Falcon’s projected 20X5 sales are $678 and its 20X4 year-end retained earnings were
$1,385. If Falcon projects a 7 percent return on sale (ROS) and expects to pay $12 in
total dividends in 20X5, forecast 20X5 year-end retained earnings.
A.$35.46
B.$713.46
C.$1,420.46
D.$1,432.46
Hatter Enterprises has a return on sales of 15%, a total asset turnover of 1.2 and an
equity multiplier of 2.0. If the company is projecting a dividend payout ratio of 40%,
calculate the firms’ sustainable growth rate.
A.15.8%
B.17.2%
C.19.4%
D.21.6%
If the required return for a stock is 14% annually, what should the stock price be one
year from today assuming the current price is $24.00 and a dividend of $0.24 is paid
sometime over the year?
A.$27.36
B.$27.12
C.$21.05
D.$20.81
Which organization typically helps a company market new securities?
A.Commercial bank
B.Insurance company
C.Investment bank
D.Mutual fund
Thompson, Inc. has a 40% dividend payout ratio. It’s projections for next year include
sales of $6 million and a return on sales of 12%. How much should be available in
retained earnings to reduce the external funding requirement?
A.$240,000
B.$288,000
C.$360,000
D.$432,000
E.$720,000
Investors that prefer lower risk when expected returns are equal are said to be:
A.risk tolerant.
B.risk seeking.
C.risk averse.
D.None of the above
If the spot rate for Japanese Yen is $.00703 and the 6 month forward rate is $.00717,
then the forward Yen is trading at a(n):
A.expected gain.
B.premium.
C.Reciprocal.
D.discount.
There is a capital gain on the sale of an asset for:
A.more than its original cost.
B.more than its book value but less than its original cost.
C.a and b
D.None of the above
Which of the following will increase equity?
A.An increase in dividends paid
B.Issuance of new stock
C.An increase in retained earnings from net income
D.Both b & c
E.All of the above
If a firm were to issue $5 million of commercial paper with a maturity of six months at
an interest rate of 10%, the paper would sell at issue date for:
A.$5,000,000.
B.$4,500,000.
C.$4,761,905.
D.$4,750,000.
The security market line:
A.relates an individual security’s return to the returns of other securities in the same
industry.
B.provides a picture of the risk-return tradeoff required by diversified investors.
C.has as its slope the beta of the security.
D.None of the above
The best rationale for a merger is that the value of the firms combined is:
A.at least equal to the sum of their separate values.
B.greater than the sum of their separate values.
C.less than the sum of their separate values.
D.None of the above
Interest is defined as the:
A.return on all investments.
B.return on debt investments.
C.return on equity investments.
D.the one year return on investments in stocks or bonds.
Riordan Trucking has sales of $18M and an accounts receivable balance of $1M. The
firm has projected next year’s sales at $24M and wants to reduce ACP by 2 days.
Calculate Riordan’s projected accounts receivable balance. (Round to the nearest $ and
assume 360 days.)
A.$1.0M
B.$1.2M
C.$1.4M
D.$1.6M
If a German company opens a plant in the U.S. and finances it by issuing dollar
denominated bonds in the United States, the bonds will be called:
A.international bonds.
B.foreign bonds.
C.Eurobonds.
D.Both a. and b. are correct.
E.All of the above are correct.
Zero-Sum Enterprise expects to pay an annual dividend of $0.48 next year. Dividends
and earnings have been growing at a compound annual rate of 8 percent and are
expected to continue growing at that rate. What is the return on Zero-Sum if its price is
$12?
A.12.3%
B.12.0%
C.10.0%
D.10.3%
Self-liquidating debt must be ____when the item financed becomes cash.
A.leveraged
B.paid off
C.amortized
D.liquidated
Which of the following techniques ignores the time value of money?
A.NPV
B.IRR
C.Payback
D.All of the above consider the time value of money.
What is the effective annual interest rate on a credit card with an interest rate of 15%
per year, compounded monthly?
A.15.0%
B.16.1%
C.17.8%
D.18.3%