The Undergrounds Coffee Shop has total assets of $85,300 and an equity multiplier of
1.53. What is the debt-equity ratio?
A. 0.28
B. 0.35
C. 0.50
D. 0.53
E. 0.67
Answer:
Which one of the following is basically equivalent to a 2-for-1 stock split?
A. 20 percent stock dividend
B. 25 percent stock dividend
C. 50 percent stock dividend
D. 100 percent stock dividend
E. 200 percent stock dividend
Answer:
A stock has an average return of 19.2 percent and a standard deviation of 10.7 percent.
In any one given year, you have a 95 percent chance that you will not lose more than
_____ percent nor earn more than ____ percent if you invest in this security.
A. -2.2; 38.2
B. -2.2; 40.6
C. -13.9; 28.9
D. -13.9; 39.6
E. -13.9; 50.3
Answer:
Venus, Inc. has an issue of preferred stock outstanding that pays a $9.00 dividend every
year, in perpetuity. If this issue currently sells for $164.60 per share, what is the
required return?
A. 5.47 percent
B. 6.89 percent
C. 7.70 percent
D. 8.23 percent
E. 8.98 percent
Answer:
Cromwell’s Interiors is considering a project that is equally as risky as the firm’s current
operations. The firm has a cost of equity of 13.7 percent and a pretax cost of debt of 8.4
percent. The debt-equity ratio is .65 and the tax rate is 40 percent. What is the cost of
capital for this project?
A. 9.97 percent
B. 10.29 percent
C. 11.38 percent
D. 11.62 percent
E. 12.30 percent
Answer:
A risky security has less risk than the overall market. What must the beta of this
security be?
A. 0
B. > 0 but < 1
C. 1
D. > 1
E. The beta cannot be determined based on the information provided.
Answer:
Lester’s BBQ has $121,000 in current assets and $109,000 in current liabilities. These
values as referred to as the firm’s:
A. capital structure.
B. cash equivalents.
C. working capital.
D. net assets.
E. fixed accounts.
Answer:
Valerie bought 200 shares of Able stock today. Able stock has been trading for some
time on the NYSE. Valerie’s purchase occurred in which market?
A. Dealer market
B. Over-the-counter market
C. Secondary market
D. Primary market
E. Tertiary market
Answer:
Given the following exchange rates, which of the following currencies are selling at a
premium?
A. Japanese yen only
B. Swiss franc and Canadian dollar only
C. U.S. pound only
D. Canadian dollar, Swiss franc, and UK pound only
E. All four currencies
Answer:
The checks received in a lockbox are deposited:
A. into a local bank and then transferred electronically to a concentration account.
B. into a local bank and immediately invested in short-term investments.
C. as soon as they are posted to the customer’s account.
D. the following day and immediately invested.
E. directly into an investment account.
Answer:
The U.S. dollar equivalent is 0.4502 for the Brazilian real and 1.4729 for the UK
pound. Which one of the following statements is correct given this information?
A. One U.S. dollar will buy 0.4502 Brazilian real.
B. If you have 0.4502 Brazilian real, it is worth 1.4729 UK pounds.
C. One UK pound will buy 1.4729 U.S. dollars.
D. One Brazilian real will buy 1.4729 UK pounds.
E. One U.S. dollar will buy 1.4729 UK pounds.
Answer:
Which one of the following is generally considered to be the best form of analysis if
you have to select a single method to analyze a variety of investment opportunities?
A. Payback
B. Profitability index
C. Accounting rate of return
D. Internal rate of return
E. Net present value
Answer:
The expected rate of return on Delaware Shores, Inc. stock is based on three possible
states of the economy. These states are boom, normal, and recession which have
probabilities of occurrence of 20 percent, 75 percent, and 5 percent, respectively. Which
one of the following statements is correct concerning the variance of the returns on this
stock?
A. The variance must decrease if the probability of occurrence for a boom increases.
B. The variance will remain constant as long as the sum of the economic probabilities is
100 percent.
C. The variance can be positive, zero, or negative, depending on the expected rate of
return assigned to each economic state.
D. The variance must be positive provided that each state of the economy produces a
different expected rate of return.
E. The variance is independent of the economic probabilities of occurrence.
Answer:
A firm has total assets of $523,100, current assets of $186,500, current liabilities of
$141,000, and total debt of $215,000. What is the debt-equity ratio?
A. 0.48
B. 0.70
C. 1.10
D. 1.43
E. 2.13
Answer:
A firm has an average collection period of 35 days and factors all of its receivables
immediately at a 0.95 percent discount. Assume all accounts are collected in full. What
is the firm’s effective cost of borrowing?
A. 9.98 percent
B. 10.13 percent
C. 10.24 percent
D. 10.38 percent
E. 10.47 percent
Answer: