Which one of the following best describes a portfolio?
A. Risky security
B. Security equally as risky as the overall market
C. New issue of stock
D. Group of assets held by an investor
E. Investment in a risk-free security
The stock price of Russell, Inc. is $81. Investors require a 14 percent rate of return on
similar stocks. If the company plans to pay a dividend of $4.20 next year, what growth
rate is expected for the companys stock price?
A. 7.99 percent
B. 8.00 percent
C. 8.12 percent
D. 8.37 percent
E. 8.81 percent
Which one of the following statements is true, all else constant?
A. A decrease in the accounts receivable turnover rate decreases the cash cycle.
B. Paying a supplier within the discount period, rather than waiting until the end of the
normal credit period, will decrease the cash cycle.
C. The cash cycle can never be negative.
D. An increase in the inventory turnover rate will decrease the cash cycle.
E. The payables period must be shorter than the receivables period.
The economic order quantity approach states that inventory order sizes should be
determined in which one of the following manners?
A. By dividing annual item sales by the carrying cost per item and multiplying by 2
B. By computing the average number of items sold each month
C. By equating restocking costs with carrying costs
D. By dividing the inventory into various groups based on the value per item
E. By computing the amount of the derived demand
Of the following, which two are the best reasons for doing a reverse stock split?I.
Return a stock to its normal trading rangeII. Eliminate small shareholdersIII. Reduce
shareholder costsIV. Avoid delisting
A. I and II
B. I and III
C. II and III
D. II and IV
E. III and IV
An asset used in a three-year project falls in the five-year MACRS class for tax
purposes. The asset has an acquisition cost of $5.4 million and will be sold for $1.2
million at the end of the project. If the tax rate is 35 percent, what is the aftertax salvage
value of the asset?
Table 9.7 Modified ACRS depreciation allowances
A. $1,075,680
B. $780,000
C. $904,320
D. $1,324,320
E. $1,187,560
One year ago, you purchased 500 shares of stock for $12 a share. The stock pays $0.22
a share in dividends each year. Today, you sold your shares for $28.30 a share. What is
your total dollar return on this investment?
A. $6,222
B. $7,432
C. $8,150
D. $7,775
E. $8,260
Mikes Place has total assets of $123,800, a debt-equity ratio of 0.75, and net income of
$7,100. What is the return on equity?
A. 3.48 percent
B. 3.73 percent
C. 5.74 percent
D. 10.04 percent
E. 13.61 percent
Which one of the following provides compensation to a bondholder when a bond is not
readily marketable at its full value?
A. Interest rate risk premium
B. Inflation premium
C. Liquidity premium
D. Taxability premium
E. Default risk premium
In the process of liquidation, some types of claims receive preference over other claims.
Which one of the following determines which type of claim is paid first?
A. Technical insolvency definition
B. Absolute priority rule
C. Accounting insolvency definition
D. Chapter 7 of the Federal Bankruptcy Reform Act of 1978
E. Securities and Exchange Commission