Pannick Motors has projected the following sales for the coming year.
Sales in the year following this one are projected to be 12 percent greater in each
quarter. Assume the company places orders during each quarter equal to 45 percent of
projected sales for the next quarter. How much will the firm pay its suppliers in quarter
3 if the firm has a 60-day payables period?
A. $408
B. $427
C. $463
D. $489
E. $511
Which one of the following refers to a method of increasing the rate at which an asset is
depreciated?
A. Noncash expense
B. Straight-line depreciation
C. Depreciation tax shield
D. Accelerated cost recovery system
E. Market-based depreciation
On which one of the following dates are dividend checks mailed?
A. Date of record
B. Ex-dividend date
C. Payment date
D. Declaration date
E. Public announcement date
Tom earned $120 in interest on his savings account last year. Tom has decided to leave
the $120 in his account so that he can earn interest on the $120 this year. This process
of earning interest on prior interest earnings is called:
A. discounting.
B. compounding.
C. duplicating.
D. multiplying.
E. indexing.
Lockboxes should be located:
A. in every town where a firm has a customer.
B. based on where a firms primary customers are located.
C. only in major urban areas since those are the key financial areas of the country.
D. close to a firms home office.
E. only in cities where the firm has regional offices.
Venus, Inc. has an issue of preferred stock outstanding that pays a $9.00 dividend every
year, in perpetuity. If this issue currently sells for $164.60 per share, what is the
required return?
A. 5.47 percent
B. 6.89 percent
C. 7.70 percent
D. 8.23 percent
E. 8.98 percent
Hunters Lodge purchased $578,000 of equipment four years ago. The equipment is
seven-year MACRS property. The firm is selling this equipment today for $199,500.
What is the aftertax cash flow from this sale if the tax rate is 35 percent? The MACRS
allowance percentages are as follows, commencing with year 1: 14.29, 24.49, 17.49,
12.49, 8.93, 8.92, 8.93, and 4.46 percent.
A. $153,869.81
B. $158,114.81
C. $198,410.18
D. $209,740.81
E. $216,610.81
Which one of the following is the need to hold cash simply as a financial reserve?
A. Precautionary motive
B. Opportunistic motive
C. Speculative motive
D. Activity motive
E. Transaction motive
Computing the present value of a growing perpetuity is most similar to computing the
current value of which one of the following?
A. Non-dividend-paying stock
B. Stock with a constant dividend
C. Stock with irregular dividends
D. Stock with a constant growth dividend
E. Stock with growing dividends for a limited period of time
Empire Industries is considering adding a new product to its lineup. This product is
expected to generate sales for four years after which time the product will be
discontinued. What is the projects net present value if the firm wants to earn a 13
percent rate of return?
A. $3,505.52
B. $3,767.24
C. $4,312.65
D. $4,519.58
E. $4,902.71
A proposed project will increase a firms accounts payables. This increase is generally:
A. treated as an erosion cost.
B. treated as an opportunity cost.
C. a sunk cost and should be ignored.
D. a cash outflow at time zero and a cash inflow at the end of the project.
E. a cash inflow at time zero and a cash outflow at the end of the project.