Phil’s Carvings sells its inventory in 93 days, on average. Costs of goods sold for the
year are $187,200. What is the average value of the firm’s inventory? Assume a 365-day
year.
A. $20,129
B. $47,698
C. $57,132
D. $61,096
E. $32,513
Suzette’s Market had long-term debt of $638,100 at the beginning of the year compared
to $574,600 at year-end. If the interest expense was $42,300, what was the firm’s cash
flow to creditors?
A. $21,200
B. $26,700
C. $54,900
D. $102,400
E. $105,800
Oil Field Services has net income of $120,400, total assets of $1,219,000, total equity
of $694,100, and total sales of $1,521,700. What is the common-size percentage for the
net income?
A. 9.00 percent
B. 7.91 percent
C. 15.53 percent
D. 12.10 percent
E. 8.62 percent
Cash flow to creditors is defined as:
A. interest paid minus net new borrowing.
B. interest paid plus net new borrowing.
C. operating cash flow minus net capital spending minus the change in net working
capital.
D. dividends paid plus net new borrowing.
E. cash flow from assets plus net new equity.
Scenario analysis is best described as the determination of the:
A. most likely outcome for a project.
B. reasonable range of project outcomes.
C. variable that has the greatest effect on a project’s outcome.
D. effect that a project’s initial cost has on the project’s net present value.
E. change in a project’s net present value given a stated change in projected sales.
Oak Tree Farms has common stock outstanding at a price of $13 a share. The total
market value of the equity is $435,000. How many shares of stock will be outstanding if
the firm does a reverse stock split of 2-for-5?
A. 9,602 shares
B. 36,000 shares
C. 13,385 shares
D. 37,500 shares
E. 83,654 shares
The 6.5 percent bond of ABCO has a yield to maturity of 6.82 percent. The bond
matures in seven years, has a face value of $1,000, and pays semiannual interest
payments. What is the amount of each coupon payment?
A. $30.00
B. $32.50
C. $68.20
D. $34.10
E. $65.00
Lester had $6,270 in his savings account at the beginning of this year. This amount
includes both the $6,000 he originally invested at the beginning of last year plus the
$270 he earned in interest last year. This year, Lester earned a total of $282.15 in
interest even though the interest rate on the account remained constant. This $282.15 is
best described as:
A. simple interest.
B. interest on interest.
C. discounted interest.
D. complex interest.
E. compound interest.
How much money does Suzie need to have in her retirement savings account today if
she wishes to withdraw $42,000 a year for 25 years? She expects to earn an average rate
of return of 9.75 percent.
A. $426,580.50
B. $407,419.81
C. $401,533.33
D. $385,160.98
E. $388,683.83
Given the following information, what is the variance of the returns on a portfolio that
is invested 40 percent in both Stocks A and B, and 20 percent in Stock C?
A. .000602
B. .001490
C. .000513
D. .000205
E. .001143
To be a member of the NYSE, you must:
A. be a primary dealer.
B. buy a seat.
C. own a trading license.
D. be registered as a floor trader.
E. be a DMM.
Green Woods sells specialty equipment for mountain climbers. Its sales for last year
included $387,000 of tents and $718,000 of climbing gear. For next year, management
has decided to sell specialty sleeping bags also. As a result of this change, sales
projections for next year are $411,000 of tents, $806,000 of climbing gear, and
$128,000 of sleeping bags. How much of next year’s sales are derived from the side
effects of adding the new product to its sales offerings?
A. $0
B. $128,000
C. $112,000
D. $251,000
E. $240,000
The stated interest rate is the interest rate expressed:
A. as if it were compounded one time per year.
B. as the quoted rate compounded by 12 periods per year.
C. in terms of the rate charged per day.
D. in terms of the interest payment made each period.
E. in terms of an effective rate.
The Flour Baker is considering a project with the following cash flows. Should this
project be accepted based on its internal rate of return if the required return is 18
percent?
A. Yes; because the project’s rate of return is 7.78 percent
B. Yes; because the project’s rate of return is 16.08 percent
C. Yes; because the project’s rate of return is 19.47 percent
D. No; because the project’s rate of return is 19.47 percent
E. No; because the project’s rate of return is 16.08 percent
What is the advertisement, commonly found in financial newspapers, that announces a
public offering of securities and provides the name of the underwriters called?
A. Prospectus
B. Red herring
C. Tombstone
D. Green Shoe
E. Underwriter’s ad
What is the market called that facilitates the sale of shares between individual
investors?
A. Primary
B. Proxy
C. Secondary
D. Inside
E. Initial
All else held constant, the book value of owners’ equity will decrease when:
A. the market value of inventory increases.
B. dividends exceed net income for a period.
C. cash is used to pay an accounts payable.
D. a long-term debt is repaid.
E. taxable income increases.
Better Chocolates has a new project that requires $838,000 of equipment. What is the
depreciation in Year 6 of this project if the equipment is classified as seven-year
property for MACRS purposes? The MACRS allowance percentages are as follows,
commencing with year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.
A. $80,411.60
B. $74,833.40
C. $89,108.00
D. $74,749.60
E. $89,327.08
Mike’s Fish Market is implementing a project that will initially increase accounts
payable by $6,100, increase inventory by $2,800, and decrease accounts receivable by
$1,300. All net working capital will be recouped when the project terminates. What is
the cash flow related to the net working capital for the last year of the project?
A. -$1,500
B. -$400
C. -$4,600
D. $1,500
E. $4,600
You have just made your first $5,000 contribution to your retirement account. Assuming
you earn a rate of return of 5 percent 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
The more actively traded large companies that are listed on NASDAQ are traded in
which one of the NASDAQ markets?
A. National
B. Capital
C. Regional
D. Global Select
E. Global
The static theory of capital structure assumes a firm:
A. maintains a constant debt-equity ratio.
B. has an all-equity structure.
C. is fixed in terms of its assets and operations.
D. pays no taxes.
E. is operating at the point where financial distress costs are eliminated.
The Warehouse has projected sales for June through September of $56,700, $68,900,
$70,200, and $54,300.The company collects 46 percent of its sales in the month of sale,
51 percent in the month following the month of sale, and 2 percent in the second month
following the month of sale. The remaining sales are never collected. What is the
amount of the August collections?
A. $65,863
B. $68,565
C. $62,158
D. $67,288
E. $65,516
Which one of the following is a key provision of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005?
A. Disallowance of bankruptcy prepacks
B. Right granted to creditors to file their own reorganization plan once a firm is in
bankruptcy for 18 months
C. Disallowance of all management bonus payments while a firm is in bankruptcy
D. Requirement that only creditors can file reorganization plans for a bankrupt firm
E. Requirement for all Chapter 11 bankruptcies to be converted to Chapter 7
bankruptcies after 18 months
Market values:
A. reflect expected selling prices given the current economic situation.
B. are affected by the accounting methods selected.
C. are equal to the initial cost minus the depreciation to date.
D. either remain constant or increase over time.
E. are equal to the greater of the initial cost or the current expected sales value.
Stock A has an expected return of 14.4 percent and a beta of 1.21. Stock B has an
expected return of 12.87 percent and a beta of 1.06. Both stocks have the same
reward-to-risk ratio. What is the risk-free rate?
A. 2.06 percent
B. 2.28 percent
C. 1.79 percent
D. 3.35 percent
E. 1.92 percent
Assume an all-equity firm has positive net income. If this firm pays a cash dividend the:
A. number of shares outstanding will increase.
B. earnings per share will decrease.
C. firm’s total assets will remain constant.
D. price-earnings ratio will decrease.
E. firm’s total equity will increase.
Assume your university earns an average rate of return of 5.65 percent on its
endowment funds. If a new gift permanently increases annual scholarships by $32,000,
what was the amount of the gift?
A. $784,090.91
B. $485,293.05
C. $615,384.62
D. $658,929.38
E. $566,371.68
Which statement is true?
A. From a legal perspective, preferred stock is a form of corporate equity.
B. All classes of stock must have equal voting rights per share.
C. Common shareholders elect the corporate directors while the preferred shareholders
vote on mergers and acquisitions.
D. Preferred dividends provide tax-free income to individual investors.
E. Preferred shareholders prefer noncumulative dividends over cumulative dividends.
The spot rate on the Norwegian kroner is 7.0305. The exchange rate one year from now
is expected to be 7.0614 assuming that relative interest rate parity exists. Interest rates
in Norway are 3.3 percent. What is the interest rate in the U.S.?
A. 2.86 percent
B. 3.02 percent
C. 3.59 percent
D. 4.54 percent
E. 4.68 percent