1) narrbegin: exhibit 17-2
exhibit 23-2
coffee; 37,500 lbs per contract, $ per lb. may 2004
narrend
refer to exhibit 23-2. for purposes of marking to market, what is the current price of
coffee futures for december?
a.$41,625
b.$53,625
c.$41,250
d.$43,500
2) the collection, concentration, and disbursement of funds for the company is called
a.target cash balance
b.cash position management
c.bank account analysis
d.none of the above
3) managers of firms should only take actions that
a.increase the value of the firms future cash flows
b.they expect will increase the firms share price
c.have benefits which are at least as great as the cost of those actions
d.all of the above
4) suppose you made a $10,000 investment ten years ago in a speculative stock fund.
your investment today is worth $100,000. what annual compounded return did you earn
over the ten year period?
a.10%
b.15%
c.25.89%
d.27.54%
5) the system in the u.s. which defines the allowable annual depreciation deductions for
various classes of assets is known as:
a.macrs
b.camrs
c.rcmas
d.scrma
6) the protection of bond collateral
a.is crucial to increasing the safety of the bond issue
b.helps enhance the marketability of the bond issue
c.does not usually occur in a bond issue
d.both (a) and (b)
7) the empirical observation that stock prices fall on ex-dividend days by significantly
less than the amount of the dividend has been often interpreted
a.as completely unexplainable by researchers
b.as evidence that dividends are more highly valued than capital gains
c.as evidence of a tax effect in dividend valuation
d.none of the above
8) narrbegin: exhibit 7-5
exhibit 7-5
narrend
given exhibit 7-5, what is the weight of security 2?
a.42.9%
b.33.3%
c.23.8%
d.cannot be determined with the data given
9) louis international has earnings per share of $2.25; just paid dividend $1.05 and
expects a roi next year (and the foreseeable future) of 16% what is the expected next
year dividend?
a.$1.140
b.$1.128
c.$1.058
d.not enough information
10) narrbegin: smith int’l investment
smith enterprises international investment
smith enterprises is considering opening a new manufacturing plant in france. the cost
of the new plant will be 25 million and the plant is expected to generate after tax cash
flows of 10 million at the end of each year for the next 4 years. after that the plant will
be worthless. the current /$ exchange rate is 0.8166/$. the expected rate of inflation for
the u.s is 2.5% per year. the risk free rate in the u.s. is 4% and the risk free rate in france
is 6%.
narrend
refer to smith enterprises international investment. what is the expected $ value of the
after tax cash flow received at the end of year 2?
a.$7.86 million
b.$10.45 million
c.$14,72 million
d.$12.72 million
11) lunar surf boards has annual fixed costs of $5,000 with a variable cost of $10 per
unit and a sales price of $20 per unit. lunar expects to sell 1,000 units this year without
much trouble. however, lunar is concerned about the scenario that variable costs will
increase 10% this year. if that happens, what will be lunars earnings before interest and
taxes?
a.$6,000
b.$5,000
c.$4,000
d.none of the above
12) narrbegin: big thompson credit terms
big thompson industries (bti)
big thompson industries (bti) currently produces and sells 50,000 units of a motor relay
used in high-end electronics. all sales are on credit, for a price of $750 per unit to all
customers. these motor relays incur $525 in variable costs and $3,000,000 in fixed costs
per year. with current credit standards, btis average collection period is 30 days.
managers are considering a relaxation in standards, and forecast a 6 percent increase in
sales, along with an increase in the average collection period to 45 days. additionally,
bad debt expense is expected to increase from 1.5 percent to 2.5 percent of sales.
investments of this type are expected to earn a 14% return. assume a 365 day year
narrend
what will be btis average investment in accounts receivable under the new standards?
a.$3,430,479
b.$3,240,741
c.$2,280,738
d.$2,746,854
13) consider the following information for smart products: total assets=$1000;
sales=$1540; net profit margin=12%; dividend payout ratio=40%; accounts
payable=$308. if sales are forecast to increase 30%, what is the short cut estimate of
external funds required (efr)?
a.$64
b.$208
c.$300
d.$462
14) if you invest $5,000 in a mutual fund with a total annual return (interest rate) of 8%
and you re-invest the proceeds each year, what will be the value of your investment
after five years?
a.$3,402.92
b.$6,597.08
c.$7,000.00
d.$7,346.64
15) emma is considering a new cat nip factory with the following cash flows, if the
disoucnt rate is 7%, what is the npv?
a. $ 35,772.42
b. $ 100,459.11
c. $ 133,960.47
d. $ 16,947.33
16) opportunity costs:
a.are irrelevant
b.should be considered when determining an investments relevant cash flows
c.are equal to the firms sunk costs
d.all of the above
17) narrbegin: dsss corporation
dsss corporation
dsss corporation is considering a new project to manufacture widgets. the cost of the
manufacturing equipment is $125,000. the cost of shipping and installation is an
additional $10,000. the asset will fall into the 3-year macrs class. the year 1- 4 macrs
percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. sales are expected
to be $225,000 per year. cost of goods sold will be 60% of sales. the project will require
an increase in net working capital of $10,000. at the end of three years, dsss plans on
ending the project and selling the manufacturing equipment for $25,000. the marginal
tax rate is 40% and dsss corporations appropriate discount rate is 15%.
narrend
refer to dsss corporation. what is the depreciation expense in year 3?
a.$44,996
b.$10,004
c.$60,008
d.$19,994
18) atlas map co. has purchased a new building for $45 million. if the value of the
building increases at a rate of 5% per year, how much will the building be worth in 20
years?
a.$119,398,397
b.$113,712,759
c.$16,960,027
d.$16,131,867