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The concept of marginal taxation is best exemplified by which one of the following?
A. Kirbys paid $120,000 in taxes while its primary competitor paid only $80,000 in
taxes.
B. Johnsons Retreat paid only $45,000 on total revenue of $570,000 last year.
C. Mitchells Grocer increased its sales by $52,000 last year and had to pay an additional
$16,000 in taxes.
D. Burlington Centre paid no taxes last year due to carryforward losses.
E. The Blue Moon paid $2.20 in taxes for every $10 of revenue last year.
Given the following information, what is the variance of the returns on a portfolio that
is invested 40 percent in both Stocks A and B, and 20 percent in Stock C?
A. 0.002102
B. 0.002490
C. 0.002513
D. 0.005746
E. 0.006143
The Shoe Box is considering adding a new line of winter footwear to its product lineup.
Which of the following are relevant cash flows for this project?I. Decreased revenue
from products currently being offered if this new footwear is added to the lineupII.
Revenue from the new line of footwearIII. Money spent to date looking for a new
product line to add to the stores offeringsIV. Cost of new counters to display the new
line of footwear
A. I and IV only
B. II and IV only
C. II and III only
D. I, II, and IV only
E. II, III, and IV only
The Undergrounds Coffee Shop has total assets of $85,300 and an equity multiplier of
1.53. What is the debt-equity ratio?
A. 0.28
B. 0.35
C. 0.50
D. 0.53
E. 0.67
Rembrandt, Samurai, Yankee, and Bulldog are all names associated with which one of
the following?
A. Eurobonds
B. Currencies
C. Cross-rate
D. Foreign bonds
E. Foreign interest rates
Gamma Corp. is expected to pay the following dividends over the next four years: $5,
$12, $18, and $1.80. Afterward, the company pledges to maintain a constant 4 percent
growth rate in dividends, forever. If the required return on the stock is 14 percent, what
is the current share price?
A. $37.92
B. $41.06
C. $43.18
D. $46.09
E. $49.31
Which one of the following is the process of determining the probability that customers
will not pay?
A. Credit analysis
B. Collection policy
C. Account aging
D. Credit terms
E. Customer invoicing
The net present value of an investment represents the difference between the
investments:
A. cash inflows and outflows.
B. cost and its net profit.
C. cost and its market value.
D. cash flows and its profits.
E. assets and liabilities.
Kelsos is considering spending $80,000 on either a stock repurchase or an extra cash
dividend. Which one of the following values will be the same whether the firm pays a
dividend or repurchases stock? Assume there are no taxes or market imperfections.
A. Number of shares outstanding
B. Price per share
C. Earnings per share
D. Price-earnings (PE) ratio
E. Market value of equity per share
You want to borrow $40,000 from your local bank to buy a new sailboat. You can afford
to make monthly payments of $775, but no more. Assuming monthly compounding,
what is the highest rate you can afford on a 60-month APR loan?
A. 5.9 percent
B. 6.0 percent
C. 6.1 percent
D. 6.2 percent
E. 7.2 percent
Jenny needs to borrow $16,000 for 3 years. The loan will be repaid in one lump sum at
the end of the loan term. Which one of the following interest rates is best for Jenny?
A. 8 percent simple interest
B. 8 percent interest, compounded annually
C. 8.5 percent simple interest
D. 8.5 percent interest, compounded annually
E. 9 percent interest, compounded annually
A firm has a weighted average cost of capital of 11.68 percent and a cost of equity of
15.5 percent. The debt-equity ratio is 0.65. There are no taxes. What is the firms cost of
debt?
A. 5.80 percent
B. 6.27 percent
C. 6.44 percent
D. 7.23 percent
E. 7.81 percent
Johnsons Tree Farm has a cash balance of $33 and a short-term loan balance of $200 at
the beginning of quarter 1. The net cash inflow for the first quarter is $89 and for the
second quarter there is a net cash outflow of $44. All cash shortfalls are funded with
short-term debt. The firm pays 2 percent of its prior quarters ending loan balance as
interest each quarter. The minimum cash balance is $25. What is the short-term loan
balance at the end of the first quarter?
A. $107
B. $111
C. $121
D. $128
E. $133
Which one of the following parties on the NYSE floor posts bid and asked prices?
A. Floor traders
B. DMMs
C. Floor brokers
D. Commission brokers
E. Fee brokers
Over the period of 1926-2011:
A. the risk premium on large-company stocks was greater than the risk premium on
small- company stocks.
B. U.S. Treasury bills had a risk premium that was just slightly over 2 percent.
C. the risk premium on long-term government bonds was zero percent.
D. the risk premium on stocks exceeded the risk premium on bonds.
E. U. S. Treasury bills had a negative risk premium.
Which one of the following refers to the option to expand into related businesses in the
future?
A. Strategic option
B. Contingency option
C. Soft rationing
D. Hard rationing
E. Capital rationing option
