Skyline Industries will need $1.8 million 5 years from now to replace some equipment.
Currently, the firm has some extra cash and would like to establish a savings account
for this purpose. The account pays 5.25 percent interest, compounded annually. How
much money must the company deposit today to fully fund the equipment purchase?
A. $1,279,947.20
B. $1,298,407.21
C. $1,350,868.47
D. $1,393,676.52
E. $1,412,308.18
Which one of the following is the tax rate that applies to the next dollar of taxable
income that a firm earns?
A. Average tax rate
B. Variable tax rate
C. Marginal tax rate
D. Absolute tax rate
E. Contingent tax rate
Harry Joiner, Inc. currently has an inventory turnover of 15.7, a payables turnover of
9.6, and a receivables turnover of 8.1. How many days are in the cash cycle?
A. 30.29 days
B. 32.70 days
C. 56.51 days
D. 84.39 days
E. 104.72 days
Smiley Industrial Goods has bonds on the market making annual payments, with 13
years to maturity, and selling for $1,095. At this price, the bonds yield 6.4 percent.
What must the coupon rate be on these bonds?
A. 6.67 percent
B. 6.84 percent
C. 7.23 percent
D. 7.50 percent
E. 7.83 percent
Accounts receivable financing is the term used to describe which of the following types
of loans that involve either the assignment or the factoring of a firms accounts
receivable?
A. Secured short-term loan
B. Unsecured short-term loan
C. Secured long-term loan
D. Unsecured long-term loan
E. Trust receipt loan
The balance sheet for Quik Treats, Inc. is shown here in market value terms. There are
20,000 shares of stock outstanding.
The company has declared a dividend of $1.40 per share. The stock goes ex-dividend
tomorrow. Ignore any tax effects. What will the firms equity value be after the dividend
is paid?
A. $572,000
B. $587,000
C. $603,000
D. $615,000
E. $643,000
Which one of the following will tend to decrease the length of the credit period?
A. Decrease in default risk
B. Increase in the cost of the product
C. Increase in competition
D. Decrease in the size of the account
E. Decrease in turnover rate
Which one of the following statements related to the security market line is correct?
A. An underpriced security will plot below the security market line.
B. A security with a beta of 1.54 will plot on the security market line if it is correctly
priced.
C. A portfolio with a beta of 0.93 will plot to the right of the overall market.
D. A security with a beta of 0.99 will plot above the security market line if it is correctly
priced.
E. A risk-free security will plot at the origin.
Which one of the following is a noncash payment made by a firm to its shareholders
and is a payment that lessens the value of each outstanding share?
A. Reverse stock split
B. Cash distribution
C. Stock dividend
D. Regular dividend
E. Liquidating dividend
Currently, you can purchase either 128 Canadian dollars or 10,050 Japanese yen for
$100. What is the /Can$ cross-rate?
A. 78.52/Can$1
B. 79.94/Can$1
C. 81.23/Can$1
D. 86.27/Can$1
E. 87.08/Can$1
Kaylors Tool Shoppe has 16,000 shares of stock outstanding at a market price of $2 a
share. Which one of the following stock splits should the firm declare if it wants to
increase the stock price to exactly $15 a share? Ignore any taxes or market
imperfections.
A. 15-for-2 stock split
B. 8-for-1 stock split
C. 1-for-7 reverse stock split
D. 2-for-15 reverse stock split
E. 1-for-8 reverse stock split
The systematic risk principle states that the expected return on a risky asset depends
only on which one of the following?
A. Unique risk
B. Diversifiable risk
C. Asset-specific risk
D. Market risk
E. Unsystematic risk
Dragon Trucking just paid its annual regular cash dividend of $1.25 a share, along with
a special dividend of $0.25 a share. The company follows a policy of increasing its
dividend by 3 percent annually. Which one of the following is the best estimate of the
firms next annual dividend payment?
A. $1.25
B. $1.29
C. $1.49
D. $1.50
E. $1.54
When are funds generally transferred into zero-balance accounts?
A. Monthly
B. Weekly
C. Daily
D. As needed
E. Never
Fresh Foods has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.7,
and a profit margin of 2.4 percent. What is the equity multiplier?
A. 0.70
B. 0.73
C. 1.93
D. 2.70
E. 2.84
Which one of the following is most apt to decrease the accounts receivable period?
A. Increasing the time granted to customers to pay for purchases
B. Shortening the cash cycle
C. Increasing the discount for cash payment
D. Selling inventory slower
E. Paying suppliers faster
You can exchange $1 for either 0.7773 euro or 0.6220 British pound. What is the
cross-rate between the pound and the euro?
A. 0.7519/ 1
B. 0.8756/ 1
C. 0.8002/ 1
D. 1.0852/ 1
E. 1.2497/ 1
Donegals Industrial Products wishes to maintain a growth rate of 6 percent a year, a
debt-equity ratio of 0.45, and a dividend payout ratio of 30 percent. The ratio of total
assets to sales is constant at 1.25. What profit margin must the firm achieve?
A. 4.68 percent
B. 5.29 percent
C. 6.33 percent
D. 6.97 percent
E. 8.19 percent