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1) emma bonds will mature in 8 years, the coupon rate of the bond is 6% paid
semiannually, if bonds currently sell for $820 what is the bonds yield to maturity?
a.9.23%
b.6.00%
c.4.61%
d.3.00%
2) you found your dream house. it will cost you $175,000 and you will put down
$35,000 as a down payment. for the rest you get a 30-year 6.25% mortgage. what will
be your monthly mortgage payment (assume no early repayment)?
a.$729
b.$862
c.$389
d.$605
3) the dominant source of financing for u.s. corporations is
a.debt financing
b.new equity
c.internal cash flow
d.none of the above
4) which of the following will increase in price as the value of the underlying asset
decreases in price, from the option holders perspective?
a.call option
b.put option
c.a long future position
d.none of the above
5) a particular asset has a beta of 1.2 and an expected return of 10%. the expected return
on the market portfolio is 13% and the risk-free is 5%. which of the following statement
is correct?
a.this asset lies on the security market line
b.this asset lies above the security market line
c.this asset lies below the security market line
d.cannot tell from the given information
6) should a firm invest in projects with npv = $0?
a.yes
b.no
c.the firm is indifferent between accepting or rejecting projects with zero npvs
d.the firm should look at the pi and irr of the projects
7) narrbegin: smart products eoq
smart products
assume a 365 day year.
smart products buys 300,000 units of a crucial input per year from a supplier that
fulfills its orders within two days of receiving them. smart products submits its orders
directly to the supplier through a web interface, so its lead time is the suppliers two day
turnaround time. each order costs smart products about $500 to place, while carrying
costs are about $60 per unit per year. the company seeks to maintain a five day usage
level in a safety stock.
narrend
at what inventory level of this input should smart eoq reorder?
a.2236 units
b.5754 units
c.4110 units
d.1644 units
8) smith enterprises stock currently sells for $17.50. a call option on the stock has a
strike price of $15 and currently sells at $4.50. what is the intrinsic value of the option?
a.$0
b.$2.50
c.$4.50
d.$1.25
9) roxy international is considering easing credit standards to increase sales, and
potentially profits. currently the firm sells 2,000,000 units at a sales price of $7 per unit
and variable cost of $5 per unit. currently the average collection period is 35 days and
the bad debt expense is 2% of sales. the required return on investment is 18%. if credit
standards are eased, the sales will increase to 2,500,000 units; the acp will increase to
65 days; and the bad debt expense will increase to 5% all else will remain the same.
what is the marginal profit from increased sales?
a.$ 3,500,000.00
b.$ 1,000,000.00
c.$ 2,500,000.00
d.$14,000,000.00
10) bavarian brewhouse is planning on going public. under the underwriting agreement
the underwriting discount is 7.25%. if the offering price of the stock is set at $12.50 per
share, how many shares does the company have to issue to raise $75 million?
a.6,000,000
b.6,469,003
c.5,567,400
d.5,000,000
11) narrbegin: bavarian brew float
bavarian brew float
bavarian brew receives about 350 checks a day with an average check size of $550.
currently customers payments spend 2 days in the mail. once a check is received it takes
about 1.5 days to process it and another 4 days to clear the banking system. the firms
opportunity cost is 10%. assume a 365-day year.
narrend
bavarian brew is contemplating implementing a lockbox system. if the system has an
annual cost of $60,000, by how many days would the float have to be reduced for the
company to implement the system?
a.2.52 days
b.3.12 days
c.3.75 days
d.4.74 days
12) herbilux botanicals forecasts the following cash flows at the beginning of each year
for a project. if the firm's discount rate is 9%, what is the present value of the project?
a.$8,32,2182
b.$8,015,517
c.$8,736,914
d.$9,523,236
13) emmacat industries estimates that the scratching post project wonder post will have
the following beginning of the year cash flows. what is the future value of the inflows at
the end of the 4th year if the annual rate of interest is 10%?
a.$5,238.02
b.$4,761.89
c.$4,635.21
d.$4,571.58
