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Financial Management, 12e (Titman/Keown/Martin) Chapter 1 Getting Started-Principles of Finance 1.1 Finance: An Overview 1) Which of the following statements best represents what inance is about? A) How political, social, and economic forces afect corporations B) Maximizing proits C) The […]

30) In a limited partnership, at least one general partner must remain in the association; the privilege of limited liability still applies to this partner. Question Status: Previous edition Objective: 1.2 Identify the diferences between the three major legal forms […]

3) In inance, we assume that investors are generally A) neutral to risk. B) averse to risk. C) fond of risk. D) none of the above. Question Status: Previous edition Objective: 1.4 Explain the ive principles of inance that form […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 10 Stock Valuation 10.1 Common Stock 1) The XYZ Company, whose common stock is currently selling for $40 per share, is expected to pay a $2.00 dividend in the coming year. If investors believe that […]

30) The shareholder can cast all votes for a single candidate or split them among various candidates through A) proxy ights. B) cumulative voting. C) call provisions. D) majority voting. Question Status: Previous edition Objective: 10.1 Identify the basic characteristics […]

10) Apple stock is now selling for $460 per share. The P/E ratio based on current earnings is 10.98 and the P/E ratio based on expected earnings is 10.16. The expected growth rate in Apples earnings must be A) 2.39%. […]

22) An issue of preferred stock currently sells for $52.50 per share and pays a constant annual expected dividend of $2.25 per share. The expected return on this security is A) 4.29%. B) 0.04%. C) 8.33%. D) 13.33%. Question Status: […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 11 Investment Decision Criteria 11.1 An Overview of Capital Budgeting 1) Which of the following are typical consequences of good capital budgeting decisions? A) The irm increases in value. B) The irm gains knowledge and […]

18) Which of the following is a correct equation to solve for the NPV of the project that has an initial outlay of $30,000, followed by incremental cash inlows in the next 3 years of $15,000, $20,000, and $30,000? Assume […]

8) Project Black Swan requires an initial investment of $115,000. It has positive cash lows of $140,000 for each of the next two years. Because of major demolition and environmental clean-up costs, cash low for the third and inal year […]

32) Aroma Candles, Inc. is evaluating a project with the following cash lows. Calculate the IRR of the project. (Round to the nearest whole percentage.) YearCash Flows 0 ($120,000) 1 $30,000 2 $70,000 3 $90,000 A) 18% B) 23% C) […]

53) Black Friday Inc. has estimated the following cash lows for a project it is considering: Period Cash Flow 0 ($150,000) 1 $70,000 2 $80,000 3 ($100,0000) a. What is the payback period for this project? b. What is the […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 12 Analyzing Project Cash Flows 12.1 Identifying Incremental Cash Flows 1) Incremental cash lows from a project = A) Firm cash lows without the project plus or minus changes in net income. B) Firm cash […]

35) Anderson-EOG Inc. is evaluating the construction of a gas pipeline to bring natural gas from Western New York state to New York City. The controller argues that depreciation has to be included among the expenses. The Treasurer argues that […]

26) Burr Habit Corporation is considering a new product line. The company currently manufactures several lines of snow skiing apparel. The new products, insulated ski shorts, are expected to generate sales less cost of goods sold of $1 million per […]

60) What is the advantage, if any, to using MACRS rather than straight line depreciation? Question Status: Previous edition Objective: 12.2 Calculate and forecast project cash lows for expansion type projects. Keywords: incremental cash lows Principles: Principle 3: Cash Flows […]

6) National Geographic is replacing an old printing press with a new one. The old press is being sold for $350,000 and it has a net book value of $75,000. Assume that National Geographic is in the 40% income tax […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 13 Risk Analysis and Project Evaluation 13.1 The Importance of Risk Analysis 1) Which of the following is a reason why risk analysis is an important part of capital budgeting? A) The people who propose […]

18) Boulangerie Boufard expects to sell 1 million croissants next year for $1.25 each. Variable cost of a croissant is $0.75. Fixed costs are $150,000, depreciation $200,000 and the tax rate is 25%. If the bakery can increase the price […]

4) Betty Gilmore plans to sell berry pies at a local farmer’s market. The permit and space rental will cost her $2,000 for the June through August season. The pies will sell for $7.00. Ingredients and overhead average $4.00 per […]

35) Year 0 Year 0 Year 1 Year 2 Revenue $15,000 $15,000 Variable Cost ($5,000) ($5,000) Depreciation ($200) ($200) Fixed Cost ($350) ($350) Operating Income $9,450 $9,450 Taxes at 30% ($2,835) ($2,835) NOPAT $6,615 $6,615 Capital Investment ($5,753) Free Cash […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 14 The Cost of Capital 14.1 The Cost of Capital: An Overview 1) In order to maximize irm value, management should invest in new assets when cash lows from the assets are discounted at the […]

14.3 Estimating the Cost of Individual Sources of Capital 1) PVE, Inc. has $15 million of debt outstanding with a coupon rate of 9%. Currently, the yield to maturity on these bonds is 7%. If the irm’s tax rate is […]

31) Given the following information, determine the risk-free rate. Cost of equity = 12% Beta = 1.50 Market risk premium = 6% A) 6.0% B) 3.0% C) 9.0% D) 6.5% Question Status: Revised Objective: 14.3 Calculate the after-tax cost of […]

7) How frequently do most irms update their cost of capital? A) Rarely, if ever B) At least once a year C) Daily D) Only when there are major changes in the irm’s capital structure Question Status: Previous edition Objective: […]

9) Which of the following is a good reason to use divisional costs of capital? A) Division managers have no vested interest in underestimating the capital costs associated with their division. B) Divisional costs of capital reduce are relatively easy […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 15 Capital Structure Policy 15.1 A Glance at Capital Structure Choices in Practice 1) The irm’s optimal capital structure is the mix of inancing sources that A) minimizes the risk of inancial distress. B) maximizes […]

7) An optimal capital structure is achieved A) when a irm’s expected proits are maximized. B) when a irm’s expected EPS are maximized. C) when a irm’s break-even point is achieved. D) when a irm’s weighted average cost of capital […]

40) In the original version of the Modigliani and Miller capital structure theorem, as a irm increases the amount of debt in its capital structure, the cost of equity will rise but the cost of capital will remain the same. […]

15) Zybeck Corp. projects operating income of $4 million next year. The irm’s income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 16 Dividend Policy 16.1 Do Firms Distribute Cash to Their Shareholders? 1) In response to a temporary decline in earnings per share, most companies would A) decrease their cash dividend. B) not decrease their cash […]

31) The ex-dividend date occurs prior to the declaration date. Question Status: Previous edition Objective: 16.1 Distinguish between the use of cash dividends and share repurchases. Keywords: dividend policy Principles: Principle 4: Market Prices Relect Information 32) Dividends tend to […]

16) Which of the following reasons is used to justify stock repurchases? A) The repurchase narrows ownership. B) The repurchase modiies the irm’s capital structure. C) The repurchase reduces the irm’s costs associated with servicing small stockholders. D) All of […]

50) Trevor Co.’s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding, what will the yearly dividend per share be if the dividend policy is as follows? a. A constant payout ratio of […]

18) According to the residual theory of dividends A) dividends are to be paid out only after investment inancing needs have been met. B) earnings remaining after payment of preferred stock dividends should be paid to common stockholders. C) dividend […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 17 Financial Forecasting and Planning 17.1 An Overview of Financial Planning 1) Types of plans that businesses typically use to guide their operations include A) strategic plans. B) long-range inancial plans. C) short-range inancial plans. […]

16) Assume that Gatsby Enterprises has sales of $83 million and ixed assets of $22.4 million in 2013. The corporation utilizes the percent-of-sales method of inancial forecasting. If Gatsby is expected to generate sales of $94 million in 2014, what […]

Answer: TRUE Dif: 2 AACSB: 3. Analytic thinking Question Status: Previous edition Objective: 17.2 Use the percent of sales method to forecast the inancing requirements of a irm, including its discretionary inancial needs. Keywords: percent of sales method Principles: Principle […]

7) The function of a budget includes to A) indicate the amount and time of future inancing needs. B) provide a basis for corrective action. C) provide information for performance evaluations. D) all of the above. Question Status: Previous edition […]

25) Home to House Distributors is preparing a cash budget. The initial conclusion is that the irm will need to borrow more money than its bank is willing to lend. Which of the following actions could Home to House Distributors […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 18 Working Capital Management 18.1 Working Capital Management and the Risk-Return Tradeof 1) An increase in ________ would increase net working capital. A) plant and equipment B) accounts payable C) accounts receivable D) both B […]

6) A “pop-up” store wants to use vacated space at a shopping mall to sell seasonal merchandise during the months of October, November and December. The rent is $10,000 per month, but the mall’s owners are requiring a payment of […]

6) Abbot Corporation has an average collection period of 49 days, an inventory conversion period of 83 days, and a payables deferral period of 36 days. What is Abbott’s cash conversion cycle? A) 96 days B) 70 days C) 85 […]

19) Atlas Tire Irons, Inc. is considering borrowing $5,000 for a 3 month period. The irm will repay the $5,000 principal amount plus $150 in interest. What is the annual percentage rate (APR) rate of interest (use a 360-day year)? […]

49) Lightbulbs.com sells industrial and institutional lighting supplies through its website. It sells directly to businesses and organizations such as universities and hospitals on terms of net 90. To inance its rather large investments in receivables and inventory, the irm […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 19 International Business Finance 19.1 Foreign Exchange Markets and Currency Exchange Rates 1) Trading in foreign exchange markets is dominated by A) Russian rubles, Indian rupees and Indonesian rupeas. B) Spanish pesetas, German marks, French […]

30) Based on the forward rates in table 19.1, the British pound is expected to A) stay the same against the dollar. B) weaken against the dollar. C) luctuate randomly against the dollar. D) strengthen against the dollar. Question Status: […]

C) An indirect quote is the exchange rate that indicates the number of units of the home currency required to buy one unit of foreign currency. D) Both B and C. Answer: B Dif: 2 AACSB: 3. Analytic thinking Question […]

19.3 Capital Budgeting for Direct Foreign Investment 1) Which of the following international business activities constitutes a foreign direct investment? All irms mentioned are U.S. based. A) Yanqui Spirits imports a 1000 cases of rum from the Dominican Republic. B) […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 2 Firms and the Financial Market 2.1 The Basic Structure of the U.S. Financial Markets 1) The principal savers in the inancial markets are A) businesses. B) banks. C) individuals. D) governments. Question Status: New […]

2.3 The Financial Marketplace: Securities Markets 1) Which of the following is true about bonds? A) They are obligations from the investor to the corporation. B) Their interest rate always varies with the Consumer Price Index. C) They have a […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 20 Corporate Risk Management 20.1 Five-Step Corporate Risk Management Process 1) The major risks assumed by irms include A) demand risk. B) foreign-exchange risk. C) operational risk. D) all of the above. Question Status: Previous […]

15) (Business of Life) What guidelines should determine whether or not an individual should buy life insurance? Question Status: Previous edition Objective: 20.2 Understand how insurance contracts can be used to manage risk. Keywords: insurance Principles: Principle 2: There Is […]

10) The price at which the stock or asset may be purchased from (or sold to) the option writer is referred to as A) intrinsic value of the option. B) option premium. C) open interest. D) exercise or striking price. […]

44) A futures contract is a specialized form of a forward contract distinguished by an organized exchange which encourages conidence in the futures market by allowing for the efective regulation of trading. Question Status: Previous edition Objective: 20.4 Understand the […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 3 Understanding Financial Statements, Taxes, and Cash Flows 3.1 An Overview of the Firm’s Financial Statements 1) Which of the basic inancial statements is best used to answer the question, “How proitable is the business?” […]

13) Based on the information contained in Table 3, what is Snark Enterprise’s gross proit margin in 2012. A) 5.6% B) 4.5% C) 29.7% D) 2.2% Question Status: New question Objective: 3.2 Evaluate irm proitability using the income statement. Keywords: […]

3.4 The Balance Sheet 1) Which of the following is not a current asset? A) Accounts payable B) Marketable securities C) Accounts receivable D) Inventory Question Status: Previous edition Objective: 3.4 Use the balance sheet to describe a irm’s investment […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 4 Financial Analysis-Sizing Up Firm Performance 4.1 Why Do We Analyze Financial Statements? 1) Which of the following parties would perform an external inancial analysis? A) A irm’s compensation committee B) A inancial analyst forecasting […]

15) An increase in ________ will increase common equity. A) paid in capital B) retained earnings C) dividends paid D) both A and C Question Status: Revised Objective: 4.3 Calculate and use a comprehensive set of inancial ratios to evaluate […]

45) GAAP, Inc. has total assets of $2,575,000, sales of $5,950,000, total liabilities of $1,855,062, and a net proit margin of 2.9%. What is GAAP’s return on equity? Round to the nearest 0.1%. A) 8.6% B) 24.0% C) 16.4% D) […]

69) ________ indicates management’s efectiveness in managing the irm’s income statement. A) Gross proit margin B) Operating proit margin C) Net proit margin D) Return on assets Question Status: Previous edition Objective: 4.3 Calculate and use a comprehensive set of […]

$575,000 McKinny cannot pay of its loan by using only internally generated funds. Dif: 2 AACSB: 3. Analytic thinking Question Status: Previous edition Objective: 4.3 Calculate and use a comprehensive set of inancial ratios to evaluate a company’s performance. Keywords: […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 5 Time Value of Money-The Basics 5.1 Using Timelines to Visualize Cash Flows 1) Financial managers use the time value of money to A) make business decisions. B) compare cash lows of diferent projects. C) […]

16) If you want to have $90 in four years, how much money must you put in a savings account today? Assume that the savings account pays 8.5% and it is compounded monthly (round to the nearest $1). A) $64 […]

3) High discount rates favor A) neither long-term nor short-term investments. B) both long-term and short-term investments. C) long-term investments. D) short-term investments. Question Status: New question Objective: 5.3 Understand discounting and calculate the present value of cash lows using […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 6 The Time Value of Money-Annuities and Other Topics 6.1 Annuities 1) You wish to borrow $2,000 to be repaid in 12 monthly installments of $189.12. The annual interest rate is A) 24%. B) 8%. […]

30) A retirement plan guarantees to pay you or your estate a ixed amount for 20 years. At the time of retirement, you will have $31,360 to your credit in the plan. The plan anticipates earning 8% interest annually over […]

59) Which of the following statements is true? A) The future value of an annuity would be greater if funds are invested at the beginning of each period instead of at the end of each period. B) An annuity is […]

6.3 Complex Cash Flow Streams 1) What is the value on 1/1/14 of the following cash lows? Use a 10% discount rate, and round your answer to the nearest $1.00. Date Cash Received Amount of Cash 1/1/16 $100 1/1/17 $200 […]

15) Assume that two investments have a three-year life and generate the cash lows shown below. Which of the two would you prefer? Year Investment A Investment B 1 $5,000 $8,000 2 $5,000 $5,000 3 $5,000 $2,000 A) Investment A, […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 7 An Introduction to Risk and Return-History of Financial Market Returns 7.1 Realized and Expected Rates of Return and Risk 1) You purchased the stock of Sargent Motors at a price of $75.75 one year […]

7.3 Geometric vs. Arithmetic Average Rates of Return 1) Marcus Berger invested $9842.33 in Hawkeyehats, Inc. four years ago. He sold the stock today for $11,396.22. What is his geometric average return? A) 2.98% B) 3.73% C) 3.95% D) There […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 8 Risk and Return-Capital Market Theory 8.1 Portfolio Returns and Portfolio Risk 1) Which of the following portfolios is clearly preferred to the others? Expected Standard Return Deviation A 14% 12% B 22% 20% C […]

32) You are considering a portfolio consisting of equal investments in the stocks Northbank Inc. and Tropical Escapes Inc. Returns on the 2 stocks under various conditions are shown below. Scenario Return (%) Return % Return % Probability Northbank Tropical […]

31) Unsystematic risk can be eliminated through diversiication. Question Status: Previous edition Objective: 8.2 Understand the concept of systematic risk for an individual investment and calculate portfolio systematic risk (beta). Keywords: beta Principles: Principle 2: There Is a Risk-Return Tradeof […]

15) Marjen stock has a required return of 20%. The expected market return is 15%, and the beta of Marjen’s stock is 1.5. Calculate the risk-free rate. A) 4% B) 5% C) 6% D) 7% Question Status: Previous edition Objective: […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 9 Debt Valuation and Interest Rates 9.1 Overview of Corporate Debt 1) The par value of a bond A) never equals its market value. B) is determined by the investor. C) generally is $1,000. D) […]

15) Bond ratings directly afect a bond’s A) spread over the Treasury yield. B) coupon rate. C) maturity date. D) call provisions. Question Status: New question Objective: 9.2 Calculate the value of a bond and relate it to the yield […]

55) Garvin, Inc.’s bonds have a par value of $1,000. The bonds pay semiannual interest of $40 and mature in ive years. a. How much would you pay for Garvin bonds if your required rate of return is 10%? b. […]

9.4 Types of Bonds 1) Eurobonds are A) issued in a country diferent from the one in whose currency the bond is denominated. B) issued only in Europe. C) the European equivalent of a junk bond. D) none of the […]