Pluto United has 18,000 shares of stock outstanding at a price per share of $38. How
many shares will be outstanding if the firm does a 5-for-4 stock split?
A. 13,600 shares
B. 15,800 shares
C. 18,000 shares
D. 19,600 shares
E. 22,500 shares
Doriss Fashions has just signed a $2.2 million contract. The contract calls for a payment
of $0.6 million today, $0.8 million one year from today, and $0.8 million two years
from today. What is this contract worth today if the firm can earn 8.2 percent on its
money?
A. $2,038,616.67
B. $2,022,709.37
C. $2,108,001.32
D. $2,124,339.07
E. $2,202,840.91
Cash flow to creditors is equal to:
A. cash flow from assets plus cash flow to stockholders.
B. beginning total liabilities minus ending total liabilities plus interest paid.
C. beginning long-term debt minus ending long-term debt plus interest paid.
D. ending total debt minus beginning total debt plus interest paid.
E. ending long-term debt minus beginning long-term debt plus interest paid.
Which one of the following terms refers to the length of time a firm grants its customers
to pay for their purchases?
A. Lockbox period
B. Discount period
C. Credit period
D. Cash cycle
E. Receivables turnover period
Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent,
21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of
these returns?
A. 11.27 percent
B. 13.05 percent
C. 13.59 percent
D. 15.08 percent
E. 14.40 percent
Stewarts Office Supply has revised its office procedures such that it now takes one day
to prepare the daily deposit, rather than two days. Accounts payable are processed in
five days, rather than the previous four days, so that shipping and receiving can better
verify the charges before the checks are written. How will these revised procedures
affect the firms float?
A. Increase the disbursement float by one day
B. Decrease the collection float by one day
C. Decrease the net float by two days
D. Increase the net float by two days
E. There will be no effect on the firms float
The modified internal rate of return is specifically designed to address the problems
associated with which one of the following?
A. Mutually exclusive projects
B. Unconventional cash flows
C. Long-term projects
D. Negative net present values
E. Crossover points
You need to use the pure play approach to assign a cost of capital to a proposed
investment. Which one of the following characteristics should you most concentrate on
as you search for an appropriate pure play firm?
A. Firm size
B. Firm location
C. Firm experience
D. Firm operations
E. Firm management
Which one of the following would tend to favor a low-dividend payout?
A. Higher tax rates on capital gains than on dividend income
B. High flotation cost for equity issues
C. Endowment fund investors who cannot spend principal
D. Investors desire for a high-dividend yield
E. Elimination of the tax deferral on capital gains
When a bonds yield to maturity is less than the bonds coupon rate, the bond:
A. had to be recently issued.
B. is selling at a premium.
C. has reached its maturity date.
D. is priced at par.
E. is selling at a discount.
Madison Square Stores has a $20 million bond issue outstanding that currently has a
market value of $18.6 million. The bonds mature in 6.5 years and pay semiannual
interest payments of $35 each. What is the firms pretax cost of debt?
A. 4.21 percent
B. 8.42 percent
C. 7.58 percent
D. 7.74 percent
E. 7.80 percent
What is the future value of $20 a week for 10 years at 6 percent interest? Assume the
first payment occurs at the end of this week.
A. $14,239.14
B. $14,361.08
C. $14,727.15
D. $15,003.14
E. $15,221.80