An investment banker’s role in a merger might include:
A.counseling reluctant targets on defensive measures.
B.assisting the acquiring company in raising the capital necessary to pay for the target.
C.assisting the acquiring company in establishing a value for the target.
D.All of the above
Learner Lanes, a producer of bowling balls, needs $2.5 million to expand operations.
You look at the firm’s balance sheet and find the following totals:
Assuming that these ratios are consistent with the firm’s target capital structure, cost of
capital based calculations would assume that ____ is raised through the issuance of new
common stock.
A.$1,400,000
B.$1,538,462
C.$1,650,000
D.$2,500,000
Which of the following cash flows has the highest present value (PV) at a 15 percent
discount rate?
A.$1,150 received one year from today
B.$2,000 received 5 years from today
C.$200 received every year (at the end of the year) for 10 years
D.$300 received every year (at the end of the year) for 5 years
Omega Sports has the following equity accounts on its balance sheet:
The current market price of the firm’s shares is $20. If the firm declares a 10 percent
stock dividend followed by a cash dividend of $0.10 per share, the retained earnings
account would change to
A.$21,060,000
B.$19,305,000
C.$25,335,000
D.$19,404,000
A company is considering a project in which the risk associated with annual cash flows
varies considerably from year to year. Which of the following methods will best allow
management to include consideration of risk in the analysis?
A.Pure play method
B.Accounting beta method
C.Certainty approach method
D.Overlay approach
A product has a contribution margin of 20% and sells for $100.00 per unit. Assuming
fixed costs of $2 million and a goal to have an EBIT of $1 million, how many units of
the product must be sold?
A.100,000 units
B.50,000 units
C.120,000 units
D.150,000 units
What is the return on assets (ROA) for a firm that has a debt ratio of 0.65, a return on
sales of 6.5%, sales of $740,000, and a total asset turnover of 4?
A.26.0%
B.16.9%
C.6.5%
D.None of the above
Assume the following facts about a single product firm:
What is the firm’s annual breakeven volume in sales revenues?
A.$540,000
B.$240,000
C.$20,000
D.$9,600
____ branches may emanate from a node.
A.Two
B.Three
C.Up to four
D.Any number of
If the prompt payment discount is foregone, which of the following credit terms implies
the customer is borrowing at a rate that is less than 20% (assume 365 days per year)?
A.2/10, net 30
B.1.5/10, net 30
C.1/10, net 20
D.3/20, net 75
E.All of the above imply borrowing at 20% or more.
What is the amount of the equal annual installments for a 10-year, $10,000 loan with a
20% rate of interest?
A.$2,225
B.$3,863
C.$2,385
D.$1,917
E.$2,000
If a bond sells at a discount and has a yield to maturity of 9%, the current yield must be:
A.equal to the coupon rate.
B.less than the coupon rate.
C.greater than the coupon rate.
D.equal to the yield to maturity.
The technique for incorporating Risk into capital budgeting that involves the use of
numbers drawn randomly from probability distributions is called a:
A.probability simulation.
B.scenario analysis.
C.sensitivity analysis.
D.Monte Carlo simulation.