Lewis Materials recently offered 15,000 shares of stock but received payment for only
12,500 shares since that was all the shares the underwriters could sell. What type of
underwriting was this?
A. Syndicated
B. Firm commitment
C. Private placement
D. Best efforts
E. Dutch auction
The Good Life Store has sales of $79,600. The cost of goods sold is $48,200 and the
other costs are $18,700. Depreciation is $8,300 and the tax rate is 34 percent. What is
the net income?
A. $2,904
B. $8,382
C. $11,204
D. $14,660
E. $16,682
Which one of the following most likely represents the greatest political risk for a
U.S.-based firm?
A. A product assembly plant located in a foreign country
B. A foreign sales office
C. Accounting office that handles all payroll functions and is located in a foreign
country
D. Natural ore mine in a foreign country
E. Subassembly plant in a foreign country that uses U.S.-made components
Jamie earned $180 in interest on her savings account last year. She has decided to leave
the $180 in her account so that she can earn interest on the $180 this year. The interest
Jamie earns this year on this $180 is referred to as:
A. simple interest.
B. complex interest.
C. accrued interest.
D. interest on interest.
E. discounted interest.
According to purchasing power parity, if a Big Mac sells for $3.89 in the United States
and 47.25 pesos in Mexico, what is the peso/$ exchange rate?
A. Ps0.0739 = $1
B. Ps0.0823 = $1
C. Ps11.29 = $1
D. Ps12.15 = $1
E. Ps14.32 = $1
The Golden Goose is considering a project with an initial cost of $46,700. The project
will produce cash inflows of $10,000 a year for the first two years and $12,000 a year
for the following three years. What is the payback period?
A. 2.87 years
B. 3.23 years
C. 3.41 years
D. 3.79 years
E. 4.23 years
The common stock of Wiley and Sons has a beta that is 25 percent larger than the
overall market beta. Currently, the market risk premium is 9.5 percent while the U.S.
Treasury bill is yielding 4.7 percent. What is the cost of equity for this firm?
A. 13.76 percent
B. 14.96 percent
C. 15.80 percent
D. 16.58 percent
E. 16.85 percent
The level of financial risk to which a firm is exposed is dependent on the firms:
A. tax rate.
B. debt-equity ratio.
C. return on assets.
D. level of earnings before interest and taxes.
E. operational level of risk.
A firm has multiple divisions of similar nature, yet varying degrees of risk. Which one
of the following would be the most appropriate, yet relatively easy, means of assigning
discount rates to each of its proposed investments?
A. Assign every project a rate equal to the firms cost of equity
B. Assign every firm a random rate that varies between the firms cost of debt and its
cost of equity
C. Assign every project a rate equal to the firms WACC plus or minus a subjective
adjustment
D. Determine the best pure play rate for each project
E. Assign every project a rate equal to the market rate of return at the time of the
proposal
Your aunt loaned you money at 1.00 percent interest per month. What is the APR of this
loan?
A. 11.88 percent
B. 12.00 percent
C. 12.16 percent
D. 16.00 percent
E. 16.28 percent
Greenwood Motels has filed a petition for bankruptcy but hopes to continue its
operations both during and after the bankruptcy process. Which one of the following
terms best applies to this situation?
A. Chapter 7 bankruptcy
B. Liquidation
C. Technical insolvency
D. Accounting insolvency
E. Reorganization
Solar Energy, Inc. will pay an annual dividend of $1.85 next year. The company just
announced that future dividends will be increasing by 2 percent annually. How much
are you willing to pay for one share of this stock if you require a 14 percent return?
A. $15.14
B. $15.42
C. $15.78
D. $16.12
E. $16.62
Peterboro Supply has a current accounts receivable balance of $391,648. Credit sales
for the year just ended were $5,338,411. How long did it take on average for credit
customers to pay off their accounts during the past year?
A. 24.78 days
B. 26.78 days
C. 29.09 days
D. 31.15 days
E. 33.33 days
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. Venture capitalists tend to
specialize in one type of financing for a select type of firm.
A. I and II only
B. III and IV only
C. I and III only
D. I and IV only
E. II and IV only
Dan is a chemist for ABC, a major drug manufacturer. Dan cannot earn excess profits
on ABC stock based on the knowledge he has related to his experiments if the financial
markets are:
A. weak form efficient.
B. strong form efficient.
C. semistrong form efficient.
D. efficient at any level.
E. aware that the trader is an insider.