Turntable Industrial, Inc. owes your firm $138,600. This amount is seriously delinquent
so your firm has offered to arrange a payment plan in the hopes that it might at least
collect a portion of this receivable. Your firm’s offer consists of weekly payments for
one year at an interest rate of 3 percent. What is the amount of each payment?
A. $2,229.90
B. $2,318.11
C. $2,409.18
D. $2,599.04
E. $2,706.33
Answer:
Which one of the following defines the terms of sale?
A. Period of time during which a discount can be taken on an invoice
B. Period of time granted to a customer to pay for the goods or services received
C. Legal documents related to the credit sale of either goods or services
D. Conditions under which a firm sells its goods or services for either cash or credit
E. Process used to determine which customers will be granted credit and which will not
Answer:
Which of the following duties belong to the underwriters of a firm commitment
securities offer?
I. Duty to offer the Green Shoe provision to all investors who buy at the offer price
II. Duty to set the offer price
III. Duty to distribute the offered shares
IV. Duty to purchase any unsold shares
A. I and III only
B. II and IV only
C. II, III, and IV only
D. I, II, and III only
E. I, II, III, and IV
Answer:
Cash flow from assets is defined as:
A. the cash flow to shareholders minus the cash flow to creditors.
B. operating cash flow plus the cash flow to creditors plus the cash flow to
shareholders.
C. operating cash flow minus the change in net working capital minus net capital
spending.
D. operating cash flow plus net capital spending plus the change in net working capital.
E. cash flow to shareholders minus net capital spending plus the change in net working
capital.
Answer:
During the year, The Dalton Firm had sales of $3,210,000. Cost of goods sold,
administrative and selling expenses, and depreciation expenses were $2,540,000,
$389,000, and $112,000, respectively. In addition, the company had an interest expense
of $118,000 and a tax rate of 34 percent. (Ignore any tax loss carryback or carryforward
provisions.) What is its operating cash flow?
A. $263,660
B. $271,420
C. $273,330
D. $285,400
E. $287,700
Answer:
Soft and Cuddly is considering a new toy that will produce the following cash flows.
Should the company produce this toy if the firm requires a 15 percent rate of return?
A. Yes, because the project’s rate of return is 10.21 percent
B. Yes, because the project’s rate of return is 11.47 percent
C. No, because the project’s rate of return is 10.21 percent
D. No, because the project’s rate of return is 11.47 percent
E. No, because the internal rate of return is zero percent
Answer:
Which one of the following is the correct formula for computing the present value of
$600 to be received in 6 years? The discount rate is 7 percent.
A. PV = $600 (1 + 6)7
B. PV = $600 (1 + 0.07)6
C. PV = $600 (0.07 6)
D. PV = $600/(1 + 0.07)6
E. PV = $600/(1 + 6)0.07
Answer:
Miller Brothers is considering a project that will produce cash inflows of $61,500,
$72,800, $84,600, and $68,000 a year for the next four years, respectively. What is the
internal rate of return if the initial cost of the project is $225,000?
A. 9.39 percent
B. 10.22 percent
C. 11.47 percent
D. 11.62 percent
E. 12.24 percent
Answer:
Ruby Falls has an average collection period of 35 days. Its average daily investment in
receivables is $71,000. What are annual credit sales?
A. $727,272
B. $740,429
C. $914,414
D. $1,450,200
E. $1,707,500
Answer:
The Play House’s December 31, 2013, balance sheet showed net fixed assets of
$1,238,000 and the December 31, 2014, balance sheet showed net fixed assets of
$1,416,000. The company’s 2014 income statement showed a depreciation expense of
$214,600. What was the firm’s net capital spending for 2014?
A. $36,600
B. $42,400
C. $392,600
D. $404,400
E. $416,600
Answer:
Northwestern Lumber Products currently has 15,000 shares of stock outstanding.
Patricia, the financial manager, is considering issuing $120,000 of debt at an interest
rate of 6.75 percent. Given this, how many shares of stock will be outstanding once the
debt is issued if the break-even level of EBIT between these two capital structure
options is $60,000? Ignore taxes.
A. 12,975 shares
B. 13,650 shares
C. 14,025 shares
D. 14,550 shares
E. 15,000 shares
Answer:
Todd will be receiving a $10,000 bonus one year from now. The process of determining
how much that bonus is worth today is called:
A. aggregating.
B. discounting.
C. simplifying.
D. compounding.
E. extrapolating.
Answer:
Gamma Corp. is expected to pay the following dividends over the next four years: $5,
$12, $18, and $1.80. Afterward, the company pledges to maintain a constant 4 percent
growth rate in dividends, forever. If the required return on the stock is 14 percent, what
is the current share price?
A. $37.92
B. $41.06
C. $43.18
D. $46.09
E. $49.31
Answer:
Moore & Moore has just finished projecting its expected cash receipts and expenditures
for next year. What is this projection called?
A. Operating projection
B. Receivables schedule
C. Balance sheet
D. Cash budget
E. Compromise policy
Answer:
Venture capital is most apt to be the source of funding for which one of the following?
A. Bankruptcy reorganization
B. Global expansion for an established firm
C. New, high-risk venture
D. Seasonal production
E. Daily operations for an established, profitable firm
Answer:
Twelve days ago, DOG, Inc. declared a dividend of $1.34 a share. The ex-dividend date
is tomorrow. All else constant, which one of the following is the best estimate of DOG,
Inc.’s opening stock price tomorrow?
A. $1.34 lower than today’s closing price
B. Today’s closing price minus an amount approximately equal to the aftertax value of
the dividend
C. The same as today’s closing price since the dividend is expected
D. $1.34 higher than today’s closing price
E. Today’s closing price plus an amount approximately equal to the aftertax value of the
dividend
Answer:
You have compiled the following information on your investments. What rate of return
should you expect to earn on this portfolio?
A. 9.54 percent
B. 9.83 percent
C. 10.01 percent
D. 10.27 percent
E. 10.58 percent
Answer:
Taunton’s is an all-equity firm that has 150,000 shares of stock outstanding. Neal, the
financial vice president, is considering borrowing $220,000 at 8.25 percent interest to
repurchase 20,000 shares. Ignoring taxes, what is the value of the firm?
A. $1,260,000
B. $1,400,000
C. $1,485,000
D. $1,520,000
E. $1,650,000
Answer:
The security market line is defined as a positively sloped straight line that displays the
relationship between which two of the following variables?
A. Beta and standard deviation
B. Systematic and unsystematic risk
C. Nominal and real returns
D. Expected return and beta
E. Risk premium and beta
Answer:
Lester’s has a market value balance sheet as shown below. The firm currently has 7,500
shares of stock outstanding at a price per share of $40. Net income is $9,500.
The firm has decided to repurchase $20,000 worth of its outstanding stock. What will
the firm’s PE ratio be after this repurchase, all else held constant?
A. 23.39
B. 28.76
C. 29.47
D. 30.13
E. 32.16
Answer:
Which one of the following statements is true concerning the price-earnings (PE) ratio?
A. A high PE ratio may indicate that a firm is expected to grow significantly.
B. A PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of
current earnings.
C. PE ratios are unaffected by the accounting methods employed by a firm.
D. The PE ratio is classified as a profitability ratio.
E. The PE ratio is a constant value for each firm.
Answer: