1) On which one of the following dates are dividend checks mailed?
A.Date of record
B.Ex-dividend date
C.Payment date
D.Declaration date
E.Public announcement date
2) The spot rate between the UK and the U.S. is £0.6789 = $1, while the one-year
forward rate is £0.6782 = $1. The risk-free rate in the UK is 3.1 percent. The risk-free
rate in the U.S. is 2.9 percent. How much profit can you earn on a loan of $2,000 by
utilizing covered interest arbitrage?
A.-$4.09
B.-$2.78
C.$3.15
D.$6.13
E.$8.55
3) How much money does Suzie need to have in her retirement savings account today if
she wishes to withdraw $25,000 a year for 30 years? She expects to earn an average rate
of return of 13 percent.
A.$176,800.16
B.$180,419.81
C.$181,533.33
D.$185,160.98
E.$187,391.34
4) The price of a stock at year 4 can be expressed as:
A.D0/(R + g4)
B.D0 (1 + R)5
C.D1 (1 + R)5
D.D4/(R – g)
E.D5/(R – g)
5) 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
6) Donner United has total owners’ equity of $18,800. The firm has current assets of
$23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of
the long-term debt?
A.$5,400
B.$12,500
C.$13,700
D.$29,800
E.$43,000
7) You would like to invest $19,000 and have a portfolio expected return of 12.3
percent. You are considering two securities, A and B. Stock A has an expected return of
15.6 percent and B has an expected return of 10.3 percent. How much should you invest
in Stock A if you invest the balance in Stock B?
A.$6,807
B.$7,170
C.$7,411
D.$7,937
E.$8,626
8) On which one of the following dates do dividends become a liability of the issuer for
accounting purposes?
A.First day of the fiscal year in which the dividend is expected to be paid
B.Twelve months prior to the expected dividend payment date
C.On the declaration date
D.On the date of record
E.On the date of payment
9) What is the net present value of a project with the following cash flows if the
discount rate is 15 percent?
A.$39.80
B.$42.97
C.$44.16
D.$48.21
E.$48.30
10) Kelso’s is considering spending $80,000 on either a stock repurchase or an extra
cash dividend. Which one of the following values will be the same whether the firm
pays a dividend or repurchases stock? Assume there are no taxes or market
imperfections.
A.Number of shares outstanding
B.Price per share
C.Earnings per share
D.Price-earnings (PE) ratio
E.Market value of equity per share
11) Pluto United has 18,000 shares of stock outstanding at a price per share of $38.
How many shares will be outstanding if the firm does a 5-for-4 stock split?
A.13,600 shares
B.15,800 shares
C.18,000 shares
D.19,600 shares
E.22,500 shares
12) You earned 26.3 percent on your investments for a time period when the risk-free
rate was 3.8 percent and the inflation rate was 4.0 percent. What was your real rate of
return for the period?
A.19.12 percent
B.20.06 percent
C.21.44 percent
D.21.67 percent
E.21.08 percent
13) Adell Furniture has a profit margin of 8.2 percent and a dividend payout ratio of 40
percent. What is the plowback ratio?
A.8.20 percent
B.27.33 percent
C.54.60 percent
D.60.00 percent
E.68.20 percent
14) The Underground’s has annual sales of $1.46 million. The cost of goods sold is
equal to 80 percent of sales. The firm has an average accounts receivable balance of
$150,000 and an average accounts payable balance of $163,500. How many days on
average does it take the firm to pay its suppliers?
A.7.14 days
B.47.72 days
C.49.81 days
D.51.09 days
E.56.67 days
15) Which one of the following statements about a limited partnership is correct?
A.All partners have their losses limited to their capital investment in the partnership
B.All partners are treated equally
C.There must be at least one general partner
D.Equity financing is easy to obtain and unlimited
E.Any partner can transfer his or her ownership interest without ending the partnership
16) Which one of the following generally pays a fixed dividend, receives first priority
in dividend payment, and maintains the right to a dividend payment, even if that
payment is deferred?
A.Cumulative common
B.Noncumulative common
C.Noncumulative preferred
D.Cumulative preferred
E.Senior common
17) Which one of the following is the need to hold cash simply as a financial reserve?
A.Precautionary motive
B.Opportunistic motive
C.Speculative motive
D.Activity motive
E.Transaction motive
18) Which one of the following is a disbursement account into which funds are
transferred from a master account only as the funds are needed to cover checks
presented for payment?
A.Lockbox account
B.Cash concentration account
C.Ledger account
D.Zero-balance account
E.Cash clearing account
19) Taylor’s, Inc. stock has plummeted in value and is currently priced at $4 a share.
The exchange on which the stock trades requires that the minimum stock price be $10 a
share. Taylor’s has decided to do a reverse stock split to avoid delisting. However, when
it does this, the firm wants the stock price increased to at least twice the minimum
exchange required price. Which one of the following stock split ratios is most
appropriate for this situation?
A.1-for-3
B.1-for-5
C.2-for-9
D.3-for-1
E.5-for-1
20) If you accept a job as a domestic security analyst for a brokerage firm, you are most
likely working in which one of the following financial areas?
A.International finance
B.Private placements
C.Corporate finance
D.Capital management
E.Investments
21) Which one of the following has the narrowest distribution of returns for the period
1926-2011?
A.Long-term corporate bonds
B.Long-term government bonds
C.Intermediate-terms government bonds
D.Large-company stocks
E.Small-company stocks
22) Delta Mu Delta is considering purchasing some new equipment costing $400,000.
The equipment will be depreciated on a straight-line basis to a zero book value over the
four-year life of the project. Projected net income for the four years is $18,900,
$21,300, $26,700, and $25,000. What is the average accounting rate of return?
A.11.49 percent
B.11.63 percent
C.12.01 percent
D.12.49 percent
E.13.20 percent
23) Quattro, Inc. has the following mutually exclusive projects available. The company
has historically used a four-year cutoff for projects. The required return is 11 percent.
The payback for Project A is ____ while the payback for Project B is ____. The NPV
for Project A is _____ while the NPV for Project B is ____. Which project, if any,
should the company accept?
A.3.92 years; 3.64 years; $780.85; $1,211.48; accept both Project A and B
B.3.92 years; 3.79 years; -$211.60; $1,211.48; accept Project B only
C.3.92 years; 3.79 years; $780.85; -$7,945.93; accept Project A only
D.4.06 years; 3.64 years; $780.85; $1,211.48; accept both Project A and B
E.4.06 years; 3.79 years; -$211.60; -$7,945.93; reject both projects
24) A firm has a weighted average cost of capital of 11.68 percent and a cost of equity
of 15.5 percent. The debt-equity ratio is 0.65 . There are no taxes. What is the firm’s
cost of debt?
A.5.80 percent
B.6.27 percent
C.6.44 percent
D.7.23 percent
E.7.81 percent
25) Here are some important figures from the budget of Wexter Enterprises for the
second quarter of 2013:
The company predicts that 2 percent of its credit sales will never be collected, 45
percent of its sales will be collected in the month of sale, and the remaining 53 percent
will be collected in the following month. Credit purchases will be paid in the month
following the purchase.
In March 2013, credit sales were $387,000 and credit purchases were $279,500. What is
the ending cash balance for April if the beginning cash balance was $97,500?
A.$87,410
B.$90,060
C.$92,800
D.$94,440
E.$97,230
26) On June 22, Roy’s Welding Shop purchased $3,300 worth of goods. The terms of
the sale were 1/7, net 21 . What is the effective annual rate of interest for the credit
period for this sale?
A.29.96 percent
B.31.38 percent
C.34.42 percent
D.37.73 percent
E.38.63 percent