The term of an investment can be described as either:
A.long or short, long-term meaning any duration longer than five years.
B.intermediate or short, intermediate being any duration longer than one year.
C.long, intermediate, or short, intermediate being any duration longer than one year but
shorter than five years.
D.None of the above
The accounts receivable balance can be misleading because:
A.it may contain substantial amounts which will never be collected.
B.the figures represent money that is incoming as opposed to tangible assets.
C.costumers often delay payment which blows up the balance.
D.it is not adjusted for the bad debt reserve.
Cash flow estimation concerns:
A.cash flows associated with future projects.
B.cash flows associated with estimation techniques, like NPV.
C.cash flows associated with estimation techniques, like IRR.
D.All of these
Which of the following is not a time value key?
A.
B.I/Y
C.LN
D.PMT
E.FV
You know you will need $25,000 at the end of 5 years. How much would you have to
deposit annually, starting at the end of the first year, into an account earning 10% to
accumulate the needed amount?
A.$3,980
B.$4,095
C.$4,435
D.$4,973
E.$5,886
Idlewild Bank has granted you a seven year loan for $50,000. If your seven annual end
of the year payments are $11,660.45, what is the rate of interest Idlewild is charging?
A.14%
B.23%
C.12.6%
D.None of the above
The following financial information is available on the Haverty Company:
Haverty can issue new common stock to net the company $44 per share. Determine the
cost of equity raised through selling new stock using the dividend growth model
approach. (Compute answer to the nearest .1%).
A.12.3%
B.13.4%
C.13.0%
D.12.7%
On the assumption that a share of stock will be held for two years and then sold, the
formula for determining its current price is:
A.P0= D0[PVFk,0]+D1[PVFk,1]+D2[PVFk,2]+P2[PVFk,2].
B.P0= D0[PVFAk,0]+D1[PVFAk,1]+D2[PVFAk,2]+P2[PVFk,2].
C.P0= D1[PVFk,1]+D2[PVFk,2]+P2[PVFk,2].
D.P0= D0[FVFk,0]+D1[FVFk,1]+D2[FVFk,2]+P2[FVFk,2].
A firm’s correctly computed capital structure is 30% debt, 20% preferred stock, and
50% equity. If retained earnings of $1 million are expected, how much capital will have
been raised when retained earnings are exhausted and new common equity must be
issued?
A.$1,428,571
B.$1,000,000
C.$2,000,000
D.$3,333,333
In general, price changes due to a given interest rate change will be:
A.smaller as the term of the bond extends farther in time.
B.larger as the term of the bond extends farther in time.
C.smaller as the maturity date nears.
D.b and c
Financial assets like stocks and bonds have value because:
A.they represent ownership of companies.
B.people are proud to own them.
C.they provide tangible benefits as do real assets.
D.they give their owners command over future cash flows.
Which of the following best describes the appropriate way to evaluate mutually
exclusive projects with unequal lives?
A.NPV is the appropriate method because NPV is always the method of choice.
B.IRR is the appropriate method because IRR adjusts for the fact that the projects are
not of the same length.
C.Replacement chain is the appropriate method because it equalizes the length of the
unequal projects.
D.Equivalent annual annuity is the appropriate method because it adjusts for the fact
that the projects are not of the same length.
E.Both c. and d. are correct.