Which of the following represents a real asset?
A.Land
B.Bonds
C.Stocks
D.Both a & c
E.All of the above
Economic Order Quantity (EOQ) increases with an increase in ____.
A.carrying cost per unit
B.fixed cost per order
C.annual demand
D.Both b & c
E.All of the above
Assume the expected inflation rate is 5% for each of the next two years and 7% per year
for the three years after. Calculate the inflation adjustment (INFL) for a 5-year loan.
A.6.2%
B.6.5%
C.7.0%
D.7.5%
Which is the most appropriate form of funding for temporary working capital?
A.Short-term debt
B.Long-term debt
C.Preferred stock
D.Common stock
Match the following:
1>Poison pill A. Divestiture through the creation of a new corporation whose
shares are distributed pro rata to the original firm’s stockholders
2>Greenmail B. A legal device that makes a hostile takeover prohibitively
expensive for the acquirer.
3>Spinoff C. A defensive measure in which a target company buys its own
shares from a potential acquirer, usually at a premium over market value
4>White knight D. A more acceptable acquirer than the one attempting a hostile
takeover.
If a firm’s current ratio less quick ratio is 1.0, then:
A.the firm’s inventory is equal to its current assets.
B.the firm’s cash is equal to its current liabilities.
C.the firm’s accounts receivable are equal to its current assets.
D.the firm’s inventory is equal to its current liabilities.
Which of the following actions will improve the current ratio?
A.Take a nine-month loan from the bank to pay off some of its suppliers
B.Accelerate the collection of accounts receivable
C.Sell off some old equipment
D.All of the above
The combined impact of operating leverage and financial leverage on the firm’s EPS is:
A.additive.
B.geometric.
C.multiplicative.
D.None of the above
Short-term loans are generally used to:
A.finance permanent additions to working capital.
B.finance additions to fixed assets.
C.finance seasonal working-capital requirements.
D.retire equity, thus changing a firm’s capital structure.
Which of the following is/are included in the list of drawbacks to using the Monte Carlo
simulation for dealing with risk in capital budgeting?
A.Cash flows still have to be estimated subjectively.
B.Individual cash flows generally don’t behave independently. If one cash flow turns
out to be less than expected, several other may behave the same way.
C.Even after creating a distribution of probably outcomes, it is difficult to know exactly
how to interpret the data.
D.Both a. and c. are drawbacks.
E.All of the above are drawbacks.
After watching “Who Wants to Be a Millionaire,” you have decided you want to join
the millionaire’s club. Your goal is to have $1,000,000 in 35 years. If you can invest in a
mutual fund that you project will earn a 10% return, how much must you invest each
year to meet your goal? (Round to nearest $)
A.$2,852
B.$3,690
C.$4,357
D.$5,119
If a firm only accepts cash for the purchase of its products, what effect would this have
on the operating and cash cycles?
A.The operating and cash cycles would be equal.
B.The operating and cash cycles would decrease relative to offering credit to customers.
C.Only the cash cycle would decrease relative to offering credit to customers.
D.Only the operating cycle would increase relative to offering credit to customers.
Which of the following best describes temporary working capital?
A.Incremental working capital to finance accounts receivable that are higher than
expected.
B.Incremental working capital to finance high seasonal production levels.
C.Incremental working capital to finance an unplanned bargain purchase.
D.None of the above describes temporary working capital.
E.a., b., and c. above describe temporary working capital.
The customary information needed to determine the firm’s weighted average cost of
capital (WACC) is:
A.the cost of each component and the target capital structure of the firm.
B.the book value capital components and the cost of each component.
C.the market value of the capital components and cost of each component.
D.Any of the above
Which of the following is considered a security?
A.IBM stock
B.IBM bond
C.US government bond
D.All of the above
Exxon Corp. bought an oil rig exactly 6 years ago for $100,000,000. Exxon depreciates
oil rigs straight line over 10 years assuming no salvage value. The rig was just sold to
British Petroleum for $30,000,000. What Capital Gain/Loss will Exxon report on this
transaction?
A.Gain of $30,000,000
B.Gain of $10,000,000
C.Loss of $10,000,000
D.Loss of $30,000,000