1) big deal, inc. wants to grow 30% next year. if it maintains its 40% dividend payout
ratio, liabilities to equity ratio of 1, and total asset turnover of 2, what must its profit
margin be to achieve this growth?
a.9.6%
b.25.8%
c.38.5%
d.51.2%
2) if a firm is technically insolvent then the firm may arrange
a.a workout
b.a voluntary settlement
c.both (a) and (b)
d.none of the above
3) a company faces costs of 9% of the amount of cash raised for an ipo. if the company
needs to raise $10 million, what are the total dollar costs?
a.$900,000
b.$989,011
c.$856,788
d.$1,000,000
4) considering the following information what is the value of the call?
a.$11.88
b.$9.61
c.$4.61
d.$1.98
5) which of the following is the practice of trading an asset for the purpose of reducing
or eliminating the risk associated with some other asset?
a.speculating
b.hedging
c.put-call parity
d.insurance
e.fixed exchange rate
6) which of the following statements is false?
a.the eva method is conceptually valid but due to the disconnect it has between
accrual-based accounting and economic value coupled with increased computational
complexity, it is not the most popular method for growth planning
b.firms generally assumed that if roi is greater than the firm’s cost of capital then
shareholder value will be created
c.one of the typical growth targets is depreciation
d.the popular growth targets tend to rely on accounting data and are typically measured
on an annual basis
7) considering the following information what is the value of the put?
a.$2.04
b.$6.44
c.$1.06
d.$8.54
8) virtually all finance jobs require:
a.teamwork
b.good communication skills
c.proficiency with computers
d.all of the above
e.both (a) and (c)
9) narrbegin: smart products eoq
smart products
assume a 365 day year.
smart products buys 300,000 units of a crucial input per year from a supplier that
fulfills its orders within two days of receiving them. smart products submits its orders
directly to the supplier through a web interface, so its lead time is the suppliers two day
turnaround time. each order costs smart products about $500 to place, while carrying
costs are about $60 per unit per year. the company seeks to maintain a five day usage
level in a safety stock.
narrend
refer to smart products. if management determines that a four day safety stock is
appropriate for this input, what is the new reorder point?
a.822 units
b.3288 units
c.4932 units
d.4110 units
10) a machine costs $3 million and has zero salvage value. the machine qualifies under
the 3-year marcs category. assume a discount rate of 10% and a 40% tax rate. what is
the present value of depreciation tax savings associated with this machine? (marcs tax
depreciation schedule of a 3-year class asset: 33.33% in year 1, 44.45% in year 2,
14.81% in year 3, and 7.41% in year 4)
a.$1,090,900
b.$1,200,000
c.$994,741
d.$998,684
11) narrbegin: exhibit 21-1 hhi
exhibit 21-1
narrend
refer to exhibit 21-1. if firms 6 and 7 were to merge what would be the hhi of the
industry?
a.2,088
b.2,158
c.2,495
d.1,645
12) callable bonds may not be called immediately after a rate decrease because
a.the call price if often at a premium above par value
b.the call provision is often deferred for several years after the bonds issue
c.recalling the old bonds and issuing new ones involves non-trivial flotation costs
d.all of the above
13) you checked the $/ exchange rate a week ago and you found that one euro cost you
$1.2432. when you checked the $/ exchange rate again yesterday one euro was trading
at $1.2343. by how much did the value of the euro appreciate (depreciate)?
a.depreciated by 0.72%
b.appreciated by 0.72%
c.depreciated by 1.24%
d.appreciated by 1.24%
14) narrbegin: exhibit 21-1 hhi
exhibit 21-1
narrend
refer to exhibit 21-1. if firms 1 and 2 were to merge what would be the hhi of the
industry?
a.2,088
b.3,488
c.2,495
d.1,645
15) oak barrel company has net operating income of $10 million. further, the company
has $80 million of debt outstanding with a required rate of return of 7 percent; the
required rate of return on the industry is 11 percent; and the corporate tax rate is 40
percent. what is the value of the oak barrel company?
a.$86.55 million
b.$83.77 million
c.$81.46 million
d.$72.28 million