannually. Today, the bond is priced at $1,054.36. If he sold the bond today, what would be his realized yield? (Round to the nearest percent.)
a.
12%
b.
8%
c.
11%
d.
9%
(20720) Realized yield: Jorge Cabrera paid $980 for a 15-year bond 10 years ago. The bond pays a coupon of 10 percent semiannually. Today, the bond is priced at $1,054.36. If he sold the bond today, what would be his realized yield? (Round to the nearest percent.)
a.
12%
b.
8%
c.
11%
d.
9%
C
78
New cards
QN\=28 (3998)
(20500) The true cost of lending is the \_________
a.
annual percentage rate
b.
effective annual rate
c.
quoted interest rate
d.
none of these
(20500) The true cost of lending is the \_________
a.
annual percentage rate
b.
effective annual rate
c.
quoted interest rate
d.
none of these
B
79
New cards
QN\=29 (4037)
(20531) Petra, Inc., has $400,000 as current assets, $1.225 million as plant and equipment, and $250,000 as goodwill. In preparing the balance sheet, these assets should be listed in which of the following orders?
a.
current assets, goodwill, and plant and equipment
b.
current assets, plant and equipment, and goodwill
c.
goodwill is not an asset and is not listed here
d.
none of these.
(20531) Petra, Inc., has $400,000 as current assets, $1.225 million as plant and equipment, and $250,000 as goodwill. In preparing the balance sheet, these assets should be listed in which of the following orders?
a.
current assets, goodwill, and plant and equipment
b.
current assets, plant and equipment, and goodwill
c.
goodwill is not an asset and is not listed here
d.
none of these.
B
80
New cards
QN\=30 (4216)
(20717) Yield to maturity: Huan Zhang bought a 10-year bond that pays 8.25 percent semiannually for $911.10. What is the yield to maturity on this bond?
a.
7.6%
b.
8.6%
c.
9.6%
d.
10.6%
(20717) Yield to maturity: Huan Zhang bought a 10-year bond that pays 8.25 percent semiannually for $911.10. What is the yield to maturity on this bond?
a.
7.6%
b.
8.6%
c.
9.6%
d.
10.6%
C
81
New cards
QN\=31 (4070)
(20561) Leverage ratio: What will be a firm's equity multiplier given a debt ratio of 0.45?
a.
1.82
b.
1.28
c.
2.22
d.
None of these
(20561) Leverage ratio: What will be a firm's equity multiplier given a debt ratio of 0.45?
a.
1.82
b.
1.28
c.
2.22
d.
None of these
A
82
New cards
QN\=32 (4042)
(20530) Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount of $230,000 for 10 years. Its market value on December 31, 2008 is $1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The asset's value should be recognized on the balance sheet at
a.
$2.3 million.
b.
$1.61 million.
c.
$230,000.
d.
$1.75 million.
(20530) Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount of $230,000 for 10 years. Its market value on December 31, 2008 is $1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The asset's value should be recognized on the balance sheet at
a.
$2.3 million.
b.
$1.61 million.
c.
$230,000.
d.
$1.75 million.
B
83
New cards
QN\=33 (4057)
(20558) Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?
a.
15.42 times
b.
18.34 times
c.
14.15 times
d.
None of these
(20558) Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?
a.
15.42 times
b.
18.34 times
c.
14.15 times
d.
None of these
C
84
New cards
QN\=34 (4043)
(20542) Triumph Trading Company provided the following information to its auditors. For the year ended March 31, 2008, the company had revenues of $1,122,878, operating expenses (excluding depreciation and leasing expenses) of $612,663, depreciation expenses of $231,415, leasing expenses of $126,193, and interest expenses equal to $87,125. If the company's tax rate was average 34 percent, what is its net income after taxes?
a.
$43,218
b.
$65,482
c.
$152,607
d.
none of these
(20542) Triumph Trading Company provided the following information to its auditors. For the year ended March 31, 2008, the company had revenues of $1,122,878, operating expenses (excluding depreciation and leasing expenses) of $612,663, depreciation expenses of $231,415, leasing expenses of $126,193, and interest expenses equal to $87,125. If the company's tax rate was average 34 percent, what is its net income after taxes?
a.
$43,218
b.
$65,482
c.
$152,607
d.
none of these
A
85
New cards
QN\=35 (4054)
(20570) DuPont equation: Sorenstam Corp has an equity multiplier of 2.34 times, total assets of $4,512,895, a ROE of 17.5 percent, and a total assets turnover of 3.1 times. Calculate the firm's ROA.
a.
6.23%
b.
4.53%
c.
7.48%
d.
5.79%
(20570) DuPont equation: Sorenstam Corp has an equity multiplier of 2.34 times, total assets of $4,512,895, a ROE of 17.5 percent, and a total assets turnover of 3.1 times. Calculate the firm's ROA.
a.
6.23%
b.
4.53%
c.
7.48%
d.
5.79%
C
86
New cards
QN\=36 (4084)
(20606) Growth rate: Peterson Electrical Supplies has generated a net income of $161,424 this year. The firm expects to see an annual growth of 30 percent for the next five years, followed by a growth rate of 15 percent for each of the next three years. What will be the firm's expected net income in eight years? (Round to the nearest dollar.)
a.
$319,157
b.
$241,329
c.
$911,546
d.
$689,259
(20606) Growth rate: Peterson Electrical Supplies has generated a net income of $161,424 this year. The firm expects to see an annual growth of 30 percent for the next five years, followed by a growth rate of 15 percent for each of the next three years. What will be the firm's expected net income in eight years? (Round to the nearest dollar.)
a.
$319,157
b.
$241,329
c.
$911,546
d.
$689,259
C
87
New cards
QN\=37 (4115)
(20599) Interest rate: Rachael Steele wants to borrow $6,000 for a period of four years. She has two choices. Her bank is offering to lend her the amount at 7.25 percent compounded annually. She can also borrow from her firm and will have to repay a total of $8,130.93 at the end of four years. Should Rachael go with her bank or the firm, and what is the interest rate if she borrows from her firm? (Round to the nearest percent.)
a.
Bank: 9%
b.
Firm: 7%
c.
Bank: 8%
d.
Firm: 6%
(20599) Interest rate: Rachael Steele wants to borrow $6,000 for a period of four years. She has two choices. Her bank is offering to lend her the amount at 7.25 percent compounded annually. She can also borrow from her firm and will have to repay a total of $8,130.93 at the end of four years. Should Rachael go with her bank or the firm, and what is the interest rate if she borrows from her firm? (Round to the nearest percent.)
a.
Bank: 9%
b.
Firm: 7%
c.
Bank: 8%
d.
Firm: 6%
C
88
New cards
QN\=38 (4114)
(20574) Future value: Ning Gao is planning to buy a house in five years. She is looking to invest $25,000 today in an index mutual fund that will provide her a return of 12 percent annually. How much will she have at the end of five years? (Round to the nearest dollar.)
a.
$45,000
b.
$28,000
c.
$44,059
d.
None of these
(20574) Future value: Ning Gao is planning to buy a house in five years. She is looking to invest $25,000 today in an index mutual fund that will provide her a return of 12 percent annually. How much will she have at the end of five years? (Round to the nearest dollar.)
a.
$45,000
b.
$28,000
c.
$44,059
d.
None of these
C
89
New cards
QN\=39 (4105)
(20604) Growth rate: Petry Corp. is a growing company with sales of $1.25 million this year. The firm expects to grow at an annual rate of 25 percent for the next three years, followed by a growth of 20 percent per year for the next two years. What will be Petry's sales at the end of five years? (Round to the nearest percent.)
a.
$2,160,000
b.
$3,515,625
c.
$1,875,000
d.
$2,929,688
(20604) Growth rate: Petry Corp. is a growing company with sales of $1.25 million this year. The firm expects to grow at an annual rate of 25 percent for the next three years, followed by a growth of 20 percent per year for the next two years. What will be Petry's sales at the end of five years? (Round to the nearest percent.)
a.
$2,160,000
b.
$3,515,625
c.
$1,875,000
d.
$2,929,688
B
90
New cards
QN\=40 (4085)
(20601) Interest rate: Pedro Martinez wants to invest $25,000 in a spa that his sister is starting. He will triple his investment in six years. What is the rate of return that Pedro is being promised? (Rounded to the nearest percent.)
a.
18%
b.
20%
c.
12%
d.
25%
(20601) Interest rate: Pedro Martinez wants to invest $25,000 in a spa that his sister is starting. He will triple his investment in six years. What is the rate of return that Pedro is being promised? (Rounded to the nearest percent.)
a.
18%
b.
20%
c.
12%
d.
25%
B
91
New cards
QN\=41 (4151)
(20635) Perpetuity: Your father is 60 years old and wants to set up a cash flow stream that would be forever. He would like to receive $20,000 every year, beginning at the end of this year. If he could invest in account earning 9 percent, how much would he have to invest today to receive his perpetual cash flow? (Round to the nearest dollar.)
a.
$222,222
b.
$200,000
c.
$189,000
d.
$235,200
(20635) Perpetuity: Your father is 60 years old and wants to set up a cash flow stream that would be forever. He would like to receive $20,000 every year, beginning at the end of this year. If he could invest in account earning 9 percent, how much would he have to invest today to receive his perpetual cash flow? (Round to the nearest dollar.)
a.
$222,222
b.
$200,000
c.
$189,000
d.
$235,200
A
92
New cards
QN\=42 (4153)
(20629) Terri Garner will invest $3,000 in an IRA for the next 30 years starting at the end of this year. The investment will earn 13 percent annually. How much will she have at the end of 30 years? (Round to the nearest dollar.)
a.
$879,598
b.
$912,334
c.
$748,212
d.
$1,233,450
(20629) Terri Garner will invest $3,000 in an IRA for the next 30 years starting at the end of this year. The investment will earn 13 percent annually. How much will she have at the end of 30 years? (Round to the nearest dollar.)
a.
$879,598
b.
$912,334
c.
$748,212
d.
$1,233,450
A
93
New cards
QN\=43 (4123)
(20619) PV of multiple cash flows: Pam Gregg is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.)
a.
$361,998
b.
$309,432
c.
$412,372
d.
$434,599
(20619) PV of multiple cash flows: Pam Gregg is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.)
a.
$361,998
b.
$309,432
c.
$412,372
d.
$434,599
A
94
New cards
QN\=44 (4140)
(20644) Growing perpetuity: Jack Benny is planning to invest in an insurance company product. The product will pay $10,000 at the end of this year. Thereafter, the payments will grow annually at a 3 percent rate forever. Jack will be able to invest his cash flows at a rate of 6.5 percent. What is the present value of this investment cash flow stream? (Round to the nearest dollar.)
a.
$326,908
b.
$312,766
c.
$285,714
d.
$258,133
(20644) Growing perpetuity: Jack Benny is planning to invest in an insurance company product. The product will pay $10,000 at the end of this year. Thereafter, the payments will grow annually at a 3 percent rate forever. Jack will be able to invest his cash flows at a rate of 6.5 percent. What is the present value of this investment cash flow stream? (Round to the nearest dollar.)
a.
$326,908
b.
$312,766
c.
$285,714
d.
$258,133
C
95
New cards
QN\=45 (4145)
(20648) Effective annual rate: Desire Cosmetics borrowed $152,300 from a bank for three years. If the quoted rate (APR) is 11.75 percent, and the compounding is daily, what is the effective annual rate (EAR)? (Round to one decimal place.)
a.
11.75%
b.
14.3%
c.
12.5%
d.
11.6%
(20648) Effective annual rate: Desire Cosmetics borrowed $152,300 from a bank for three years. If the quoted rate (APR) is 11.75 percent, and the compounding is daily, what is the effective annual rate (EAR)? (Round to one decimal place.)
a.
11.75%
b.
14.3%
c.
12.5%
d.
11.6%
C
96
New cards
QN\=46 (4158)
(20694) The expected return on Mike's Seafood stock is 17.9 percent. If the expected return on the market is 13 percent and the beta for Kiwi is 1.7, then what is the risk-free rate?
a.
4.5%
b.
5.0%
c.
5.5%
d.
6.0%
(20694) The expected return on Mike's Seafood stock is 17.9 percent. If the expected return on the market is 13 percent and the beta for Kiwi is 1.7, then what is the risk-free rate?
a.
4.5%
b.
5.0%
c.
5.5%
d.
6.0%
D
97
New cards
QN\=47 (4189)
(20652) Use the following table to calculate the expected return for the asset.
Return Probability
0.1 0.25
0.2 0.5
0.25 0.25
a.
15.00%
b.
17.50%
c.
18.75%
d.
20.00%
(20652) Use the following table to calculate the expected return for the asset.
Return Probability
0.1 0.25
0.2 0.5
0.25 0.25
a.
15.00%
b.
17.50%
c.
18.75%
d.
20.00%
C
98
New cards
QN\=48 (4173)
(20660) Julio purchased a stock one year ago for $27. The stock is now worth $32, and the total return to Julio for owning the stock was 37 percent. What is the dollar amount of dividends that he received for owning the stock during the year?
a.
$4
b.
$5
c.
$6
d.
$7
(20660) Julio purchased a stock one year ago for $27. The stock is now worth $32, and the total return to Julio for owning the stock was 37 percent. What is the dollar amount of dividends that he received for owning the stock during the year?
a.
$4
b.
$5
c.
$6
d.
$7
B
99
New cards
QN\=49 (4183)
(20670) You know that the average college student eats 0.75 pounds of food at lunch. If the standard deviation of that eating is 0.2 pounds of food, then what is the total amount of food that a cafeteria should have on hand to be 95percent confident that it will not run out of food when feeding 50 college students.
a.
17.90 pounds
b.
21.05 pounds
c.
53.95 pounds
d.
57.10 pounds
(20670) You know that the average college student eats 0.75 pounds of food at lunch. If the standard deviation of that eating is 0.2 pounds of food, then what is the total amount of food that a cafeteria should have on hand to be 95percent confident that it will not run out of food when feeding 50 college students.
a.
17.90 pounds
b.
21.05 pounds
c.
53.95 pounds
d.
57.10 pounds
C
100
New cards
QN\=50 (4162)
(20695) The expected return on KarolCo. stock is 16.5 percent. If the risk-free rate is 5 percent and the beta of KarolCo is 2.3, then what is the risk premium on the market?
a.
2.5%
b.
5.0%
c.
7.5%
d.
10.0%
(20695) The expected return on KarolCo. stock is 16.5 percent. If the risk-free rate is 5 percent and the beta of KarolCo is 2.3, then what is the risk premium on the market?
a.
2.5%
b.
5.0%
c.
7.5%
d.
10.0%
B
Note 
Flashcards (46)