1) in which situation below would a lock-box system likely produce greater benefits?
a.when interest rates are very low
b.when interest rates are very high
c.when the firms customers are concentrated locally
d.when the firm collects with ach transfers
2) an increase in which of the following variables is likely to lead to an increase in a
firm’s dividend payout?
a.positive-npv investment opportunities
b.personal tax rates on dividend income
c.asset growth rate
d.free cash flow generated
3) suppose snooty wine importers has an order of chateau de snoot wines arriving from
france in october, and the order will be paid in euros. if snooty enters a contract today
with a forward rate of 0.9 euros per u.s. dollar for october delivery, and the spot rate in
october turns out to be euro 0.85 per u.s. dollar, what is the effect of the forward
contract on snooty?
a.snooty importers made $37,500
b.snooty importers lost $37,500
c.snooty importers made $637,55
d.there is no effect.
4) which of the following statements is true?
a.rule 144a was instituted to decrease liquidity and increase issuing costs in the
private-placement market
b.rule 144a was instituted to increase liquidity and decrease issuing costs in the
private-placement market
c.rule 144a was instituted to increase liquidity and decrease issuing costs in the
public-placement market
d.rule 144a was instituted to decrease liquidity and increase issuing costs in the
public-placement market
5) you have written a call option on 1 share of z stock that is worth $15. you expect the
price of the stock to either move to $20 or $10 over the next year. how many shares of z
stock should you own to perfectly hedge your position on the call option? the strike
price on the option is $15.
a.2 shares
b.1 share
c..5 shares
d.none of the above
6) the multiyear action plan for the major investments and competitive initiative that the
firms managers believe will drive the future success of the enterprise is called
a.the firms rollout plan
b.the tactical plan
c.the strategic plan
d.none of the above
7) what is the present value of an operating lease that involves payments of $12,000 per
year (the end of the year) for 14 years with no possibility of purchase at the end of the
lease term. assume that the firm is in the 35% marginal tax rate and the pre-tax cost of
debt for the firm is 9%?
a.$73,179.04
b.$93,433.80
c.$60,731.97
d.$112,583.13
8) narrbegin: silly sally
silly sally, inc.
silly sally, inc. forecasts the following sales levels: january, $420; february, $435;
march, $450; and april, $470. historically, 40% of its sales are for cash. of the remaining
sales, 80% are collected in one month, 15% are collected in the second month, while
the rest remain uncollected. november sales were $380 and december sales were $500.
(all values $000)
purchases are made at 60% of the next months sales forecast, and are paid for in the
month of purchase. other cash outlays are: rent, $10 monthly; wages and salaries, $50
monthly; a tax payment of $30 in march; an interest payment of $15 in march; and a
planned purchase of $20 of new fixed assets in january.
narrend
what are silly sallys forecasted cash outflows for february?
a.$270
b.$330
c.$395
d.$450
9) bavarian sausages has a working capital/total assets ratio of 0.3, a retained
earnings/total assets ratio of 0.4, an earnings before interest and taxes/total assets ratio
of 0.24, a market value of equity/book value of equity ratio of 0.4, and a sales/total
assets ratio of 0.55. what is the companys z score?
a.2.50
b.1.75
c.3.25
d.2.85
10) narrbegin: exhibit 7-2
exhibit 7-2
narrend
given exhibit 7-2, what is the expected return?
a.10.75%
b.13.00%
c.16.00%
d.17.75%
11) taxes impact the wacc calculation because:
a.dividends paid on common stock are tax deductible
b.dividends paid on preferred stock are tax deductible
c.interest paid on debt is tax deductible
d.both (a) and (c) are true
e.all of the above