1) when a corporation offers shares to the public for the first time that is an:
a.ipo
b.ppo
c.npo
d.lbo
2) narrbegin: far corporation
far corporation
far corporation is considering a new project to manufacture widgets. the cost of the
manufacturing equipment is $150,000. the cost of shipping and installation is an
additional $15,000. 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 $300,000 per year. cost of goods sold will be 80% of sales. the project will require
an increase in net working capital of $15,000. at the end of three years, far plans on
ending the project and selling the manufacturing equipment for $35,000. the marginal
tax rate is 40% and far corporations appropriate discount rate is 12%.
narrend
refer to far corporation. what is the depreciation expense in year 2?
a.$49,995
b.$22,215
c.$11,115
d.$66,675
3) what would be the benefit of a lock-box system that reduced mail float by 1.5 days,
eliminated processing float, and reduced clearing float by 1 day, if coyote valley
products faces a 9% opportunity cost of funds?
a.$112,500
b.$157,500
c.$180,000
d.$67,500
4) the slope of the security market line is:
a.the return on the market
b.beta
c.the market risk premium
d.the risk-free rate
5) what is the normal timing in which a firm’s customers pay their accounts, expressed
as the percentage of monthly sales collected in each month following the sale?
a.payment pattern
b.aging of accounts receivable
c.credit scoring
d.just-in-time system
e.none of the above
6) let the expected inflation in the united sates be 4% and the expected inflation in
europe is 2.3 %; also suppose that the united states one-year, risk-free rate is 5% what
must the risk-free rate in europe be to maintain interest rate parity?
a.3.28%
b.2.42%
c.5.12%
d.7.30%
7) if you are looking at an indirect quote for a u.s. dollar -foreign currency exchange
rate and the number has increased from yesterday to today, then
a.the u.s dollar has increased in value
b.the u.s dollar has decreased in value
c.the foreign currency has decreased in value
d.both a and c are correct
8) why do shareholders bear most of the risk of running a firm?
a.they only have a residual claim on the firms cash flows
b.they receive a salary from the company
c.they are guaranteed a fixed payout each quarter
d.shares can be taken away at any time without notice
9) narrbegin: running shoes, inc.
running shoes, inc.
running shoes, inc. has 2 million shares of stock outstanding. the stock currently sells
for $12.50 per share. the firms debt is publicly traded and was recently quoted at 90%
of face value. it has a total face value of $10 million, and it is currently priced to yield
8%. the risk free rate is 2% and the market risk premium is 8%. youve estimated that
the firm has a beta of 1.20. the corporate tax rate is 40%.
narrend
what is the wacc for running shoes, inc.?
a.7.97%
b.9.15%
c.9.58%
d.9.80%
10) gizmo co. has the following financial measures: working capital to total assets ratio
of 0.05, retained earnings to total assets ratio of 0.10, ebit to total assets ratio of 0.3,
market value of equity to book value of equity ratio of 1.1, and sales to total assets ratio
of 0.4. what is gizmos z-score?
a.2.40
b.2.35
c.2.30
d.2.25