1) you just bought a 5-year zero coupon bond with a $1,000 face value for $735.67.
what is the taxable capital gain on this bond next year?
a.$274.33
b.$68.51
c.$169.47
d.$46.64
2) narrbegin: bavarian credit terms
bavarian brew credit terms
bavarian brew is producing and selling brewery equipment to microbreweries
nationwide. bavarian is charging $15,000 per unit and all of their sales are on credit.
under the current credit policy bavarian brew expects to sell 500 units. the variable
costs are $6,000/unit and fixed costs are $1,500,000 per year. the company is thinking
about changing their credit terms from net 30 to 3/10 net 30. the effect of this change
would be a 5% increase in unit sales, but also an increase in bad debt expenses from 2%
to 4% of sales. the company expects 75% of its customers to take advantage of the cash
discount. currently the company has an average collection period of 38 days, 30 days
until the customers mail their payments and another 8 days to process the payments
once they arrive. bavarian brews opportunity cost of funds invested in accounts
receivable is 12%.
narrend
what is bavarian brews total variable cost of annual sales under the old credit policy?
a.$3,150,000
b.$2,500,000
c.$3,000,000
d.$3,750,000
3) the rules dictating voting procedures and other aspects of corporate governance for a
corporation are
a.the minutes of the board of directors meeting
b.the corporate charter
c.the institute for corporate governance corporate governance procedures
d.the securities and exchange commission rules for corporate governance
4) narrbegin: smith credit ln -w/o comp
smith enterprise credit line (w/o comp)
smith enterprise has an one year credit line of $5,000,000 with second bank. on average
smith uses $3,250,000 of the credit line. second bank charges a .45% commitment fee
on the unused portion of the line and the interest rate is set at libor +1.5%. assume that
the libor is 6.3%
narrend
refer to smith enterprise credit line (w/o comp). if you only borrowed $2,000,000
against the line, what would be your effective borrowing rate?
a.7.80%
b.8.04%
c.8.45%
d.8.48%
5) you want to buy a house in 4 years and expect to need $25,000 for a down payment.
if you have $15,000 to invest, how much interest do you have to earn (compounded
annually) to reach your goal?
a.16.67%
b.13.62%
c.25.74%
d.21.53%
6) which of the following most likely is not a question asked in long-term financial
planning?
a.what threats to our current business exist?
b.what is (are) our core competency(ies)?
c.can we do better by leaving markets (selling assets) and investing elsewhere?
d.should we acquire new vending machines for the employees breakrooms?
7) you are considering buying carpet for your university; grade a carpet costs $25.25 a
square yard and lasts 5 years and grade b costs $18.25 a square yard and lasts 3 years;
grade c costs $12.10 a yard and lasts 2 years; which carpet should be chosen if the
discount rate is 5%? assume that due to a large endowment given by the state’s”carpet
king” the university is committed to continued carpet use. which carpet should be
chosen?
a.grade a
b.grade b
c.grade c
8) narrbegin: smart acquires snazzy
smart acquires snazzy
smart products plans to acquire snazzy snaps, which will create $8 million in
incremental cash flows for smart each year for the first six years. smart products plans
to divest snazzy snaps at the end of the sixth year for $112,500,000. smarts beta (b) is
1.2, and is expected to remain so after the acquisition. the risk free rate is 5 percent and
the expected return on the market is 16 percent. smart products has a 100 percent equity
capital structure which will be maintained post-acquisition.
narrend
what is the maximum price smart products can pay for snazzy snaps?
a.$30,153,951
b.$69,090,200
c.$102,729,660
d.$48,257,950
9) narrbegin: stock returns
narrend
what is the average return of stock b?
a.13.8%
b.12.6%
c.5.00%
d.8.52%
10) narrbegin: cboe
cboe
use the following information on cboe 13-week t-bill rate options to answer the
following question(s).
narrend
refer to cboe. suppose you want to construct a collar to reduce the cost of the cap by
selling a floor. what is the net cost of the least expensive such collar? (be sure the strike
prices on the call and the put are not the same!)
1. $0.10 per contract outflow
2. $10 per contract outflow
3. $0.10 per contract inflow
4. $10 per contract inflow
11) the expected rate of inflation for japan is 11%. the risk-free rate in japan is 5% and
the risk-free rate in italy is 2%. what must the inflation rate in italy be in order for real
interest rate parity to hold?
a.11.0%
b.7.83%
c.-3.51%
d.14.26%
12) consider the cash receipts projections of roxy inc. that is developing a cash budget
for october , november and december; sales in august and september were $600,000 and
$500,000 respectively. the forecast sales are $400,000, $300,000 and $200,000 for
october, november and december respectively. 20 % of sales are cash sales and 80% are
credit sales; collects about 70% of each months sales in the next month but waiting until
the following month for the remaining 10% of sales. bad debts are negligible. the firm
is expectsing cash dividend of $10,000 in december from a subsidiary.what are the total
cash receipts in december? (in thousands)
a.$300
b.$290
c.$250
d.$340
13) a non-u.s. based company would like to issue a form of its common equity in the
u.s. a current method for doing so would be
a.to contract for a u.s. investment back to issue a sponsored adr
b.to let a u.s. investment bank issue an unsponsored adr
c.to sell put options on its own stock to u.s. investors
d.none of the above
14) a financial intermediary is an institution that:
a.lends money to borrowers and raises that capital by issuing equity
b.lends money to borrowers and raises that capital by issuing liabilities against itself
c.issues stocks and sells shares in itself to generate cash for investing for the
stockholders
d.none of the above