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1) a root cause of firm agency costs is
a.managerial carelessness
b.a manager owning too much of his firms stock
c.a managers concern for his personal well-being
d.federal agency filing requirements
2) narrbegin: smart acquires snazzy
smart acquires snazzy
smart products plans to acquire snazzy snaps, which will create $8 million in
incremental cash flows for smart each year for the first six years. smart products plans
to divest snazzy snaps at the end of the sixth year for $112,500,000. smarts beta (b) is
1.2, and is expected to remain so after the acquisition. the risk free rate is 5 percent and
the expected return on the market is 16 percent. smart products has a 100 percent equity
capital structure which will be maintained post-acquisition.
narrend
refer to smart acquires snazzy. if smart products beta (b) falls to 0.95 post-acquisition,
what would its weighted average cost of capital be?
a.9.05%
b.18.2%
c.12.10%
d.15.45%
3) a modern day buggy whip maker that went out of business because of low sales
really failed because of
a.its corporate maturity
b.its inability to control the business cycle
c.an aggressive capital structure
d.none of the above
4) the outright sale of a firms receivables to a third party is called
a.a write-off
b.factoring
c.re-invoicing
d.none of the above
5) increases in assets must be accompanied by
a.an increase in liabilities
b.an increase in owners equity
c.equal amounts of a) and b)
d.some combination of a) and b)
6) bavarian sausages has a working capital/total assets ratio of 0.1, a retained
earnings/total assets ratio of 0.2, an earnings before interest and taxes/total assets ratio
of 0.14, a market value of equity/book value of equity ratio of 0.2, and a sales/total
assets ratio of 0.35. what is the companys z score?
a.0.86
b.1.96
c.1.33
d.2.13
7) suppose that j.b. campbell & company operates in the united states and sells 10
coffee tables to a japanese company. j.b. campbell & company delivers the tables now
and will receive ¥187,500 in 6 months. if the current spot rate is ¥122/$ and if the
exchange rate in 6 months is ¥127/$, how much will j.b. campbell & company have
gained / lost from the movements in exchange rates if it does not hedge this transaction.
a.they will not gain or lose anything on this transaction
b.they will gain ¥50
c.they will gain $60.50
d.they will lose $60.50
8) you find that the yield on a 6-year bond is 12% while that of a 4-year bond is 9%.
what should be the yield on a 2-year bond beginning four years from now as predicted
by the expectations theory?
a.3.00%
b.18.25%
c.39.83%
d.none of the above
9) milton gaming company currently has assets of $3,000,000 and accounts payable of
$200,000. the firms sales last year were $10,000,000. if the firm anticipates next years
sales to grow by 8% over that of last year and the firm pays out 25% of its net income
in dividends, then what net profit margin is required in order to have the estimated
external funds required be equal to zero?
a.27.00%
b.25.00%
c.2.77%
d.2.50%
10) louis incorporated has ebit of $500,000 for the current year. the firm has $250,500
of debt outstanding with a coupon rate of 12 percent. investors require a return of 18
percent on the firm, and the firm has a corporate tax rate of 40%. what is the present
value of the firms tax shields?
a.$ 30,060
b.$100,200
c.$200,000
d.$ 45,090
11) based upon the following levels of risk, which stock should have the highest price if
each stock is expected to produce the same level of cash over the future life of each
asset?
a.stock a
b.stock b
c.stock c
d.there is not enough information to decide
12) considering the following information what is the value of the call?
a.$2.84
b.$12.69
c.$11.01
d.$2.88
13) the user of an asset in a leasing arrangement is called the
a.lessor
b.lessee
c.trustee
d.none of the above
14) which of the following is not considered a weakness of the sole proprietorship?
a.limited life
b.unlimited personal liability
c.simplicity
d.limited access to capital
15) which of the following is a strength of a sole proprietorship?
a.unlimited life
b.easy to form
c.limited liability
d.limited access to capital
16) 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
what is smart productss carrying cost at the eoq?
a.$49,320
b.$313,655
c.$42,420
d.$134,160
17) a root cause of firm agency costs is
a.managerial carelessness
b.a manager owning too much of his firms stock
c.a managers concern for his personal well-being
d.federal agency filing requirements
18) narrbegin: cash budget
bavarian brews schedule of projected cash disbursement
all of bavarian brews sales are credit sales. the company collects 60% of its sales in the
next month and the remainder in the month after that.
narrend
what is the value of bavarian brew's receivables at the end of april?
a.$780
b.$180
c.$600
d.$270
19) an investment banking firm that generally occupies the lead or co-lead managers
position in large security offerings is referred to as
a.a bulge bracket firm
b.a green shoe firm
c.a wall street firm
d.none of the above
