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1) the quote for a euro in terms of u.s. dollars is $1.1232/. how many euros equals one
u.s. dollar($)?
a.1 equals $1 since there exchange rates are fixed to one another
b.0.8903 is equal to $1
c.1.1232 is equal to $1
d.you can not figure this out since both the u.s. dollar and the euro are floating
exchange rates
2) roxy international has earnings per share of $4.05; just paid dividend $2.03 and
expects a roi next year (and the foreseeable future) of 15% what is the expected next
year dividend?
a.$2.182
b.$2.183
c.$2.041
d.not enough information
3) what of the following is false regarding debt capital?
a.debt holders receive interest payments at fixed intervals
b.debt holders receive the amount of their loan (called principal) at the debts maturity
date
c.debt holders can force the firm into bankruptcy if interest payments are not made
d.debt holders have voting rights for the firms board of directors
4) narrbegin: exhibit 9-1
exhibit 9-1
a project requires an initial investment in equipment and machinery of $10 million. the
equipment is expected to have a 5-year lifetime with no salvage value and will be
depreciated on a straight-line basis. the project is expected to generate revenues of $5.1
million each year for the 5 years and have operating expenses (not including
depreciation) amounting to 1/3 of revenues.
narrend
refer to exhibit 9-1. the tax rate is 40%. what is the net cash flow in year 1?
a.2.84m
b.3.40m
c.0.84m
d.2.04m
5) a creditor that has a specific asset pledged as collateral are called
a.secured creditors
b.unsecured creditors
c.general creditors
d.shareholders
6) the primary role(s) of the cash manager is
a.to manage the cash flow time line related to collection of funds
b.to manage the cash flow time line related to concentration of funds
c.to manage the cash flow time line related to disbursement of funds
d.all of the above
7) to maximize the value of a business, a firm needs access to capital and to minimize
risk for investors. given these guidelines, which business form should maximize value
for a firm?
a.sole proprietorship
b.limited partnership
c.general partnership
d.corporation
8) before passage of the jobs and growth tax reconciliation act of 2003, some argued to
completely eliminate the tax rate on dividends. calculate the tax disadvantage to
organizing a u.s. business today if the jobs and growth tax reconciliation act of 2003
passed with this provision. consider the following firm: all earnings will be paid out as
dividends, and operating income before taxes will be $1,500,000. the effective
corporate tax rate is 35%, and the tax rate on corporate dividends is 0%. the average
personal tax rate for partners in the business is 35%. what is the tax disadvantage?
a.$0
b.$75,000
c.$100,000
d.$125,000
9) which of the following statements is true?
a.using the same wacc to discount all a firm's potential investments is a sound financial
practice
b.when a firm has debt in its capital structure, the cost of equity is the appropriate
discount rate to use in npv calculations
c.if an investment being evaluated has higher risk than the firm's current set of projects,
the firm's wacc is the appropriate discount rate to use
d.statements (a) and (b) are true
e.all of the above statements are false
10) you just bought a bond with a yield to maturity of 9.5%. if the rate of inflation is
expected to be 4%, what is the real return on your investment?
a.9.50%
b.5.29%
c.4.00%
d.not enough information
11) which of the following statements is false?
a.the valuation process involves linking an asset's past benefits and uncertainty to
determine a fair present value
b.holding future benefits in the form of cash flows constant, the riskier the benefits the
higher the estimated present value
c.finance theory focuses primarily on intangible benefits expected from an asset
d.all of the above statements are true
e.all of the above statements are false
12) options that offer a firm the ability to adapt to changes in inputs, outputs and
maintaining excess production capacity are known as:
a.expansion options
b.abandonment options
c.follow-on investment options
d.flexibility options
13) narrbegin: exhibit 7-2
exhibit 7-2
narrend
given exhibit 7-2, what is the expected variance?
a.943.19%
b.1058.69%
c.49.27%
d.32.54%
14) you buy a house for $220,000 in a neighborhood where home prices have risen 5%
annually on average. you suspect that growth in home prices will slow to an average of
3.5% per year over the next five years. if your growth estimate of 3.5% growth is
correct, how much less will your house be worth in five years compared with 5%
growth?
a.$3,300.00
b.$16,500.00
c.$19,490.95
d.$13,870.51
15) narrbegin: polyana
polyana shoe store
the polyana shoe store had sales last year of $50,000,000 based upon a cost of goods
sold of $40,000,000. polyana also has inventory, accounts receivable, and accounts
payable of $5,000,000, $7,000,000, and $9,000,000, respectively.
narrend
if polyana were to increase its gross profit margin during the previous year, without
changing its accounts receivable level, then what would have happened to polyanas
cash conversion cycle?
a.decrease
b.remain the same
c.increase
d.it is impossible to tell without more information
