What entity within the firm has the discretion to issue dividends?
A.Board of directors
B.CEO
C.CFO
D.Vice President of Finance
If a company has fixed costs of $40,000, a unit selling price of $12, and variable costs
of $4 per unit, how many units will it have to sell to make a profit of $20,000?
A.5,000 units
B.2,500 units
C.3,600 units
D.7,500 units
A principal difference between a line of credit and a revolving credit agreement is that:
A.a revolver is a legally binding commitment from the bank to lend up to a stipulated
amount.
B.the borrower must pay a commitment fee on unborrowed money with a line of credit.
C.the line of credit is an informal agreement but may not be canceled due to a decline in
the borrower’s financial health during the relatively short period of the agreement.
D.the bank can cancel a revolver at any time if it refunds the commitment fee.
Retained earnings represents:
A.money paid to owners, stockholders, and executives.
B.funds a company can draw on in time of need.
C.profits that have been re-invested in the company.
D.income the government holds in trust for the company.
Match the following:
1>Blanket lien A. The length of time it takes to pay off a loan
should be approximately equal to the duration of the project it supports.
2>Maturity matching principle B. An attempt to transfer the task of maintaining
inventory from a manufacturer to its suppliers.
3>ZBA C. Permits the disbursement of funds at remote
locations without the need to maintain excess cash at those locations.
4>JIT inventory D. Enables a lender to maintain a collateral
position in all of the inventory at a borrower’s facility.
What is the future value of $1,000, placed in a saving account for four years if the
account pays 8%, compounded quarterly?
A.$1,320.45
B.$1,360.50
C.$1,372.80
D.None of the above
What does non-amortized debt mean?
A.Interest payments are constant over the life of the bond.
B.Interest payments are based on current market rates for bonds of similar risk.
C.No repayment of principal is made during the life of the bond.
D.The face value of the bond is not repaid to the lender.
Williamson Manufacturing paid a $2 dividend last year and expects dividends to grow
at a constant rate of 7%. The firm’s stock is selling at $45 per share and flotation costs
on a new issue would be 15%. Calculate Williamson’s cost of new equity.
A.10.2%
B.11.8%
C.12.6%
D.13.6%
Employee stock options are most similar to:
A.call options.
B.put options.
C.Treasury bills.
D.warrants.
Which of the following best describes a firm’s external funding requirement?
A.Growth in assets minus growth in liabilities minus net income
B.Growth in assets minus net income
C.Growth in assets minus growth in current liabilities minus net income
D.Growth in assets minus growth in current liabilities minus the year’s retained earnings
E.Growth in assets minus the current year’s retained earnings
When a firm sells an asset for ____, it realizes a capital gain and must pay income taxes
on it.
A.book value
B.less than book value
C.more than book value
D.any amount
Your firm, New Sunrise, has just leased a $28,000 BMW for you. The lease requires six
beginning of the year payments that will fully amortize the cost of the car. How much
are the payments if the interest rate is 12 percent?
A.$6,810.99
B.$7,766.99
C.$6,423.74
D.$6,081.25
A corporate bond is yielding 9%. You are in the 35% tax bracket. What is the after tax
yield on the bond?
A.5.85%
B.8.10%
C.3.90%
D.12.15%
Transaction costs tend to make tailoring a _____impractical.
A.dividend stream
B.business cash flow
C.series of investment returns
D.stock trade
Spiess Corporation€s 12%, $1,000 bonds mature in 10 years. The company can call the
bonds in five years if it pays bondholders a call premium of 12 percent. What should
Spiess€s bonds sell for if investors expect them to be called in five years and the
interest rate is 9%?
A.$1,195.96
B.$840.45
C.$2,120.00
D.$1,194.68