The average net income of a project divided by the projects average book value is
referred to as the projects:
A. required return.
B. market rate of return.
C. internal rate of return.
D. average accounting return.
E. discounted rate of return.
The spot rate between Canada and the U.S. is Can$1.2381 = $1, while the one-year
forward rate is Can$1.2379 = $1. The risk-free rate in Canada is 2.8 percent. The
risk-free rate in the U.S. is 3.6 percent. How much profit can you earn on a loan of
$1,000 by utilizing covered interest arbitrage?
A. -$8.14
B. -$7.83
C. -$5.36
D. $3.49
E. $6.57
Alfa Life Insurance Co. is trying to sell you an investment policy that will pay you and
your heirs $10,000 per year forever. If the required return on this investment is 4.75
percent, how much will you pay for the policy?
A. $206,576.83
B. $210,526.32
C. $214,211.50
D. $217,119.02
E. $221,160.91
Daniels Market has sales of $36,600, costs of $28,400, depreciation expense of $3,100,
and interest expense of $1,500. If the tax rate is 34 percent, what is the operating cash
flow, OCF?
A. $4,811
B. $5,279
C. $6,466
D. $6,976
E. $7,013
What term is used to describe an account that a bond trustee manages for the sole
purpose of redeeming bonds early?
A. Registered account
B. Bearer account
C. Call account
D. Sinking fund
E. Premium fund
Generally speaking, bonds issued in the U.S. pay interest on a(n) _____ basis.
A. annual
B. semiannual
C. quarterly
D. monthly
E. daily
The Medicine Shoppe has a return on equity of 19.2 percent, a profit margin of 11.6
percent, and total equity of $738,000. What is the net income?
A. $85,608
B. $113,875
C. $141,696
D. $146,542
E. $149,897
The Park Place has a return on assets of 13.7 percent, a cost of equity of 20 percent, and
a pretax cost of debt of 7.1 percent. What is the debt-equity ratio? Ignore taxes.
A. 0.44
B. 0.47
C. 0.61
D. 0.88
E. 0.95
Which one of the following statements is true regarding the period 1926-2011?
A. The returns on small-company stocks were less volatile than the returns on
large-company stocks.
B. The risk-free rate of return remained constant over the time period.
C. U.S. Treasury bills had a positive average real rate of return.
D. Bonds had an average rate of return that exceeded the average return on stocks.
E. The inflation rate was just as volatile as the return on long-term bonds.
Mind Blowers, Inc. has a new project in mind that will increase accounts receivable by
$28,000, decrease accounts payable by $6,000, increase fixed assets by $36,000, and
decrease inventory by $11,000. What is the amount the firm should use as the initial
cash flow attributable to net working capital when it analyzes this project?
A. -$45,000
B. -$37,000
C. -$23,000
D. -$17,000
E. -$1,000
Big Als Meat Market has annual sales of $531,000 and cost of goods sold of $358,000.
The profit margin is 4.8 percent and the accounts payable period is 41 days. What is the
average accounts payable balance?
A. $9,421
B. $25,488
C. $40,214
D. $45,211
E. $54,449
The payback period is the length of time it takes an investment to generate sufficient
cash flows to enable the project to:
A. produce a positive annual cash flow.
B. produce a positive cash flow from assets.
C. offset its fixed expenses.
D. offset its total expenses.
E. recoup its initial cost.
You place an order for 680 units of widgets at a unit price of $46. The supplier offers
terms of 2/5, net 20. If you dont take the discount, how much interest are you paying
implicitly?
A. $46
B. $625.60
C. $792.00
D. $1,460
E. $1,564
Given the following information, what is the expected return on a portfolio that is
invested 35 percent in Stock A, 45 percent in Stock B, and the balance in Stock C?
A. 11.84 percent
B. 12.53 percent
C. 12.91 percent
D. 13.46 percent
E. 13.87 percent