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1) widgetmaker has discovered that its fixed costs are $100,000 per month. if
widgetmaker sells its widgets for $35 per unit based upon a cost of $15 per unit to
manufacture (variable costs) then what dollar sales per year must widgetmaker sell in
order to break-even?
a.$175,000
b.$1,200,000
c.$2,100,000
d.none of the above
2) narrbegin: exhibit 21-1 hhi
exhibit 21-1
narrend
refer to exhibit 21-1. if firms 1 and 7 were to merge what is the hhi of the industry?
a.2,050
b.2,469
c.2,438
d.2,945
3) emmacat industries estimates that the scratching post project wonder post will have
the following begining of the year cash flows. what is the present value of the inflows
of wonder post if the annual rate of interest is 10%?
a.$3,529.04
b.$3,577.64
c.$3,482.50
d.$3,434.68
4) if you were to plot the return of asset classes on a graph with the standard deviation
of returns on the horizontal axis and expected returns on the vertical axis, then which
security class is most likely to be in the farthest upper right hand corner of the graph?
a.treasury bills
b.treasury bonds
c.corporate bonds
d.stocks
5) narrbegin: bavarian brew bond
bavarian brew bond
bavarian brew is thinking about recalling $30 million of 15 year, $1,000 par value
bonds, that were issued ten years ago. the bonds carry a coupon rate of 7.8% and have a
call price of $1,110. initially the bonds generated total proceeds of $28.65 million and
the flotation costs were $500,000. bavarian brew wants to sell $30 million of 5 year,
$1,000 par value bonds with a 5.8% coupon rate to retire the old bonds. the flotation
costs on the new bond issue are estimated to be $525,000. due to having to issue the
new bonds before the old bonds can be retired the company expects a period of 3
months were they have to pay interest on the old and the new bonds. assume a tax rate
of 34%
narrend
refer to bavarian brew bond. what are the annual tax savings from the amortization of
the flotation cost of the new bonds?
a.$11,900
b.$35,700
c.$23,100
d.$27,500
6) the price at which the owner of an option can buy or sell the underlying asset is
called the
a.market price
b.liquidation value
c.strike price
d.intrinsic value
7) a drawback to the historical approach of estimating an assets expected return is:
a.the risk of the firm may have changed over time
b.history always repeats itself
c.that the range of potential outcomes is often very broad
d.all of the above are drawbacks to the historical approach
8) pam is in need of cash right now and wants to sell the rights to a $1,000 cash flow
that she will receive 5 years from today. if the discount rate for such a cash flow is
9.5%, then what is the fair price that someone should be willing to pay pam today for
rights to that future cash flow?
a.$1,574.24
b.$635.23
c.$260.44
d.$913.24
9) if you have an increase in accounts recieveable of $20,000; an increase in inventory
of $10,000; and an increase in accounts payable of $6,000, what is the change in net
working capital?
a. $ (24,000.00)
b. $ 36,000.00
c. $ 24,000.00
d. $ (16,000.00)
10) narrbegin: exhibit 4-1
exhibit 4-1
in the financial section of your local paper, you see the following bond quotation:
narrend
given exhibit 4-1, what is the current ask yield of the big city bond? assume that todays
date is august, 2004.
a.6.14%
b.6.31%
c.6.58%
d.6.73%
11) consider the following macrs table for a 5-year asset. if an asset is purchased for
$200,000; with a shipping and istallation cost of $15,000 and an expected salvage value
of $30,000; what is the depreciation expense in the second year?
a. $ 64,000.00
b. $ 62,400.00
c. $ 68,800.00
d. $ 57,600.00
12) a loan made by an institution to a business with an initial maturity of more than 1
year, generally 5 to 12 years, is known as a(n):
a.eurocurrency loan
b.treasury bill
c.syndicated loan
d.term loan
e.stock purchase warrant
13) china has one of the fastest growing and potentially largest economies in the world,
yet there is very little or no private equity investment. why?
a.there are not enough attractive investment opportunities yet
b.basic contracting and property rights issues cannot be legally supported or enforced at
this time
c.stock market growth provides more than enough funding
d.none of the above
14) narrbegin: exhibit 22-1 liquidation
exhibit 23-1
narrend
if the company has $4,152,000 in funds to distribute to unsecured creditors, how much
do the owners of the firm receive in case i?
a.$0
b.$98,000
c.$128,000
d.$253,000
