Which of the following should be included in the analysis of a proposed investment?I.
Erosion effectsII. Opportunity costsIII. Sunk costsIV. Side effects
A. I only
B. II only
C. I and IV only
D. I, II, and IV only
E. I, II, III, and IV
You just received a loan offer from Friendly Loans. The company is offering you
$5,000 at 14.3 percent interest. The monthly payment is only $100. If you accept this
offer, how long will it take you to pay off the loan?
A. 5.84 years
B. 6.37 years
C. 6.80 years
D. 7.33 years
E. 7.59 years
Undertaker Enterprises earns $0.17 in profit on every $1 of sales and has $0.67 in assets
for every $1 of sales. The firm pays out 20 percent of its profits to its shareholders.
What is the internal growth rate?
A. 6.37 percent
B. 7.76 percent
C. 8.80 percent
D. 25.47 percent
E. 29.65 percent
You bought a share of 8.5 percent preferred stock for $40 last year. The market price for
your stock is now $88.10. What is your total return for last year?
A. 7.51 percent
B. 7.73 percent
C. 7.86 percent
D. 8.10 percent
E. 10.53 percent
Michael Jackson, Inc. currently has an operating cycle of 154 days and a cash cycle of
38 days. The firm is implementing some changes that will reduce the inventory period
by 16 days and decrease the receivables period by 4 days on average. The accounts
payable period will be decreased by 4 days. How many days will be in the new cash
cycle once all of these changes become effective?
A. 15 days
B. 16 days
C. 22 days
D. 55 days
E. 61 days
Relative purchasing power parity is based on the principle that the expected percentage
change in the exchange rate between two countries is equal to which one of the
following?
A. Difference in the risk-free interest rates in the two countries
B. Average interest rate in the two countries
C. Average inflation rate of the two countries
D. Difference in the inflation rates of the two countries
E. Difference between the two countries average inflation and interest rates
If you accept a job as a domestic security analyst for a brokerage firm, you are most
likely working in which one of the following financial areas?
A. International finance
B. Private placements
C. Corporate finance
D. Capital management
E. Investments
As of this morning, your firm had a ledger balance of $775 with no outstanding
deposits or checks. Today, your firm deposited six checks in the amount of $79 each
and wrote a check in the amount of $330. What is the amount of the collection float as
of the end of the day?
A. $115
B. $240
C. $330
D. $474
E. $775
Which one of the following correctly matches a country with its currency?
A. Canada-pound
B. China-yuan
C. Mexico-real
D. Japan-lira
E. United Kingdom-euro
The spot rate for the pound is 0.6220 = $1 and for the Canadian dollar is Can$0.9725
= $1. What is the /Can$ cross-rate?
A. 0.6396/ 1
B. 0.6627/ 1
C. 1.0333/ 1
D. 1.5635/ 1
E. 01.8238/ 1
Which one of the following will affect the capital structure weights used to compute a
firms weighted average cost of capital?
A. Decrease in the book value of a firms equity
B. Decrease in a firms tax rate
C. Increase in the market value of the firms common stock
D. Increase in the market risk premium
E. Increase in the firms beta
Boone Brothers remodels homes and replaces windows. Ace Builders constructs new
homes. If Boone Brothers considers expanding into new home construction, it should
evaluate the expansion project using which one of the following as the required return
for the project?
A. Boone Brothers cost of capital
B. Ace Builders cost of capital
C. Average of Boone Brothers and Ace Builders cost of capital
D. Lower of Boone Brothers or Ace Builders cost of capital
E. Higher of Boone Brothers or Ace Builders cost of capital
Elkins Feed Lot is an all-equity firm with positive net income. Which one of the
following will result if the firm pays a cash dividend?
A. Number of shares outstanding will increase
B. Earnings per share will decrease
C. Total assets will remain constant
D. Price-earnings ratio will decrease
E. Total equity will increase
You have just made your first $5,000 contribution to your individual retirement
account. Assuming you earn a 5 percent rate of return and make no additional
contributions, what will your account be worth when you retire in 35 years? What if
you wait for 5 years before contributing?
A. $26,335.37; $23,011.60
B. $27,311.20; $29,803.04
C. $27,311.20; $22,614.08
D. $27,580.08; 21,609.71
E. $31,241.90; $32,614.08
Stock A has a beta of 1.47 while Stock B has a beta of 1.08 and an expected return of
13.2 percent. What is the expected return on Stock A if the risk-free rate is 4.5 percent
and both stocks have equal reward-to-risk premiums?
A. 12.12 percent
B. 15.07 percent
C. 16.34 percent
D. 16.89 percent
E. 17.78 percent
Here are some important figures from the budget of Wexter Enterprises for the second
quarter of 2013:
The company predicts that 2 percent of its credit sales will never be collected, 45
percent of its sales will be collected in the month of sale, and the remaining 53 percent
will be collected in the following month. Credit purchases will be paid in the month
following the purchase.In March 2013, credit sales were $387,000 and credit purchases
were $279,500. What is the ending cash balance for April if the beginning cash balance
was $97,500?
A. $87,410
B. $90,060
C. $92,800
D. $94,440
E. $97,230
Which of the following characteristics will tend to cause a firm to adopt a more liberal
credit policy?I. Repeat customersII. Excess capacityIII. High variable costsIV. Limited
competition
A. I and II only
B. III and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
Kyle Electric has three positive net present value opportunities. Unfortunately, the firm
has not been able to find financing for any of these projects. Which one of the following
terms best describes the firms situation?
A. Sensitivity analysis
B. Capital rationing
C. Soft rationing
D. Contingency planning
E. Sunk cost