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1) narrbegin: exhibit 22-1 liquidation
exhibit 23-1
narrend
if the company has $2,456,000 in funds to distribute to unsecured creditors, what is the
settlement that is received by the holders of the notes payable in case i?
a.$1,444,706
b.$2,500,000
c.$1,055,294
d.$1,863,685
2) a firm has a capital structure of 40% debt and 60% equity. debt can be issued at a
return of 10%, while the cost of equity for the firm is 15%. the firm is considering a $50
million expansion of their production facility. the project has the same risk as the firm
overall and will earn $12 million per year for 6 years. what is the npv of the expansion
if the tax rate facing the firm is 40%?
a.-$0.4 million
b.-$0.2 million
c.$0 million
d.$0.2 million
3) narrbegin: miller venture capital
miller venture capital
miller venture capital made a $5 million investment in bavarian sausage technology
(bst) 8 years ago and in return received 1 million shares of convertible preferred stock
that can be converted into 2 shares of common stock. after all stock has been converted
bst will have 15 million shares outstanding. in addition, the company is planning on
issuing an additional 3 million shares in an ipo.
narrend
miller venture capital fund wants to average a 34.375% return on its investments. of the
15 total investments 5 have failed (i.e a return of -100%), and 7 generated a zero return.
two other projects yielded a return of 80% and 85%, respectively. what has to be the
return on the last outstanding investment in order for miller to reach its investment
goal?
a.425%
b.1,250%
c.885%
d.680%
4) an inventory system that is premised on materials arriving exactly when they are
needed for production is called
a.materials resource planning
b.material resource planning ii
c.a just-in-time inventory system
d.none of the above
5) consider the cash receipts projections of emma inc. that is developing a cash budget
for october , november and december; sales in august and september were $200,000 and
$500,000 respectively. the forecast sales are $800,000, $900,000 and $200,000 for
october, november and december respectively. 15 % of sales are cash sales and 85% are
credit sales; collects about 60% of each months sales in the next month but waiting until
the following month for the remaining 25% of sales. bad debts are negligible. the firm
is expectsing cash dividend of $25,000 in december from a subsidiary.what are the total
cash receipts in october? (in thousands)
a.$630
b.$765
c.$470
d.$765
6) which of the following investors can force a firm into bankruptcy court if the firm
does not pay the expected cash flow to the investor?
a.common equity investor
b.preferred equity investor
c.debt investor
d.none of the above
7) a transaction in which two or more business organizations combine into a single
entity is called
a.an acquisition
b.a merger
c.a buyout
d.all of the above
8) narrbegin: exhibit 22-1 liquidation
exhibit 23-1
narrend
if the company has $3,000,000 in funds to distribute to unsecured creditors, how much
do the owners of the firm receive in case iii?
a.$675,000
b.$0
c.$525,000
d.$175,000
9) what can a company do to shorten its cash conversion cycle?
a.turn inventory over as quickly as possible
b.collect accounts receivables as quickly as possible
c.pay accounts as slowly as possible
d.all of the above
10) what is the minimum rating required for a bond to be considered investment grade?
a.aa
b.a
c.bbb
d.bb
11) if you would like to work in finance by trading debt and equity securities for
customers, then which finance career classification should you target?
a.corporate finance
b.commercial banking
c.investment banking
d.money management
12) a project may have multiple irrs when
a.the project generates an alternating series of net cash inflows and outflows
b.the project generates an immediate cash inflow followed by cash outflow
c.the project has a negative npv
d.the project is of considerably large scale
13) bavarian sausage just paid a $1.57 dividend and investors expect that dividend to
grow by 5% each year forever. if the required return on the stock investment is 14%,
what should be the price of the stock in 5 years?
a.$18.32
b.$23.33
c.$17.44
d.$22.26
14) narrbegin: exhibit 22-1 liquidation
exhibit 23-1
narrend
if the company has $3,000,000 in funds to distribute to unsecured creditors, what is the
settlement that is received by the holders of the subordinated debentures in case ii?
a.$2,250,000
b.$1,203,525
c.$$1,046512
d.$1,538,957
15) narrbegin: big thompson credit terms
big thompson industries (bti)
big thompson industries (bti) currently produces and sells 50,000 units of a motor relay
used in high-end electronics. all sales are on credit, for a price of $750 per unit to all
customers. these motor relays incur $525 in variable costs and $3,000,000 in fixed costs
per year. with current credit standards, btis average collection period is 30 days.
managers are considering a relaxation in standards, and forecast a 6 percent increase in
sales, along with an increase in the average collection period to 45 days. additionally,
bad debt expense is expected to increase from 1.5 percent to 2.5 percent of sales.
investments of this type are expected to earn a 14% return. assume a 365 day year
narrend
refer to big thompson. what is the marginal cost of bad debt expense if the new
standards are adopted?
a.$993,750
b.$937,500
c.$562,500
d.$431,250
16) this risk that exchange rate movements will adversely impact reported financial
results on a firms financial statements
a.transactions exposure
b.translation exposure
c.economic exposure
d.political risk
17) which of the following is not a benefit of going public for a private firm?
a.new capital for the company
b.publicly traded stock for acquisitions
c.personal wealth and liquidity
d.low managerial cost in issuing the ipo
18) the option to make additional investments should earlier investments prove to be
successful is known as a(n):
a.expansion option
b.abandonment option
c.follow-on investment option
d.flexibility option
19) narrbegin: npv profile
npv profile
the figure below shows the npv profile for two investment projects.
narrend
refer to npv profile. if the hurdle rate is 13%, and the two projects are mutually
exclusive, which project should be accepted?
a.project 1
b.project 2
c.both projects
d.neither project
