The directors of Almond and Sons met on Friday, February 5. They declared that the
first-quarter dividend was to be paid on Friday, April 9, with a record date of Friday,
March 12. By what date must you be a registered owner of Almond stock to receive the
dividend?
A.February 5
B.March 8
C.March 12
D.April 9
The Marshall Company has determined that its return on equity is 18.5%. Management
is interested in the various components that went into this calculation. You are given the
following information: Sales = $12 M, Return on Assets = 7.5% and Return on Sales =
4.5%. What percentage of the company’s assets are financed by equity? (Round to the
nearest whole percentage)
A.24%
B.37%
C.41%
D.53%
Money markets are markets for:
A.foreign currency exchange.
B.consumer automobile loans.
C.corporate stocks.
D.long-term bonds.
E.short-term debt securities.
Working capital represents assets that support day-to-day operating activities. Funding
working capital requires:
A.a commitment of capital (money) for a short time, i.e. a time comparable to the
period for which working capital assets are held.
B.a more or less permanent investment of funds to support ongoing daily operations.
C.a commitment to allocate funds annually from the firm’s capital budget.
D.All of the above
Berg Inc. has just paid a dividend of $2.00, and is now selling for $48 per share. Similar
stocks generally earn a 12.5% return. Assuming that Berg Inc. is a constant growth
stock, what is its expected rate of growth?
A.5.0%
B.6.0%
C.7.0%
D.8.0%
E.9.0%
Which of the following can help ensure that everyone understands what they have to do
in the coming year?
A.Making different people accountable for same tasks
B.The business planning process
C.Comparing actuals with budgets
D.Making accurate financial plans
Static Inc. has had a hard time recently. In order to help the firm survive a downturn in
the market for its products, management has announced that it doesn’t plan to pay
dividends for the next three years. A modest dividend of $2.00 is projected for the
fourth year after which dividends are expected to grow at 5% indefinitely. Similar
stocks return 10%. How much should Static’s stock sell for today?
A.$30.05
B.$20.00
C.$40.00
D.$28.69
Suppose a project involving the introduction of a new product is marginally profitable
based on a 6-year cash flow estimate, but becomes much more profitable if two
additional years are included in the analysis. How much weight would you assign to the
two additional years of cash flows?
A.The two additional years of cash flows should not be considered.
B.The two additional years of cash flows should be treated just like the first six years.
C.The two additional years of cash flows should be treated just like the first six years if
management is confident that the product will be viable for eight years.
D.Because the distant future is increasingly uncertain analytical extensions that make a
marginal project look good should be considered with substantial skepticism.
E.Both c. and d. may be correct depending on the situation.
The assets and liabilities in working capital accounts turn over:
A.regularly.
B.seldom.
C.sporadically.
D.frequently.
Which of the following is true of opportunity costs?
A.Not included in initial cash flow
B.Must be estimated and included in the cash flows of the project
C.Similar to sunk costs
D.Should be ignored by the firm
E.Similar to fixed costs
Which of the following types of inventory will be held by a retail company?
A.Supplies
B.Finished goods
C.Work in process
D.Raw materials
Truman University is thinking of opening an evening college. In figuring the cost of
such a project, a figure is provided for lighting of parking lots. It is pointed out by the
university’s finance officer that a city ordinance requires that the parking lots be lighted
whether there is an evening college in session or not. Lighting expenses in this case are:
A.opportunity costs.
B.alternative costs.
C.variable costs.
D.side effects.
E.sunk costs.
Pendulum Corp. is considering making a tender offer for Poe Inc. Pendulum’s
management is conservative and insists that the deal make financial sense based cash
flows projected no more than five years into the future, which have been estimated as
follows:
Year 1 2 3 4 5
Cash flow $3.4M $3.7M $4.0M $4.0M $4.2M
Pendulum has also determined that the appropriate risk adjusted discount rate for the
analysis is 9.0%. If Poe has 400,000 shares outstanding, what is the maximum per share
price Pendulum should be willing to pay for Poe’s stock?
A.$37.00
B.$37.21
C.$40.00
D.$42.21
A company might experience two-stage growth for which of the following reasons?
A.Introduction of a new product
B.A major improvement in the economy that is expected to level out after a few years.
C.A major downturn in the economy that is expected to level out after a few years.
D.Both a. and b. above are correct
E.All of the above are correct
The future cash flows of a stand-alone capital project are as follows:
The internal rate of return for this project is approximately:
A.55%.
B.12%.
C.14%.
D.16%.
Which of the following is true of replacement projects?
A.They generate costs that are planned and directly related to the sales forecast.
B.Their benefits usually come from expected savings.
C.They need not be adjusted for depreciation and taxes.
D.They imply increases in costs and revenues.
The effect of a change in a firm’s credit terms from “net 30” to “2/10, net 30” on its own
balance sheet is likely to be:
A.decreased accounts receivable.
B.increased accounts receivable.
C.decreased accounts payable.
D.increased accounts payable.
The ____ theory states that the yield curve slopes upward or downward based on the
predicted future interest rates.
A.expectations
B.liquidity preference
C.market segmentation
D.maturity risk
In finance the primary goal of management is to:
A.utilize its economic resources in the most advantageous way.
B.minimize all possible expenses.
C.maximize shareholder wealth which is generally achieved by maximizing stock price.
D.make the best use of its assets.
What is the year-end balance for $1000 deposited at an 8% rate, if the compounding is
done monthly?
A.$1,007
B.$1,080
C.$1,083
D.$1,960