Rocket City Space Camp has annual credit sales of $16 million. The average collection
period is 35 days. What is the average investment in accounts receivable as shown on
the balance sheet?
A. $646,000
B. $824,000
C. $1,408,888
D. $1,534,247
E. $1,693,134
Laura Lynn owns 20,700 shares of Global Exporters. Her shares have a total market
value of $787,270. In total, the firm has 65,000 shares outstanding. Each share is
entitled to one vote under the straight voting policy of the firm. The next election is in
four months at which time two directors are up for election. How much more must
Laura Lynn invest in this firm to guarantee that she is elected to the board?
A. $0
B. $396,554
C. $448,820
D. $498,406
E. $547,478
Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock
sells for $28.40 a share at a required return of 14 percent. What is the amount of the last
dividend this company paid?
A. $3.50
B. $3.55
C. $3.60
D. $3.65
E. $3.70
Stock in ABC Enterprises has a beta of 1.06. The market risk premium is 6.8 percent,
and T-bills are currently yielding 3.2 percent. ABCs most recent dividend was $1.56 per
share, and dividends are expected to grow at a 4 percent annual rate indefinitely. If the
stock sells for $43 a share, what is your best estimate of ABCs cost of equity?
A. 7.78 percent
B. 8.82 percent
C. 9.09 percent
D. 9.41 percent
E. 9.69 percent
The common stock of The Garden of Eden is selling for $42 a share. The company pays
a constant annual dividend and has a total return of 5.8 percent. What is the amount of
the dividend?
A. $1.02
B. $2.04
C. $2.44
D. $3.70
E. $6.81
Which one of the following features distinguishes an ordinary annuity from an annuity
due?
A. Number of equal payments
B. Amount of each payment
C. Frequency of the payments
D. Annuity interest rate
E. Timing of the annuity payments
Uptown Insurance offers an annuity due with semiannual payments for 25 years at 6
percent interest. The annuity costs $200,000 today. What is the amount of each annuity
payment?
A. $7,546.70
B. $7,600.00
C. $7,773.10
D. $7,800.00
E. $7,856.25
Chick N Fish is considering two different capital structures. The first option consists of
25,000 shares of stock. The second option consists of 15,000 shares of stock plus
$150,000 of debt at an interest rate of 7.5 percent. Ignore taxes. What is the break-even
level of earnings before interest and taxes (EBIT) between these two options?
A. $2,813
B. $3,134
C. $16,410
D. $28,125
E. $31,338
Planters Bank pays 5 percent simple interest on its savings account balances, whereas
Centura Bank pays 5 percent compounded annually. If you made a $12,000 deposit in
each bank, how much more money would you earn from your Centura Bank account at
the end of 20 years?
A. $7,155.84
B. $7,839.57
C. $7,960.47
D. $8,400.09
E. $8,784.14
The common stock of Hillshire Farms has yielded 16.3 percent, 7.2 percent, 11.8
percent, -3.6 percent, and 9.7 percent over the past five years, respectively. What is the
geometric average return?
A. 7.91 percent
B. 8.03 percent
C. 8.07 percent
D. 8.27 percent
E. 9.64 percent
Donner United has total owners equity of $18,800. The firm has current assets of
$23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of
the long-term debt?
A. $5,400
B. $12,500
C. $13,700
D. $29,800
E. $43,000