1) suppose you have a chance to buy a treasury strip. the strip is from a government
bond with a 6% coupon rate (face value of $1,000). you will receive this strip in one
year and have a discount rate of 10%. what is the price you are willing to pay for this
strip?
a.$36.87
b.$54.55
c.$60.00
d.$94.34
2) which of the following was the largest bankruptcy in the united states?
a.enron corp
b.texaco
c.lehman brothers
d.chrysler
3) a specialized chapter governing bankruptcies of cities and municipalities
a.chapter 9
b.chapter 12
c.chapter 13
d.chapter 15
4) considering the following information what is the value of the put?
a.$0.12
b.$5.88
c.$1.29
d.$36.00
5) you own stock in a company that just announced a 1-3 reverse stock split. if shares
currently trade at $15 a share, what should the stock price be after the reverse stock
split?
a.$15
b.$5
c.$45
d.$30
6) emma is evaluating a lock-box system that will reduce float by 4 days. the firm has
annual sales of $52 million and an opportunity cost of 15%. if the lock-box system is
adopted, what is the value of funds released?
a. $ 85,479.45
b. $ 142,465.75
c. $ 21,369.86
d. $ 569,863.01
7) cash receipts include
a.cash sales
b.accounts receivable collections
c.both a and b
d.none of the above
8) narrbegin: exhibit 8-2
exhibit 8-2
a piece of equipment costs $1.2m. the equipment has a useful life of 4 years. in each of
the four years, the investment generates a cash inflow of $0.5m. the impact of the
investment project on net income is derived by subtracting depreciation from cash flow
each year.
narrend
refer to exhibit 8-2. assume the equipment is depreciated on a straight-line basis over 4
years, what is the average contribution to net income across all four years?
a.$0.2m
b.$0.5m
c.$0.3m
d.$0.8m
9) the operating cycle is the length of time from the receipt of inventory until the
a.beginning of the cash conversion cycle
b.end of the cash conversion cycle
c.payment of accounts payable
d.collection of cash from sales
10) consider the following cash flows each arriving at the end of the year. if the
discount rate is 15% compounded quarterly, what is the present value?
a.$4,354.40
b.$4,303.67
c.$4,281.56
d.$4,270.38
11) when a call options strike price is less than the current price of the underlying asset,
the call is said to be
a.at the money
b.in the money
c.out of the money
d.worthless
12) conglomerate mergers may be explained by which of the following?
a.seeking financial synergies
b.availability of free cash flow
c.diversification/risk reduction
d.all of the above
13) if managers make dividend decisions only after taking all positive-npv projects,
they are following
a.a constant payout ratio policy
b.a low-regular-and-extra policy
c.a constant nominal payment policy
d.a residual payment policy
14) narrbegin: bavarian credit terms
bavarian brew credit terms
bavarian brew is producing and selling brewery equipment to microbreweries
nationwide. bavarian is charging $15,000 per unit and all of their sales are on credit.
under the current credit policy bavarian brew expects to sell 500 units. the variable
costs are $6,000/unit and fixed costs are $1,500,000 per year. the company is thinking
about changing their credit terms from net 30 to 3/10 net 30. the effect of this change
would be a 5% increase in unit sales, but also an increase in bad debt expenses from 2%
to 4% of sales. the company expects 75% of its customers to take advantage of the cash
discount. currently the company has an average collection period of 38 days, 30 days
until the customers mail their payments and another 8 days to process the payments
once they arrive. bavarian brews opportunity cost of funds invested in accounts
receivable is 12%.
narrend
what is bavarian brews average investment in accounts receivables under the old credit
policy?
a.$287,631
b.$236,407
c.$205,479
d.$312,175
15) the idea that identical goods trading in different markets should have the same price
is called
a.the interest rate parity
b.the big mac index
c.the law of one price
d.none of the above
16) which type of risk affects just a few securities at a time?
a.return risk
b.variance risk
c.unsystematic risk
d.systematic risk