The balance sheet of Binger, Inc. has the following balances:
What is the amount of the change in net working capital?
A. -$8,100
B. -$7,400
C. $7,700
D. $8,000
E. $8,100
LaDoris & Mike, Inc. sells earnings forecasts for Chinese securities. Its credit terms are
1/5, net 15. Based on experience, 85 percent of all customers take the discount. What is
the average collection period?
A. 6.0 days
B. 6.5 days
C. 7.0 day
D. 7.5 days
E. 8.0 days
A project has expected cash inflows, starting with year 1, of $2,200, $2,900, $3,500,
and finally in year 4, $4,000. The profitability index is 1.14 and the discount rate is 12
percent. What is the initial cost of the project?
A. $7,899.16
B. $8,098.24
C. $8,166.19
D. $9,211.06
E. $9,250.00
Custom Tailored Shirts is a specialty retailer offering T-shirts, sweatshirts, and caps. Its
most recent annual sales consisted of $14,000 of T-shirts, $11,000 of sweatshirts, and
$1,300 of caps. The company is adding polo shirts to the lineup and projects that this
addition will result in sales next year of $14,000 of T-shirts, $8,000 of sweatshirts,
$7,800 of Polo shirts, and $1,300 of caps. What sales amount should be used when
evaluating the Polo shirt project?
A. $0
B. $4,800
C. $4,900
D. $5,000
E. $9,100
Consider a portfolio comprised of four risky securities. Assume the economy has three
states with varying probabilities of occurrence. Which one of the following will
guarantee that the portfolio variance will equal zero?
A. The portfolio beta must be 1.0.
B. The portfolio expected rate of return must be the same for each economic state.
C. The portfolio risk premium must equal zero.
D. The portfolio expected rate of return must equal the expected market rate of return.
E. There must be equal probabilities that the state of the economy will be a boom or a
bust.
Which one of the following is defined as an agreement to exchange two securities or
two currencies?
A. Hedge
B. Swap
C. SWIFT
D. Gilt
E. Arbitrage
Katie owns 100 shares of ABC stock. Which one of the following terms is used to refer
to the return that Katie and the other shareholders require on their investment in ABC?
A. Weighted average cost of capital
B. Pure play cost
C. Cost of equity
D. Subjective cost
E. Cost of debt
Companies can list their stock on which one of the following without having to meet
listing requirements or filing financial statements with the SEC?
A. NASDAQ Capital Market
B. Over-the-Counter Bulletin Board
C. Pink sheets
D. NASDAQ Global Market
E. NYSE
The Road Kill Restaurant has the following current account values for the year. These
accounts represent a net _____ of cash for the year in the amount of ____.
A. Source; $3,100
B. Source; $4,700
C. Use; $3,100
D. Use; $3,800
E. Use; $4,700
Investors require a 4 percent return on risk-free investments. On a particular risky
investment, investors require an excess return of 7 percent in addition to the risk-free
rate of 4 percent. What is this excess return called?
A. Inflation premium
B. Required return
C. Real return
D. Average return
E. Risk premium
The Play Houses December 31, 2013, balance sheet showed net fixed assets of
$1,238,000 and the December 31, 2014, balance sheet showed net fixed assets of
$1,416,000. The companys 2014 income statement showed a depreciation expense of
$214,600. What was the firms net capital spending for 2014?
A. $36,600
B. $42,400
C. $392,600
D. $404,400
E. $416,600
Greenbriar Cotton Mill is spending $330,000 to update its facility. The company
estimates that this investment will improve its cash inflows by $56,500 a year for 10
years. What is the payback period?
A. 4.03 years
B. 4.95 years
C. 5.48 years
D. 5.84 years
E. The project never pays back.
Ready To Go is an all-equity firm specializing in hot ready-to-eat meals. Management
has estimated the firms earnings before interest and taxes will be $175,000 annually
forever. The present cost of equity is 15.1 percent. Currently, the firm has no debt but is
considering borrowing $750,000 at 9 percent interest. The tax rate is 34 percent. What
is the value of the unlevered firm?
A. $623,017
B. $646,511
C. $704,141
D. $764,901
E. $855,200