A recent direct quote for the British pound was $1.6750. How many British pounds can
be purchased with $100?
A.165.70
B.59.70
C.0.5970
D.16.57
The primary advantage of the proprietor form of business over the corporate form is:
A.ease of raising capital (money.)
B.avoidance of double taxation.
C.unlimited life.
D.limited liability.
Calculate the NPV of a project requiring a $3,000 investment followed by an outflow of
$500 in Year 1, and inflows of $1,000 in Year 2 and $4,000 in Year 3. The cost of
capital is 12%. (Round to nearest $)
A.$52
B.$198
C.$257
D.$486
Which of the following best represents the capital gains yield on a stock held for one
year?
A.(P1– P0)/P1
B.(P1– P0)/P0
C.D1/P0+ (P1– P0)/P1
D.D1/P0+ (P1– P0)/P0
E.D1/P1
If current interest rates are lower than the coupon rate, investors owning a bond can:
A.sell the bond at a premium, because lower interest rates will cause investors to bid
price up to the point where their investment yields the market’s return.
B.only sell the bond at a discount (below face value), recognizing that the lower the
price of the bond, the closer the yield becomes to the market’s return.
C.be wise to hold the bond until maturity, at which point the market value will greater
than the face value of the bond.
D.None of the above
Although the courts usually permit bankrupt firms to continue in business, they protect
creditors’ interests by requiring:
A.that all disbursements be approved by the court.
B.that all checks be countersigned by a bankruptcy judge.
C.that a trustee oversees the company’s operation while it is in bankruptcy.
D.All of the above
With respect to transaction and translation gains and losses:
A.transaction gains and losses have immediate cash flow and tax consequences,
translation gains and losses have neither.
B.transaction and translation gains are taxable, but only transaction losses are tax
deductible.
C.transaction gains and losses are taxable but have no immediate cash flow impact.
D.transaction gains and losses have an immediate cash flow impact, but taxation is
deferred until the related assets are sold.
If the forward rate for the British pound indicates that it is selling at a discount relative
to the spot rate, foreign exchange brokers expect:
A.a decrease in the demand for British pounds.
B.no change in the demand for British pounds.
C.the British pound to weaken against the U.S. dollar.
D.the British pound to strengthen against the U.S. dollar.
E.None of the above is correct.
The lease on a new office requires an immediate payment of $24,000 plus $24,000 per
year at the end of each of the next 10 years. At a discount rate of 14 percent, what is the
present value of this stream of lease payments?
A.$130,872
B.$149,194
C.$142,710
D.$264,000
Common characteristics of operating and financial leverage include:
A.both involve the substitution of fixed for variable cash outflows.
B.both are affected by a firm’s investing decisions.
C.both are affected by a firm’s financing decisions.
D.None of the above
Which entity is most directly responsible for the accounting within the firm?
A.Treasurer
B.Controller
C.CFO
D.CEO
A divestiture is unlikely to be undertaken because of:
A.high debt from an LBO.
B.the need to diversify.
C.poor performance.
D.a lack of strategic fit.
The aggressive approach to the financing of a firm’s current assets uses a ____
proportion of short-term debt and a ____ proportion of long-term debt.
A.low, high
B.relatively high, relatively low
C.high interest, low interest
D.None of the above
The value of resources used in a capital budgeting project should be measured in terms
of their:
A.acquisition cost.
B.historical cost.
C.opportunity cost.
D.depreciated cost.