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1) you are introduced to an investment that has an expected return of 20% equal to the
standard deviation of the distribution of returns. what is the probability that the
investment will have a return less than 20% in the first year? assume a normal
distribution.
a.0%
b.50%
c.68%
d.not enough information to determine
2) narrbegin: cash disbursements
bavarian brews schedule of projected cash disbursement
the companys purchases are 75% of its sales. of those purchases 15% are paid in cash,
50% are paid in the following month and the remainder in the month after that. the
companys wages and salaries equal 15% of sales each month plus $50. taxes of $125
are due in april. the company is going to purchase new machinery worth $1000 in
march and pay 50% right away and the rest in april. in addition, the company will pay a
$175 dividend in february.
narrend
what is the value of bavarian brew's accounts payable at the end of march?
a.$515.25
b.$755.25
c.$1,515.25
d.$1,015.25
3) louis international needs $100 million in new equity capital; currently shares are
trading at $40 per share. morgan steely (the investment banker) requires a 6% spread of
the offer price which will be $38 per share and is fully subsribed at that price. the fixes
costs (legal, accounting, etc.) are estimated at $250,000. what is the net price per share
the firm will receive?
a.$35.72
b.$37.60
c.$35.60
d.$38.00
4) once a firm becomes publicly traded it must
a.report any material change in operations, ownership and financing
b.hold general shareholders' meetings at least once a year
c.use the shelf registration process to issue any new securities
d.all of the above
e.(a) and (b) only
5) a stock is expected to pay a dividend of $3.00 in one year. to purchase the stock,
investors seek a 15% annual return. if the stock is currently trading at $60, what is the
implied constant growth rate in dividends for the future?
a.5%
b.10%
c.15%
d.20%
6) if your firm produces a product that is used primarily by gold producers, then your
firm might be subject to a risk related to the price of gold. if that risk is indirectly
related to the price of gold, then this is an example of
a.transaction exposure
b.translation exposure
c.economic exposure
d.none of the above
7) narrbegin: kramerica, inc.
kramerica, inc.
kramerica inc. just paid its investors a dividend of $2.00. this growing company expects
dividends to grow at 20% for the next 2 years. after year 2, dividends are expected to
grow constantly at 5% per year. investors require a 15% return on kramerica stock.
narrend
what will be the dividend in two years for kramerica?
a.$2.21
b.$2.40
c.$2.52
d.$2.88
8) which of the following is not a practical motive for stock repurchases?
a.the desire to reduce the amount of the firm's outstanding debt
b.having shares available for employee stock-option plans
c.retiring shares of common stock
d.obtaining shares to be used in acquisitions
e.all of the above are practical motives for stock repurchases
9) an agent of a firm could be any of the following:
a.100% owner of the firm
b.the irs agent in charge of auditing the firms tax return
c.an employee who does not own any proportion of the firm
d.a supplier of the firm
10) emma international recently conducted an ipo, emma received $52 per share and the
offer price was $54 per share and the stock price rose to $59 per share. what was the
underwriter discount?
a.3.39%
b.3.85%
c.8.47%
d.3.70%
11) louis is considering a new litter box factory with the following cash flows, what is
the payback?
a.3.4
b.4.6
c.4.0
d.5.0
12) narrbegin: bavarian brewhouse
bavarian brewhouse
capital structure information for bavarian brewhouse
narrend
what is bavarian brewhouses cost of preferred stock?
a.8.00%
b.15.5%
c.10.7%
d.12.6%
13) roxy international is considering easing credit standards to increase sales, and
potentially profits. currently the firm sells 2,000,000 units at a sales price of $7 per unit
and variable cost of $5 per unit. currently the average collection period is 35 days and
the bad debt expense is 2% of sales. the required return on investment is 18%. if credit
standards are eased, the sales will increase to 2,500,000 units; the acp will increase to
65 days; and the bad debt expense will increase to 5% all else will remain the same.
what is the cost associated with the increased investment in accounts receivable?
a.$ 172,602.74
b.$ 400,684.93
c.$3,150,000.00
d.$ 228,082.19
14) narrbegin: exhibit 17-2
exhibit 23-2
coffee; 37,500 lbs per contract, $ per lb. may 2004
narrend
refer to exhibit 23-2. if you are interested in purchasing a december futures contract,
what is the price of a 37,500 lbs contract for december delivery?
a.$43,500
b.$37,500
c.$32,500
d.$47,500
15) which of the following is considered a type of real options
a.expansion option
b.abandonment option
c.flexibility option
d.all of the above
16) 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 growth
rate?
a.1.37%
b.8.53%
c.7.47%
d.24.89%
17) bavarian brew has an average age of inventory of 35 days, an average collection
period of 27 days, and an average payment period of 16 days. what is the companys
cash conversion cycle?
a.62 days
b.46 days
c.51 days
d.43 days
18) maximizing profit as the managers goal has several flaws, including:
a.earnings figures focus on past performance rather than current or future performance
b.the timing of the profits may be ignored
c.focusing on earnings does not mean that the firm will necessarily have enough cash
on hand to pay its bills
d.risk is ignored
e.all of the above
