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1) Tressler Dry Cleaners has inventory of $1,700, accounts payable of $4,200, cash of $1,950, and accounts receivable of $3,680. What is the cash ratio? A.0.24 B.0.46 C.0.53 D.0.98 E.1.34 2) The excess return earned by a risky asset, for […]

1) Key facts and assumptions concerning FM Foods, Inc. at December 31, 2011, appear below. Estimate FM’s after-tax cost of equity capital. A.4.50% B.6.92% C.7.93% D.12.20% E.17.48% 2) Which one of the following relates to a negative change in net […]

1) A project has expected cash inflows, starting with year 1, of $2,200, $2,900, $3,500 and finally in year four, $4,000. The profitability index is 1.14 and the discount rate is 12 percent. What is the initial cost of the […]

1) Central Staircase is offering preferred stock which is commonly referred to as 10-10 stock. This stock will pay an annual dividend of $10 a share starting 10 years from now. What is this stock worth to you today if […]

1) The stock price of Samuelson, Inc., is $71. Investors require a 15 percent rate of return on similar stocks. If the company plans to pay a dividend of $4.20 next year, what growth rate is expected for the company’s […]

1) Aaron’s Tea House has a 32 percent tax rate and an interest tax shield valued at $6,728 for the year. How much did the firm pay in annual interest? A.$2,153 B.$2,304 C.$2,468 D.$20,507 E.$21,025 2) What is the payback […]

1) Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 a share at a required return of 14 percent. What is the amount of the last dividend this company paid? A.$3.50 B.$3.55 C.$3.60 D.$3.65 […]

1) New Steel Products has total assets of $991,000, a total asset turnover rate of 1.1, a debt-equity ratio of 0.6, and a return on equity of 8.7 percent. What is the firm’s net income? A.$53,885.63 B.$58,303.33 C.$64,624.14 D.$70,548.09 E.$77,236.67 […]

1) Delfino’s expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually? A.$1.50 (1.02)1 B.$1.50 (1.02)2 C.$1.50 (1.02)3 D.$1.50 (1.02)4 […]

1) Letitia borrowed $6,000 from her bank 2 years ago. The loan term is 4 years. Each year, she must repay the bank $1,500 plus the annual interest. Which type of loan does she have? A.Amortized B.Blended discount C.Interest-only D.Pure […]

1) Glamour Clothing charges a daily rate of 0.05 percent on its store credit cards. What interest rate is the company required by law to report to potential customers? A.17.99 percent B.18.25 percent C.19.50 percent D.20.02 percent E.20.24 percent 2) […]

1) The sources and uses of cash over a stated period of time are reflected on the: A.income statement B.balance sheet C.shareholders’ equity statement D.cash flow statement E.statement of operating position 2) Which of the following are cash inflows from […]

1) The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following? A.Share price levels B.Risk level C.Short-term versus long-term investments D.Rates of return E.Dividends 2) Based on the […]

1) Turner Industries started a new project three months ago. Sales arising from this project are exceeding all expectations. Given this, which one of the following is management most apt to implement? A.Option to wait B.Soft rationing C.Strategic option D.Option […]

1) Which one of the following is an underwriting of securities where the offer price is determined by investor bids? A.Private placement B.Best efforts underwriting C.Initial public offering D.Green Shoe option E.Dutch auction 2) The Furniture Hut is offering a […]

1) The 1-year forward rate for the British pound is 0.6781 = $1. The spot rate is 0.6789 = $1. The interest rate on a risk-free asset in the U.K. is 4.6 percent. If interest rate parity exists, what is […]

1) Figure 9.1 In March of 2011, Macklemore Corp. considered an acquisition of Blue Scholar Learning, Inc. (BSL), a privately-held educational software firm. As a first step in deciding what price to bid for BSL, Macklemore’s CFO, Ryan Lewis, has […]

1) A bond trader just purchased and resold a bond. The amount of profit earned by the trader from this purchase and resale is referred to as the: A.market yield B.yield-to-call C.bid-ask spread D.current yield E.bond premium 2) Marcos & […]

1) Donovan Brothers, Inc. would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal? A.Return on assets B.Net income C.Retention ratio D.Dividend payout ratio E.Return on equity 2) […]

1) Peter’s Motor Works has total assets of $689,400, long-term debt of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio? A.0.60 B.0.91 C.1.01 […]

1) You have agreed to pay a five percent commission to your best friend if he can locate a buyer for your car. This arrangement is most similar to the compensation arrangement for which one of these individuals who is […]

1) Valerie bought 200 shares of Able stock today. Able stock has been trading for some time on the NYSE. Valerie’s purchase occurred in which market? A.Dealer market B.Over-the-counter market C.Secondary market D.Primary market E.Tertiary market 2) Mark is analyzing […]

1) Currently, you can exchange $1 for Sf1.14. Assume that the average inflation rate in the U.S. over the next two years will be 2.5 percent annually as compared to 3 percent in Switzerland. Based on this information and relative […]

1) EAC Nutrition offers a 9.5 percent coupon bond with annual payments, maturing 11 years from today. Your required return is 11.2 percent. What price are you willing to pay for this bond if the face (or par) value is […]

1) Highly liquid assets: A.increase the probability a firm will face financial distress B.appear on the right side of a balance sheet C.generally produce a high rate of return D.can be sold quickly at close to full value E.include all […]

1) Lockboxes should be located: A.in every town where a firm has a customer B.based on where a firm’s primary customers are located C.only in major urban areas since those are the key financial areas of the country D.close to […]

1) The Green House has a profit margin of 5.6 percent on sales of $311,200. The firm currently has 15,000 shares of stock outstanding at a market price of $11.60 per share. What is the price-earnings ratio? A.9.98 B.10.02 C.11.50 […]

1) A real rate of return is defined as a rate that has been adjusted for which one of the following? A.Inflation B.Interest rate risk C.Taxes D.Liquidity E.Default risk 2) Which one of the following tends to be true for […]

1) Which one of the following is the best universal definition of an exchange rate? A.Price of one country’s currency expressed in terms of another country’s currency B.Number of foreign dollars that can be purchased for every one U.S. dollar […]

1) The relationship between the present value and the time period is best described as: A.direct B.inverse C.unrelated D.ambiguous E.parallel 2) You purchase a bond with an invoice price of $1,120. The bond has a coupon rate of 7.5 percent, […]

1) The required return on a stock is equal to which one of the following if the dividend on the stock decreases by 1 percent per year? A.(P0/D1)-g B.(D1/P0)/g C.Dividend yield + capital gains yield D.Dividend yield – capital gains […]

1) The common stock of Western Hill Farms has yielded 16.3 percent, 7.2 percent, 11.8 percent, -3.6 percent, and 9.9 percent over the past five years, respectively. What is the geometric average return? A.7.91 percent B.8.03 percent C.8.11 percent D.8.27 […]

1) Which one of the following players on the floor of the NYSE is obligated to maintain a fair, orderly market for a limited number of securities? A.Specialist B.Floor trader C.$2 broker D.Commission broker E.Floor broker 2) M.G. Movers can […]

1) Which one of the following statements is correct? A.Oral offers can be made for new securities during the waiting period B.A Green Shoe letter must be provided to all investors who purchase shares of a new equity offering C.Corporate […]

1) Given an interest rate of zero percent, the future value of a lump sum invested today will always: A.remain constant, regardless of the investment time period B.decrease if the investment time period is shortened C.decrease if the investment time […]

1) A corporation: A.is ultimately controlled by its board of directors B.is a legal entity separate from its owners C.is prohibited from entering into contractual agreements D.has its identity defined by its bylaws E.has its existence regulated by the rules […]

1) The manager of Gloria’s Boutique has approved Carla’s application for credit. The maximum payment that has been approved is $65 a month for 24 months. The APR is 15.7 percent. What is the maximum initial purchase that Carla can […]

1) All else constant, the weighted average cost of capital for a risky, levered firm will decrease if: A.the firm’s bonds start selling at a premium rather than at a discount B.the market risk premium increases C.the firm replaces some […]

1) Taylor Farms is borrowing $75,000 for 3 years at an APR of 9 percent. The loan calls for the principal balance to be reduced by equal amounts over the life of the loan. Interest is to be paid in […]

1) Suppose you could buy 1,320 South Korea won or 78 Pakistan rupees last year for $1. Today, $1 will buy you 1,318 won or 80 rupees. Which one of the following occurred over the past year? A.The dollar appreciated […]

1) Assume that PE is the euro price of a product, PUS is the U.S. price of the identical product, and S0 is the spot exchange rate, quoted as the amount of foreign currency per dollar. Given this, which one […]

1) A credit card has an annual percentage rate of 12.9 percent and charges interest monthly. The effective annual rate on this account: A.will be less than 12.9 percent B.can either be less than or equal to 12.9 percent C.is […]

1) Home Supply, Inc. has compiled the following information: For 2010, the cash flow from assets is _____ and the cash flow to shareholders is _______. A.$49,100; $62,500 B.$49,100; $76,800 C.$49,100; $81,100 D.$56,400; $76,800 E.$56,400; $79,300 2) In relation to […]

1) Andersen’s Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 34 percent. The firm paid out $16,500 in dividends. What is the addition to retained earnings? A.$36,909 […]

1) Taylor’s Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm’s float assuming these […]

1) Which one of the following is the need to hold cash simply as a financial reserve? A.Precautionary motive B.Opportunistic motive C.Speculative motive D.Activity motive E.Transaction motive 2) You plan to buy a new Mercedes four years from now. Today, […]

1) Better Plastics is a mature manufacturing firm. The company just paid a $4 annual dividend, but management expects to reduce the payout by 3 percent per year, indefinitely. If you require a 12 percent return on this stock, what […]

1) You are analyzing a project and have developed the following estimates. The depreciation is $14,800 a year and the tax rate is 35 percent. What is the base case operating cash flow? A.$18,770 B.$18,972 C.$21,433 D.$21,690 E.$22,410 2) The […]

1) The inflation premium: A.increases the real return B.is inversely related to the time to maturity C.remains constant over time D.rewards investors for accepting interest rate risk E.compensates investors for expected price increases 2) Bruce Moneybags owns several restaurants and […]

1) Boone Brothers remodels homes and replaces windows. Ace Builders constructs new homes. If Boone Brothers considers expanding into new home construction, it should evaluate the expansion project using which one of the following as the required return for the […]

1) Which of the following are true statements? I. Venture capitalists tend to be long-term investors in a firm. II. Venture capital is relatively easy to obtain for most new firms. III. Venture capitalists generally have an exit strategy. IV. […]

1) Gabriel Furniture has a profit margin of 8.2 percent and a dividend payout ratio of 30 percent. What is the plowback ratio? A.10.66 percent B.27.33 percent C.54.60 percent D.70.00 percent E.78.20 percent 2) Which of the following are examples […]

1) What is the effective annual rate of 13.9 percent compounded quarterly? A.13.23 percent B.13.82 percent C.14.37 percent D.14.64 percent E.15.01 percent 2) Travis recently purchased a callable bond. However, that bond cannot be currently redeemed by the issuer. Thus, […]

1) The Green Shingle purchased a parcel of land 6 years ago for $299,500. At that time, the firm invested $64,000 grading the site so that it would be usable. Since the firm wasn’t ready to use the site itself […]

1) Which of the following ratios are measures of a firm’s liquidity? I. fixed asset turnover ratio II. current ratio III. debt-equity ratio IV. acid test A.I and III only B.II and IV only C.III and IV only D.I, II, […]