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1) if a company issues $25,000 worth of debt and has a corporate tax rate of 40%, what
is the pv of the debt tax shield?
a.$25,000
b.$10,000
c.$15,000
d.$20,000
2) narrbegin: bavarian sausage scenario
bavarian sausage scenario
bavarian sausage is considering starting the production of a new chocolate filled
sausage. the company is not sure yet what the exact sales potential and costs of the
product will be. bavarian sausage has determined the following three possible
scenarios:
narrend
what is the best case scenario break even point for bavarian sausage?
a.572
b.1,125
c.5,000
d.2,526
3) cozmo costanza just took out a $24,000 bank loan to help purchase his dream car. the
bank offered a 5-year loan at a 6% apr. the loan will feature monthly payments and
monthly compounding of interest. suppose that cozmo would like to pay off the
remaining balance on his car loan at the end of the second year (24 payments). what is
the remaining balance on the car loan after the second year?
a.$10,469
b.$12,171
c.$14,400
d.$15,252
4) which of the following factors will affect the price of an option?
a.the strike price of the option
b.the amount of time until expiration
c.the price of the underlying stock
d.all of the above
5) the length of time from the receipt of inventory until it is sold is
a.the average age of inventory
b.the cash conversion cycle
c.the average collection period
d.the operating cycle
6) for multinational situation, applies to u.s. assets of firms that file primary bankruptcy
in another country
a.chapter 9
b.chapter 12
c.chapter 13
d.chapter 15
7) if the return on your common stock investment is on average 18% and the return on
treasury bills was 5% over the same period of time, what is the risk premium that you
earned.
a.23%
b.13%
c.18%
d.5%
8) a collection system that is characterized by many collection points with each having
a depository account at a local bank is called
a.field banking system
b.mail based collection system
c.electronic invoice presentment and payment system
d.electronic bill presentment and payment system
9) the formula for the capital asset pricing model is:
a.e(ri) = rf + bi(e(rm) - rf)
b.e(ri) = rf + bie(rm)
c.e(ri) =bi(e(rm) - rf)
d.e(ri) + rf = bi(e(rm) - rf)
10) what is considered a primary market transaction?
a.corporations sell securities to investors in exchange for cash
b.investor a buys stock from investor b
c.a company declares a dividend
d.a company makes a bank deposit
11) you must know all the cash flows of an investment project to compute its
a.npv, irr, pi, and discount payback period
b.npv, irr, pi, payback period, and discount payback period
c.npv, pi, irr
d.npv, accounting rate of return, irr, pi
12) roxy international is considering easing credit standards to increase sales, and
potentially profits. currently the firm sells 2,000,000 units at a sales price of $7 per unit
and variable cost of $5 per unit. currently the average collection period is 35 days and
the bad debt expense is 2% of sales. the required return on investment is 18%. if credit
standards are eased, the sales will increase to 2,500,000 units; the acp will increase to
65 days; and the bad debt expense will increase to 5% all else will remain the same.
what is the profit (or loss) associated with easing credit standards?
a. $176,917.81
b. $405,000.00
c.- $418,082.19
d. $823,082.19
13) consider the following details for a bond issued by bravo incorporated.
issue date8/5/2000
maturity date8/5/2030
annual coupon rate (semi-annual coupons)9%
face value$1,000
suppose that todays date is 8/5/2004, what should the current trading price by for this
bond if investors want a 12% annual return?
a.$762.08
b.$763.13
c.$906.85
d.$1,000.00
14) which of the following represents career opportunities in finance?
a.corporate finance
b.investment banking
c.consulting
d.all of the above
15) for the prior year, billy bobs dress shop had a net profit margin of 5% based upon a
sales level of $100,000. its total assets are $1,000,000 while its total equity is $300,000.
if billy bob pays out 50% of its net income in dividends, then what is the firms
sustainable growth rate going forward?
a..84%
b.8.00%
c.8.40%
d.none of the above
16) kelley industries has 100 million shares of common stock outstanding with a current
market price of $50. the firm is contemplating undertaking an investment project which
requires an initial cash outflow of $100 million. the irr of the project is equal to the
firms cost of capital. what will be the firms stock price if capital markets fully reflect
the value of undertaking the project?
a.$50
b.$49
c.$51
d.cannot tell from the given information
17) what is the name of the procedure that applies statistically derived weights for key
financial and credit characteristics to predict whether or not a credit applicant with
specific scores for each characteristic will pay the requested credit in a timely fashion?
a.aging of accounts receivable
b.payment pattern monitoring
c.credit scoring
d.just-in-time system
e.none of the above
18) roxy is considering a new cat food factory with the following cash flows, what is
the irr?
yearcf
a.8.16%
b.9.42%
c.8.32%
d.10.12%
19) a firm can grow more rapidly if (consider each in isolation):
a.it pays larger dividends
b.it uses less debt
c.its asset to sales ratio is larger
d.its profit margin is larger
20) you are trying to determine the appropriate risk-adjusted rate, in u.s. dollars for a
project in britain. you know that the correct risk-adjusted discount rate in pounds is
15% and the risk-free rate in pounds is 9%. if the risk-free rate in dollars is 5%, then
what is the correct risk-adjusted discount rate in dollars? round to the nearest .01%
a.10.80%
b.5.50%
c.0.48%
d.none of the above
