Which one of the following is a correct statement, all else held constant?
A. The present value is inversely related to the future value.
B. The future value is inversely related to the period of time.
C. The period of time is directly related to the interest rate.
D. The present value is directly related to the interest rate.
E. The future value is directly related to the interest rate.
Which one of the following is the length of time that a retailer owes its supplier for an
inventory purchase?
A. Inventory period
B. Accounts receivable period
C. Accounts payable period
D. Operating cycle
E. Cash cycle
A project has the following cash flows. What is the payback period?
A. 2.48 years
B. 2.59 years
C. 2.96 years
D. 3.21 years
E. 3.43 years
Which one of the following is a shortage cost associated with a firm’s inventory?
A. Restocking cost
B. Opportunity cost of capital
C. Inventory obsolescence
D. Insurance cost
E. Inventory theft
You are considering the following two mutually exclusive projects. The required return
on each project is 14 percent. Which project should you accept and what is the best
reason for that decision?
A. Project A, because it pays back faster
B. Project A, because it has the higher profitability index
C. Project B, because it has the higher profitability index
D. Project A, because it has the higher net present value
E. Project B, because it has the higher net present value
One year ago, Alpha Supply issued 15-year bonds at par. The bonds have a coupon rate
of 6.5 percent and pay interest annually. Today, the market rate of interest on these
bonds is 7.2 percent. How does the price of these bonds today compare to the issue
price?
A. 4.99 percent lower
B. 5.38 percent lower
C. 6.05 percent lower
D. 0.07 percent higher
E. 1.36 percent higher
Which one of the following describes systemic risk?
A. Risk that affects a large number of assets
B. An individual security’s total risk
C. Diversifiable risk
D. Asset specific risk
E. Risk unique to a firm’s management
Kristina started setting aside funds three years ago to save for a down payment on a
house. She has saved $900 each quarter and earned an average rate of return of 4.8
percent. How much money does she currently have saved for her down payment?
A. $11,542.10
B. $12,388.19
C. $15,209.80
D. $15,366.67
E. $16,023.13
Circle K Stores has net income of $41,000, a profit margin of 3.7 percent, and a return
on assets of 9 percent. What is the capital intensity ratio?
A. 0.41
B. 0.86
C. 1.16
D. 1.34
E. 2.43
Which one of the following best defines the economic order quantity (EOQ)?
A. Minimum size of an order needed to qualify for free shipping
B. Minimum amount that must be ordered to obtain the quantity discount
C. Number of items that are sold on average each month
D. Restocking quantity that minimizes the total cost of inventory
E. Minimal amount of inventory that must be purchased to receive a cash discount
Assume that large-company stocks had an average return of 11.4 percent and a standard
deviation of 19.7 percent for a 40-year period. What range of returns would you expect
to see on these stocks 95 percent of the time?
A. -50.3 percent to 53.2 percent
B. -50.3 percent to 73.9 percent
C. -50.3 percent to 64.1 percent
D. 28.0 percent to 50.8 percent
E. -28.0 percent to 50.8 percent
Ruby Falls has an average collection period of 35 days. Its average daily investment in
receivables is $71,000. What are annual credit sales?
A. $727,272
B. $740,429
C. $914,414
D. $1,450,200
E. $1,707,500
In relation to bonds, which one of the following terms has the same meaning as the term
“crossover”?
A. Speculative
B. 5B
C. Fallen angel
D. Junk
E. Triple A
Which one of the following is most closely related to the net present value profile?
A. Internal rate of return
B. Average accounting return
C. Profitability index
D. Payback
E. Discounted payback
Al’s Bakery has a checkbook balance of $1,650. A $700 deposit was made today and
will be added to the available balance tomorrow. There are two outstanding checks that
total to $623. There are no other outstanding items. Which one of the following
statements accurately reflects this situation?
A. The disbursement float is $1,650.
B. The firm’s current available balance is equal to $1,650 plus $700 minus $623.
C. The firm’s collection float exceeds its disbursement float.
D. The firm’s available balance is greater than its book balance.
E. The firm has a net disbursement float.
Braxton’s Cleaning Company stock is selling for $32.60 a share based on a 14 percent
rate of return. What is the amount of the next annual dividend if the dividends are
increasing by 5 percent annually?
A. $2.71
B. $2.75
C. $2.78
D. $2.86
E. $2.93
The Cannon Ball has projected its first quarter sales at $11,200, second quarter sales at
$10,900, and third quarter sales at $13,300. The firm’s cost of goods sold is equal to 71
percent of the next quarter’s sales. The accounts receivable period is 30 days and the
accounts payable period is 60 days. At the beginning of the first quarter, the firm has an
accounts receivable balance of $2,800 and an accounts payable balance of $6,300. The
firm pays $1,500 a month in cash expenses and $200 a month in taxes. At the beginning
of the first quarter, the cash balance is $530 and the short-term loan balance is zero.
During the first quarter, the firm is planning on spending $2,600 for some new
equipment. The firm maintains a minimum cash balance of $20. Assume each month
has 30 days. What is the cumulative cash surplus (deficit) at the end of the first quarter,
prior to any short-term borrowing?
A. -$2,403
B. -$1,983
C. -$857
D. -$837
E. -$667
A $1,000 face value bond currently has a yield to maturity of 6.69 percent. The bond
matures in three years and pays interest annually. The coupon rate is 7 percent. What is
the current price of this bond?
A. $948.01
B. $949.60
C. $1,005.26
D. $1,008.18
E. $1,010.13