Earth Fare Foods has total assets of $229,800, net fixed assets of $71,500, long-term
debt of $52,000, and total debt of $78,700. If inventory is $45,000, what is the current
ratio?
A. 0.20
B. 0.46
C. 0.84
D. 1.18
E. 5.93
One year ago, LaTresa purchased 600 shares of Outland Co. stock for $3,600. The stock
does not pay any regular dividends but it did pay a special dividend of $0.30 a share last
week. This morning, she sold her shares for $7.25 a share. What was the total return on
this investment?
A. 18.00 percent
B. 20.83 percent
C. 22.50 percent
D. 25.83 percent
E. 28.24 percent
Consider an asset that costs $465,000 and is depreciated straight-line to zero over its
six-year tax life. The asset is to be used in a four-year project; at the end of the project,
the asset can be sold for $120,000. If the relevant tax rate is 35 percent, what is the
aftertax cash flow from the sale of this asset?
A. $132,250
B. $155,000
C. $116,500
D. $97,600
E. $79,200
Which one of the following correctly states a qualification an issuer must meet to be
qualified to use Rule 415 for shelf registration?
A. The issuer must never have defaulted on its debt.
B. The issuer must have outstanding stock with a market value in excess of $250
million.
C. The issuer must never have violated the Securities Act of 1934.
D. The issuer must have an investment grade rating.
E. The issuer cannot have defaulted on its debt within the past five years.
Jamie is analyzing the estimated net present value of a project under various what if
scenarios. The type of analysis that Jamie is doing is best described as:
A. sensitivity analysis.
B. erosion planning.
C. scenario analysis.
D. benefit planning.
E. opportunity evaluation.
Which one of the following is an underwriting of securities where the offer price is
determined by investor bids?
A. Private placement
B. Best efforts underwriting
C. Initial public offering
D. Green Shoe option
E. Dutch auction
Currently, you can exchange 100 for $134.15. The inflation rate in Euroland is
expected to be 3.1 percent as compared to 3.6 percent in the U.S. Assuming that relative
purchasing power parity exists, what should the exchange rate be five years from now?
A. 0.7198/$1
B. 0.7270/$1
C. 0.7367/$1
D. 0.7405/$1
E. 0.7423/$1
Which one of the following is the maximum growth rate that a firm can achieve without
any additional external financing?
A. DuPont rate
B. External growth rate
C. Sustainable growth rate
D. Internal growth rate
E. Cash flow rate
Which one of the following statements is correct?
A. Exchange rates are adjusted each morning and held constant until the next morning.
B. The four most common currencies traded in the foreign exchange market are the
U.S. dollar, franc, euro, and peso.
C. All countries of South America uses the peso as their currency.
D. New Zealand uses the same currency as Australia and that is the A$.
E. The foreign exchange market is the largest financial market in the world.
Steve owns a store that caters primarily to men and their hobbies. He is contemplating
greatly expanding the hunting and fishing section of the store. If he does this, he
expects his fishing and hunting sales will increase, his camping gear sales will increase,
and his model train sales will decrease. Which of the following should Steve include in
his revenue projection for the expansion project?I. Increase in fishing and hunting
salesII. Increase in camping gear salesIII. Decrease in model train sales
A. I only
B. II only
C. I and III only
D. II and III only
E. I, II, and III
Which one of the following indicators offers the best assurance that a project will
produce value for its owners?
A. PI equal to zero
B. Negative rate of return
C. Positive AAR
D. Positive IRR
E. Positive NPV
Tims Tools just issued a dividend of $1.80 per share on its common stock. The
company is expected to maintain a constant 4 percent growth rate in its dividends
indefinitely. If the stock sells for $31 a share, what is the companys cost of equity?
A. 8.81 percent
B. 9.37 percent
C. 9.94 percent
D. 10.04 percent
E. 10.46 percent
The cost of preferred stock:
A. increases when a firms tax rate decreases.
B. is constant over time.
C. is unaffected by changes in the market price.
D. is equal to the stocks dividend yield.
E. increases as the price of the stock increases.
Which one of the following is the agreed-upon exchange rate that is to be used when
currencies are exchanged at some point in the future based on an agreement made
today?
A. Spot rate
B. ADR rate
C. London Interbank Offer Rate
D. Forward exchange rate
E. Cross-rate
Travis invests $10,000 today into a retirement account. He expects to earn 8 percent,
compounded annually, on his money for the next 26 years. After that, he wants to be
more conservative, so only expects to earn 5 percent, compounded annually. How much
money will he have in his account when he retires 38 years from now, assuming this is
the only deposit he makes into the account?
A. $129,411.20
B. $132,827.88
C. $134,616.56
D. $141,919.67
E. $142,003.12
Which one of the following is defined as a bell-shaped frequency distribution that is
defined by its average and its standard deviation?
A. Arithmetic average return
B. Variance
C. Standard deviation
D. Probability curve
E. Normal distribution
Horseshoe Stables is losing significant market share and thus its managers have decided
to decrease the firms annual dividend. The last annual dividend was $0.90 a share but
all future dividends will be decreased by 10 percent annually. What is a share of this
stock worth today at a required return of 15 percent?
A. $3.06
B. $3.24
C. $3.41
D. $3.59
E. $3.95
Which one of the following is most apt to delay the collection of cash?
A. Having customers mail checks to a local lockbox rather than the home office
B. Depositing checks throughout the day
C. Posting payments to accounts receivable prior to making deposits
D. Collecting mail twice daily
E. Supplying customers with bar coded payment slips
Margie opened a used bookstore and is both the 100 percent owner and the stores
manager. Which type of business entity does Margie own if she is personally liable for
all the stores debts?
A. Sole proprietorship
B. Limited partnership
C. Corporation
D. Joint stock company
E. General partnership