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1) narrbegin: dsss corporation
dsss corporation
dsss corporation is considering a new project to manufacture widgets. the cost of the
manufacturing equipment is $125,000. the cost of shipping and installation is an
additional $10,000. the asset will fall into the 3-year macrs class. the year 1- 4 macrs
percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. sales are expected
to be $225,000 per year. cost of goods sold will be 60% of sales. the project will require
an increase in net working capital of $10,000. at the end of three years, dsss plans on
ending the project and selling the manufacturing equipment for $25,000. the marginal
tax rate is 40% and dsss corporations appropriate discount rate is 15%.
narrend
refer to dsss corporation. what is the initial investment outlay for this project?
a.$10,000
b.$135,000
c.$145,000
d.$155,000
2) with few exceptions over time, ____ have generally provided more total funding to
entrepreneurial companies each year.
a.angel capitalists
b.institutional venture capital funds
c.vulture funds
d.government sponsored enterprises
3) narrbegin: miller venture capital
miller venture capital
miller venture capital made a $5 million investment in bavarian sausage technology
(bst) 8 years ago and in return received 1 million shares of convertible preferred stock
that can be converted into 2 shares of common stock. after all stock has been converted
bst will have 15 million shares outstanding. in addition, the company is planning on
issuing an additional 3 million shares in an ipo.
narrend
miller venture capital fund wants to average a 50% return on its investments. of the 15
total investments 5 have failed (i.e a return of -100%), and 7 generated a zero return.
what has to be the average return on the three outstanding investment in order for miller
to reach its investment goal?
a.268%
b.417%
c.124%
d.930%
4) a young graduate invests $10,000 in a mutual fund that pays 8% interest per year.
what is the future value of this investment in 12 years?
a.$12,000
b.$19,600
c.$22,000
d.$25,182
5) narrbegin: kennesaw steel corp.
kennesaw steel corporation
as chief financial officer of the kennesaw steel corporation (ksc), you are considering a
recapitalization plan that would convert ksc from its current all-equity capital structure
to one including substantial financial leverage. ksc now has 100,000 shares of common
stock outstanding, which are selling for $50.00 each, and the recapitalization proposal is
to issue $2,000,000 worth of long-term debt at an interest rate of 8.0 percent and use the
proceeds to repurchase $2,000,000 of common stock.
narrend
refer to kennesaw steel corporation. the tax rate is 40%. what level of ebit will earnings
per share equal zero for shareholders under the new capital structure? (assume that the
stock can be repurchased at $50 per share)
a.$0
b.$60,000
c.$120,000
d.$160,000
6) what percentage of publically held firms in the u.s after experiencing financial
distress default?
a.100%
b.57%
c.19%
d.24%
7) formal business entities with full-time professionals dedication to seeking out and
funding promising ventures
a.institutional venture capital funds
b.angel capitalists
c.small business investment companies
d.financial capital funds
8) narrbegin: cash disbursements
bavarian brews schedule of projected cash disbursement
the companys purchases are 75% of its sales. of those purchases 15% are paid in cash,
50% are paid in the following month and the remainder in the month after that. the
companys wages and salaries equal 15% of sales each month plus $50. taxes of $125
are due in april. the company is going to purchase new machinery worth $1000 in
march and pay 50% right away and the rest in april. in addition, the company will pay a
$175 dividend in february.
narrend
what is the value of the bavarian brews accounts payable at the end of february? assume
the company had sales of $490 in december.
a.$688.50
b.$738.50
c.$638.50
d.$869.00
9) as a young entreprenuer, you are considering opening a new restaurant in your
hometown. you plan on operating the restaurant for four years and then either expand
the business or close the restaurant and move onto something else. an economist has
estimated the value of your option to expand at $300,000 in todays dollars. given the
estimates below, what is the project value of the new restaurant business if cash flows
are discounted at 12%?
a.-$124,066
b.$75,933
c.$175,933
d.$275,933
10) narrbegin: sea grove beach corp.
sea grove beach corporation
sea grove beach corporation is executing an initial public offering with the following
characteristics. the company will sell 12 million shares at an offer price of $20 per
share, the underwriter will charge a 7 percent underwriting fee, and the shares are
expected to sell for $27.50 per share by the end of the first days trading. assuming this
ipo is executed as expected.
narrend
how much will sea grove beach corporation receive from the offering?
a.$6.30 million
b.$223.20 million
c.$240.50 million
d.$306.90 million
11) you set up a college fund in which you pay $2,000 each year at the end of the year.
how much money will you have accumulated in the fund after 18 years, if your fund
earns 7% compounded annually?
a.$72,757.93
b.$67,998.07
c.$20,118.17
d.$28,339.25
12) a young couple buys their dream house. after paying their down payment and
closing costs, the couple has borrowed $400,000 from the bank. the terms of the
mortgage are 30 years of monthly payments at an apr of 6% with monthly
compounding. suppose the couple wants to pay off their mortgage early, and will make
extra payments to accomplish this goal. specifically, the couple will pay an extra $2,000
every 12 months (this extra amount is in addition to the regular scheduled mortgage
payment). the first extra $2,000 will be paid after month 12. what will be the balance of
the loan after the first year of the mortgage?
a.$392,940.44
b.$393,087.95
c.$394,090.84
d.$397,601.80
13) liquidity management involves
a.earning a positive return on idle excess cash balances
b.obtaining low-cost financing for meeting unexpected needs and seasonal cash
shortages
c.maintaining the greatest degree of liquidity possible for the firms assets
d.both a and b
