Today, you deposit $2,400 in a bank account that pays 4 percent simple interest. How
much interest will you earn over the next 5 years?
A. $96.00
B. $101.15
C. $480.00
D. $492.16
E. $519.97
A proposed project requires an initial cash outlay of $849,000 for equipment and an
additional cash outlay of $48,500 in year 1 to cover operating costs. During years 2
through 4, the project will generate cash inflows of $354,000 a year. What is the net
present value of this project at a discount rate of 13 percent? Round your answer to the
nearest whole dollar.
A. -$152,232
B. -$66,391
C. $67,333
D. $128,612
E. $239,602
The Draiman, Inc. currently has $3,600 in cash. The company owes $41,800 to
suppliers for merchandise and $21,500 to the bank for a long-term loan. Customers owe
The Draiman $18,000 for their purchases. The inventory has a book value of $53,300
and an estimated market value of $61,200. If the store compiled a balance sheet as of
today, what would be the book value of the current assets?
A. $46,800
B. $55,600
C. $64,700
D. $74,900
E. $96,500
Electronics and More offers credit terms of 1/5, net 20. What is the effective annual rate
on a $12,000 purchase if you forgo the discount?
A. 0 percent
B. 8.59 percent
C. 14.99 percent
D. 27.71 percent
E. 32.58 percent
A firm wants to create a WACC of 10.4 percent. The firms cost of equity is 14.5 percent
and its pretax cost of debt is 8.5 percent. The tax rate is 34 percent. What does the
debt-equity ratio need to be for the firm to achieve its target WACC?
A. 0.51
B. 0.57
C. 0.62
D. 0.70
E. 0.86
When comparing savings accounts, you should select the account that has the:
A. lowest annual percentage rate.
B. highest annual percent rate.
C. highest stated rate.
D. lowest effective annual rate.
E. highest effective annual rate.
Your grandfather started his own business 52 years ago. He opened a savings account at
the end of his third month of business and contributed $x. Every three months since
then, he faithfully saved another $x. His savings account has earned an average rate of
4.5 percent annually. Today, his account is valued at $364,209.11. How much did your
grandfather save every three months?
A. $425.15
B. $428.67
C. $431.09
D. $443.13
E. $462.25
Brunos is considering a change from its current capital structure. Brunos currently has
an all-equity capital structure and is considering a capital structure with 30 percent debt.
There are currently 6,500 shares outstanding at a price per share of $46. EBIT is
expected to remain constant at $43,000. The interest rate on new debt is 8.5 percent and
there are no taxes. Tracie owns $20,700 worth of stock in the company. The firm has a
100 percent payout. What would Tracies cash flow be under the new capital structure
assuming that she keeps all of her shares?
A. $1,998
B. $2,227
C. $2,815
D. $3,027
E. $3,499
One year ago, Debra purchased 4,200 shares of KNF stock for $177,072. Today, she
sold those shares for $48.10 a share. What is the capital gains yield on this investment if
the dividend yield is 4.1 percent?
A. 10.79 percent
B. 11.23 percent
C. 13.07 percent
D. 15.04 percent
E. 14.53 percent
Which one of the following terms best refers to the practice of investing in a variety of
diverse assets as a means of reducing risk?
A. Systematic
B. Unsystematic
C. Diversification
D. Security market line
E. Capital asset pricing model
Which one of the following statements concerning underwriting is correct?
A. Underwriters exercise the Green Shoe option whenever the market price of an IPO
declines initially.
B. Underwriters guarantee the number of shares to be sold in a best efforts
underwriting.
C. Competitive underwriting is generally more expensive than negotiated underwriting.
D. The majority of equity underwritings in the U.S. are competitive underwritings.
E. Underwriters may receive warrants as part of their compensation.
A bond trader just purchased and resold a bond. The amount of profit earned by the
trader from this purchase and resale is referred to as the:
A. market yield.
B. yield-to-call.
C. bid-ask spread.
D. current yield.
E. bond premium.
Financial statement analysis:
A. is primarily used to identify account values that meet the normal standards.
B. is limited to internal use by a firms managers.
C. provides useful information that can serve as a basis for forecasting future
performance.
D. provides useful information to shareholders but not to debtholders.
E. is enhanced by comparing results to those of a firms peers but not by comparing
results to prior periods.
Joseph Turner and Sons has 125,000 shares of stock outstanding. The firm has extra
cash so it announced this morning that it is willing to repurchase 25,000 of its shares.
What type of offer is the firm making?
A. Rights offer
B. Secondary issue
C. Targeted repurchase
D. Tender offer
E. Private issue