Strategic planning involves broad thinking about a firm’s mission, and goals. It usually
has a time frame or planning horizon of:
A.10 to 20 years.
B.one to three years.
C.five years.
D.Any of the above
If the Canadian dollar strengthens against the British pound, which of the following will
not happen?
A.Canadian tourism in England will increase.
B.British tourism in Canada will decrease.
C.Canadian imports of British goods will decrease.
D.Britain’s Jaguar motorcar will cost Canadians less.
Which of the following is an incorrect statement of an issue involved in receivables
management?
A.Easier credit increases sales
B.Easier credit increases bad debt losses
C.Easier credit lowers the cost of financing receivables
D.Easier credit improves customer relations
If an investor prefers the present value of an investment to its future value:
A.he has selected an interest rate that is too high.
B.he has selected an interest rate that is too low.
C.he has a zero time value of money.
D.None of the above
Lenders protect themselves from conflicts of interest with shareholders through:
A.cooperative agreements signed by shareholders and lenders.
B.limiting the amount of funds bondholders lend.
C.loan agreements that prohibit companies from undertaking excessive risk.
D.offering lenders a share of profits.
A recent direct quote for the euro was $.8845. The euro’s indirect equivalent is:
A.¬0.8845.
B.$1.1306.
C.¬1.1306.
D.¬0.1155.
Which of the following is not one of the three major areas of finance?
A.Accounting
B.Investments and financial markets
C.Financial management of companies
D.The banking system
Kappa International is thinking about acquiring New Life Inc. New Life generated net
cash flows of $13 million last year. This cash flow has been growing at a four percent
rate, which is expected to continue into the foreseeable future. Kappa has 10 million
shares of common stock outstanding on which stockholders earn a return of about 14%,
while New Life has 15 million shares outstanding on which stockholders earn a return
of 13%. What is the maximum price per share that Kappa International should offer for
New Life?
A.$9.01
B.$9.28
C.$9.62
D.$10.01
Technical problems associated with the internal rate of return include:
A.the possibility of multiple IRRs, which rarely present practical difficulties.
B.the assumption that all cash flows are reinvested at the IRR.
C.Neither of the above
D.Both of the above
Keith Stone has a 10-year-old daughter, Kate, who will be entering college in 8 years.
Keith estimates college costs to be $16,000, $17,000, $18,000 and $19,000 payable at
the beginning of each of Kate’s four years in college. How much must Keith save each
year (assume end of year payments) for each of the next 8 years to have enough savings
to pay for Kate’s education when she starts college? Assume Keith can earn 9% on his
savings.
A.$5,569
B.$7,720
C.$5,108
D.$7,677
The Modified Accelerated Cost Recovery System (MACRS) is often used by
companies to calculate depreciation expense for tax purposes. Which of the following is
most correct?
A.MACRS allows greater tax deductions related to depreciation earlier in the life of an
asset than straight line depreciation does.
B.MACRS uses the half-year convention in calculating depreciation expense.
C.MACRS always depreciates the value of an asset down to zero (as opposed to a
salvage value) if the asset is held long enough by the company.
D.Even though depreciation is a non-cash expense, the use of MACRS can improve the
profitability of a project as compared to the same project using straight line
depreciation.
E.All of the above are correct.
Which of the following is a major argument against globalization?
A.It leads to higher domestic production.
B.It decreases standards of living worldwide.
C.It results in exploitation of labor in underdeveloped countries.
D.It reduces domestic profitability in the long term.