All else constant, the weighted average cost of capital for a risky, levered firm will
decrease if:
A. the firm’s bonds start selling at a premium rather than at a discount.
B. the market risk premium increases.
C. the firm replaces some of its debt with preferred stock.
D. corporate taxes are eliminated.
E. the dividend yield on the common stock increases.
Answer:
The following is the sales budget for Uptown Rentals, Inc. for the first quarter of 2013:
Credit sales are collected as follows:
60 percent in the month of sale
32 percent in the month after the sale
8 percent in the second month after the sale
The accounts receivable balance at the end of the previous quarter was $87,040
($73,600 of which was uncollected December sales). How much did the firm collect in
the month of February?
A. $118,533
B. $121,212
C. $135,208
D. $138,615
E. $147,040
Answer:
Planters Bank pays 5 percent simple interest on its savings account balances, whereas
Centura Bank pays 5 percent compounded annually. If you made a $12,000 deposit in
each bank, how much more money would you earn from your Centura Bank account at
the end of 20 years?
A. $7,155.84
B. $7,839.57
C. $7,960.47
D. $8,400.09
E. $8,784.14
Answer:
Stadford, Inc. is financed with 40 percent debt and 60 percent equity. This mixture of
debt and equity is referred to as the firm’s:
A. capital structure.
B. capital budget.
C. asset allocation.
D. working capital.
E. risk structure.
Answer:
You own a portfolio that is invested as follows: $11,400 of Stock A, $8,800 of Stock B,
$14,900 of Stock C, and $3,200 of Stock D. What is the portfolio weight of Stock C?
A. 38.47 percent
B. 38.90 percent
C. 39.80 percent
D. 41.94 percent
E. 43.08 percent
Answer:
When issuing securities, which of the following can occur prior to receiving the
approval by the SEC of a registration statement?
I. Oral offer to buy shares
II. Written offer to buy shares
III. Final determination of the offer price
IV. Distribution of a preliminary prospectus
A. I only
B. III only
C. III and IV only
D. I and IV only
E. None of the listed activities can occur until after the SEC approval is received.
Answer: