Kessler, Inc. has accounts receivable of $31,600, total assets of $311,500, cost of goods
sold of $208,400, and a capital intensity ratio of 1.08. What is the accounts receivable
turnover rate?
A. 8.99
B. 9.13
C. 9.42
D. 9.61
E. 9.72
A fire has destroyed a large percentage of the financial records of the Strongwell Co.
You have the task of piecing together information in order to release a financial report.
You have found the return on equity to be 13.8 percent. Sales were $979,000, the total
debt ratio was 0.42, and total debt was $548,000. What is the return on assets?
A. 6.92 percent
B. 8.00 percent
C. 8.45 percent
D. 9.03 percent
E. 9.29 percent
A security produced returns of 12 percent, -11 percent, -2 percent, 15 percent, and 9
percent over the past five years, respectively. Based on these five years, what is the
probability that an investor in this stock will lose more than 17.06 percent in any one
given year?
A. 0.50 percent
B. 1.00 percent
C. 1.25 percent
D. 2.50 percent
E. 5.00 percent
Webster Mining is considering the purchase of a new sorting machine. The quote
consists of a quarterly payment of $29,600 for seven years at 8 percent interest. What is
the purchase price of the equipment?
A. $621,380.92
B. $629,925.66
C. $687,418.22
D. $774,311.28
E. $836,267.35
EKG, Inc. is considering a new project that will require an initial cash investment of
$398,000. The project will produce no cash flows for the first two years. The projected
cash flows for years 3 through 7 are $79,000, $88,000, $102,000, $140,000, and
$160,000, respectively. How long will it take the firm to recover its initial investment in
this project?
A. 3.81 years
B. 3.98 years
C. 5.57years
D. 5.92 years
E. The project never pays back.
The annual interest divided by the face value of a bond is referred to as the:
A. market rate.
B. call rate.
C. coupon rate.
D. current yield.
E. yield-to-maturity.
Which one of the following represents additional compensation provided to
bondholders to offset the possibility that the bond issuer might not pay the interest
and/or principal payments as expected?
A. Interest rate risk premium
B. Inflation premium
C. Liquidity premium
D. Taxability premium
E. Default risk premium
The spot rate on the Norwegian kroner is 6.689. The exchange rate one year from now
is expected to be 6.745 assuming that relative interest rate parity exists. Interest rates in
Norway are 3.7 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
Today, you are buying a $1,000 face value bond at an invoice price of $987. The bond
has a 6 percent coupon and pays interest semiannually. There are two months until the
next coupon date. What is the clean price of this bond?
A. $947
B. $957
C. $967
D. $977
E. $987
Which one of the following will decrease the aftertax cost of debt for a firm?
A. Decrease in the firms beta
B. Increase in tax rates
C. Increase in the risk-free rate of return
D. Decrease in the market price of the debt
E. Decrease in a bonds yield to maturity
The net present value:
A. decreases as the required rate of return increases.
B. is equal to the initial investment when the internal rate of return is equal to the
required return.
C. method of analysis cannot be applied to mutually exclusive projects.
D. is directly related to the discount rate.
E. is unaffected by the timing of an investments cash flows.
Northwestern Lumber Products currently has 15,000 shares of stock outstanding.
Patricia, the financial manager, is considering issuing $120,000 of debt at an interest
rate of 6.75 percent. Given this, how many shares of stock will be outstanding once the
debt is issued if the break-even level of EBIT between these two capital structure
options is $60,000? Ignore taxes.
A. 12,975 shares
B. 13,650 shares
C. 14,025 shares
D. 14,550 shares
E. 15,000 shares
The opportunities that a manager has to modify a project once it has started are called:
A. sensitivity choices.
B. managerial options.
C. scenario adjustments.
D. restructuring options.
E. erosion control measures.
Lakeside Winery is considering expanding its winemaking operations. The expansion
will require new equipment costing $649,000 that would be depreciated on a
straight-line basis to a zero balance over the four-year life of the project. The estimated
salvage value is $187,000. The project requires $38,000 initially for net working
capital, all of which will be recouped at the end of the project. The projected operating
cash flow is $198,500 a year. What is the net present value of this project if the relevant
discount rate is 14 percent and the tax rate is 35 percent?
A. -$14,162
B. -$8,309
C. -$2,747
D. $2,311
E. $3,615
Which one of the following generally pays a fixed dividend, receives first priority in
dividend payment, and maintains the right to a dividend payment, even if that payment
is deferred?
A. Cumulative common
B. Noncumulative common
C. Noncumulative preferred
D. Cumulative preferred
E. Senior common
The current yield on a bond is equal to the annual interest divided by which one of the
following?
A. Issue price
B. Maturity value
C. Face amount
D. Current market price
E. Current par value
The financial statement that summarizes a firms accounting value as of a particular date
is called the:
A. income statement.
B. cash flow statement.
C. liquidity position.
D. balance sheet.
E. periodic operating statement.
You currently own a portfolio valued at $80,000 that is equally as risky as the market.
Given the information below, what is the beta of Stock C?
A. 0.91
B. 0.95
C. 1.04
D. 1.13
E. 1.18
Red Mountain, Inc. bonds have a face value of $1,000. The bonds carry a 7 percent
coupon, pay interest semiannually, and mature in 13.5 years. What is the current price
of these bonds if the yield to maturity is 6.82 percent?
A. $989.50
B. $994.56
C. $1,015.72
D. $1,018.27
E. $1,020.00
Berzett Industrial Products has both common and noncumulative preferred stock
outstanding. The dividends on these stocks are $1.10 per quarter per share of common
and $3.50 per quarter per share of preferred. The company has not paid any dividends
for the past two quarters but is expected to pay dividends on both the common and the
preferred stock next quarter. What is the minimum amount the firm must pay per share
to its preferred stockholders next quarter if it plans to pay a common dividend?
A. $0
B. $1.10
C. $3.50
D. $5.00
E. $7.00