1) narrbegin: exhibit 15-1
exhibit 15-1
you are working to forecast the cash disbursements for a manufacturing company. sales
are forecasted to be $175,000, $200,000, $225,000, and $250,000 for january, february,
march, and april, respectively. the firm purchases 25% of each amount in cash and will
then pay 70% of the credit purchase in the month following the purchase with the
remainder paid in full two months after the purchase.
narrend
refer to exhibit 15-1. what is the amount of february sales to be collected in april for the
company?
a.$206,625
b.$105,000
c.$45,000
d.none of the above
2) dividends are irrelevant in perfect capital markets because
a.no tax consequences exist for dividend or capital gains income
b.no transactions cost consequences exist for trading (buying or selling) shares
c.retaining earnings or paying dividends have no effect on the firms investment
decisions (accepting positive-npv projects)
d.all of the above
3) in recent history, the largest portion of venture capital investments have occurred
a.in california
b.in new england
c.in the airline industry
d.in start up stage financing
4) 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 total cash flow generated in year 3?
a.$35,000
b.$9,554
c.$15,000
d.$40,446
5) what is the term applied to a firm that offers shares to the general public for the first
time?
a.initial public offering
b.initial placed offering
c.investment plan offer
d.investment of public offers
6) currently the brazilian real is trading at r/$ 1.7531; if the current anticipated
inflations are 4% (u.s) and 7.3% (brazil) over the next year what is the fair one-year
forward price? (r/$)
a.1.686
b.1.699
c.1.809
d.1.634
7) which of the following is true?
a.u.s. corporations propensity to pay cash dividends has increased over the past thirty
years
b.when repurchases are considered, the payout ratio has declined over the past thirty
years
c.when repurchases are considered, the payout ratio has increased over the past thirty
years
d.most of the firms paying cash dividends are technology related firms that grew
rapidly in the 90s
8) smith construction, inc. is expected to pay a $2.78 dividend next year. the dividend is
expected to grow by 4% each year for the next three years. after that the company will
never pay another dividend ever again. if your required return on the stock investment
is 10%, what should the stock sell for today?
a.$7.46
b.$28.91
c.$35.06
d.$9.31
9) a $1,000 par value bond that makes annual interest payments of $50 and matures in
four years sells for $980. what is the yield to maturity of the bond?
a.5.57%
b.2.47%
c.4.54%
d.2.04%
10) within altmans z score model of predicting bankruptcy, the total value of the assets
are included in the model. if the total value of the assets decreases what effect does that
have on the probability of the firm being in bankruptcy?
a.increases
b.remains the same
c.decreases
d.it is impossible to determine since the value of the assets is only used as a parameter
in the model
11) gizmo co. has a z-score based on its most recent financial information of 3.0. based
on this,
a.gizmo has a high probability of failure
b.gizmo has a low probability of failure
c.gizmos probability of failure is uncertain
d.none of these, since the z-score does not predict firm failure
12) narrbegin: bavarian brew bond
bavarian brew bond
bavarian brew is thinking about recalling $30 million of 15 year, $1,000 par value
bonds, that were issued ten years ago. the bonds carry a coupon rate of 7.8% and have a
call price of $1,110. initially the bonds generated total proceeds of $28.65 million and
the flotation costs were $500,000. bavarian brew wants to sell $30 million of 5 year,
$1,000 par value bonds with a 5.8% coupon rate to retire the old bonds. the flotation
costs on the new bond issue are estimated to be $525,000. due to having to issue the
new bonds before the old bonds can be retired the company expects a period of 3
months were they have to pay interest on the old and the new bonds. assume a tax rate
of 34%
narrend
refer to bavarian brew bond. what is the after tax cost of the call premium?
a.$3,300,000
b.$1,122,000
c.$2,178,000
d.$2,867,000
13) bavarian brew has an average age of inventory of 35 days, an average collection
period of 27 days and a cash conversion cycle of 16 days. what is the companys average
payment period?
a.46 days
b.62 days
c.16 days
d.19 days
14) shareholders can attempt to overcome agency problems by all but one of the
following:
a.incurring costs to monitor managers
b.paying managers a good salary
c.relying on market forces to exert managerial discipline
d.paying the manager a proportion of the profits that the firm generates
15) which of the following statements is (are) true?
a.shareholders have a legal right to receive dividends
b.a firm’s board of directors must decide whether to pay dividends
c.most u.s. firms that pay cash dividends do so only once every year
d.all of the above are true
e.only (a) and (c) are true
16) narrbegin: exhibit 9-2
exhibit 9-2
the following data are projected for a possible investment project:
1234
narrend
refer to exhibit 9-2. the project requires an initial investment of $300,000 on equipment.
working capital is anticipated to be variable at 10% of revenues; the working capital
investment must be made at the beginning of each period, and will be recovered in full
at the end of year 4. equipment will be sold at its book value at the end of year 4. the tax
rate is 40%.
what is the net cash flow to the firm in year 4?
a.$101,600
b.$201,600
c.$183,600
d.$161,600
17) bavarian brewhouse had aftertax earnings of $1,500,000 in 2004. the company
needs $2,500,000 for new investments and plans to finance 60% of those investments
with debt. if bavarian brew follows a residual dividend policy, what total dividend will
be paid?
a.$1,500,000
b.$500,000
c.$2,500,000
d.$0
18) a fund that attempts to researches and finds undervalued and overvalued stocks
a.an efficient portfolio
b.a passive portfolio
c.an active portfolio
d.an index portfolio