A U.S. firm has total assets valued at 687,000 located in Germany. This valuation did
not change from last year. Last year, the exchange rate was 0.94 = $1. Today, the
exchange rate is .0.75 = $1. By what amount did these assets change in value on the
firms U.S. financial statements?
A. -$185,148.94
B. -$162,311.19
C. $162,311.19
D. $185,148.94
E. $0
Laceys has an average collection period of 32 days and factors all of its receivables
immediately at a 1.1 percent discount. Assume all accounts are collected in full. What is
the firms effective cost of borrowing?
A. 13.38 percent
B. 13.45 percent
C. 13.57 percent
D. 13.63 percent
E. 13.88 percent
The Jelly Jar would like to sell 1,000 shares of stock using the Dutch auction method.
The bids received are as follows:
Bidder D will receive _____ shares and pay a price per share of _____.
A. 0; $0
B. 700; $37.00
C. 272; $37.00
D. 272; $38.75
E. 700; $38.75
The call premium is the amount by which the:
A. market price exceeds the par value.
B. market price exceeds the call price.
C. face value exceeds the market price.
D. call price exceeds the par value.
E. call price exceeds the market price.
Tom and Jerri currently own 300 shares of Alpha stock. Each share is currently worth
$36. What will Tom and Jerris investment in Alpha be worth if the company declares a
4-for-3 stock dividend?
A. $6,075
B. $10,800
C. $19,000
D. $21,600
E. $28,800
The matching principle states that:
A. costs should be recorded on the income statement whenever those costs can be
reliably determined.
B. costs should be recorded when paid.
C. the costs of producing an item should be recorded when the sale of that item is
recorded as revenue.
D. sales should be recorded when the payment for that sale is received.
E. sales should be recorded when the earnings process is virtually completed and the
value of the sale can be determined.
Given the following partial stock quote, what was the closing price on the previous
trading day if the firms earnings per share are $1.90?
A. $16.71
B. $16.77
C. $16.89
D. $17.09
E. $17.40
Which one of the following is most apt to align managements priorities with
shareholders interests?
A. Increasing employee retirement benefits
B. Compensating managers with shares of stock that must be held for three years before
the shares can be sold
C. Allowing a manager to decorate his or her own office once he or she has been in that
office for a period of three years or more
D. Increasing the number of paid holidays that long-term employees are entitled to
receive
E. Allowing employees to retire early with full retirement benefits
A project has annual depreciation of $16,200, costs of $87,100, and sales of $123,000.
The applicable tax rate is 40 percent. What is the operating cash flow according to the
tax shield approach?
A. $21,540
B. $27,667
C. $27,458
D. $28,020
E. $29,878
The foreign subsidiary of a U.S. firm is profitable when profits are measured in the
foreign currency but those profits become losses when measured in U.S. dollars. This is
an example of which one of the following?
A. Interest rate disparities
B. Short-run exposure to exchange rate risk
C. Long-run exposure to exchange rate risk
D. Political risk associated with the foreign operations
E. Translation exposure to exchange rate risk
What is the probability associated with a return that lies in the upper tail when the mean
plus two standard deviations is graphed?
A. 0.05 percent
B. 0.5 percent
C. 1.0 percent
D. 2.5 percent
E. 5.0 percent
As compared to a cash dividend, a share repurchase will do which of the following?
A. Increase both earnings per share and the PE ratio
B. Increase the earnings per share but not affect the PE ratio
C. Increase the earnings per share and decrease the PE ratio
D. Not affect either the earnings per share nor the PE ratio
E. Not affect the earnings per share but will decrease the PE ratio
You were recently hired by a firm as a project analyst. The owner of the firm is
unfamiliar with financial analysis and wants to know only what the expected dollar
return is per dollar spent on a given project. Which financial method of analysis will
provide the information that the owner requests?
A. Internal rate of return
B. Modified internal rate of return
C. Net present value
D. Profitability index
E. Payback
Suppose Gallinger Corp. has the following characteristics: Shares outstanding:
1,000,000Current share price: $10Total debt: $1,000,000Total cash: $500,000Based on
the formula above, what is the enterprise value of Gallinger Corp.?
A. $9,500,000
B. $10,500,000
C. $11,500,000
D. $12,000,000
E. $13,500,000
Which of the following combinations is ensured to decrease the interest rate sensitivity
of a bond?
A. Increase in both the time to maturity and the coupon rate
B. Increase in the time to maturity and a decrease in the coupon rate
C. Decrease in both the time to maturity and the coupon rate
D. Decrease in the time to maturity and an increase in the coupon rate
E. Decrease in the time to maturity and an increase in the face value
You want to buy a new sports car from Roys Cars for $51,800. The contract is in the
form of a 48-month annuity due at a 9.2 percent APR. What will your monthly payment
be?
A. $1,284.13
B. $1,309.29
C. $1,345.70
D. $1,352.98
E. $1,384.32
The Brown Jug has compiled the following information:
What is the operating cash flow for 2014?
A. $21,900
B. $26,700
C. $42,100
D. $48,300
E. $52,600
Which one of the following will increase the cost of equity, all else held constant?
A. Increase in the dividend growth rate
B. Decrease in beta
C. Decrease in future dividends
D. Increase in stock price
E. Decrease in market risk premium
What is the name given to a subsidiary of a firm that exists solely to handle the credit
functions of the parent company?
A. Internal credit organization
B. Bank
C. Credit association
D. Captive finance company
E. Credit union