Archives: Quiz

Santa Klaus Toys just paid its annual dividend of $1.40. The required return is 8 percent and the dividend growth rate is 1 percent. What is the expected value of this stock five years from now? A. $20.82 B. $21.23 […]

The NYSE: A. presently conducts all of its trading through SuperDOT. B. is a dealer market. C. is in the business of attracting order flow. D. is solely a primary market. E. is based on a multiple market maker system. […]

Which one of the following is true if the managers of a firm accept only projects that have a profitability index greater than 1.5? A. The firm should increase in value each time the firm accepts a new project. B. […]

The current spot rate between the UK and the U.S. is 0.6220 per $1. The expected inflation rate in the U.S. is 2.1 percent. The expected inflation rate in the UK is 2.6 percent. If relative purchasing power parity exists, […]

Nu Tek is comprised of four separate operating divisions. For this year, the firm has decided to allocate capital funds using a soft rationing approach. Which one of the following applies to this situation? A. Division managers will be limited […]

Today, you deposit $2,400 in a bank account that pays 4 percent simple interest. How much interest will you earn over the next 5 years? A. $96.00 B. $101.15 C. $480.00 D. $492.16 E. $519.97 A proposed project requires an […]

Kessler, Inc. has accounts receivable of $31,600, total assets of $311,500, cost of goods sold of $208,400, and a capital intensity ratio of 1.08. What is the accounts receivable turnover rate? A. 8.99 B. 9.13 C. 9.42 D. 9.61 E. […]

ADP, Inc. needs to raise $32 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the offer price is $45 per share […]

Which one of the following is a general characteristic of a securities broker? A. Trades from his or her own inventory B. Trades only foreign securities C. Trades listed securities in an auction market D. Trades electronically from any geographic […]

USA Manufacturing issued 30-year, 8.5 percent semiannual bonds 6 years ago. The bonds currently sell at 101 percent of face value. What is the firms aftertax cost of debt if the tax rate is 30 percent? A. 5.88 percent B. […]

Your favorite running shoes cost $91 in the U.S. while the identical shoes cost Can$114.50 in Canada. According to purchasing power parity, what is the Can$/$ exchange rate? A. Can$0.7948/$1 B. Can$0.8426/$1 C. Can$0.9108/$1 D. Can$1.2582/$1 E. Can$1.3305/$1 You have […]

Over the last four years, the common stock of Plymouth Shippers has had an arithmetic average return of 9.3 percent. Three of those four years produced returns of 14.1 percent, 15.6 percent, and 3.4 percent, respectively. What is the geometric […]

Smelly Perfumes sells 3,500 units of its perfume collection each year at a price per unit of $275. All sales are on credit with terms of 1/7, net 30. The discount is taken by 40 percent of the customers. What […]

A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent. The current profit margin is 7.5 percent and the firm uses no external financing sources. What must the total asset […]

Which one of the following increases the number of shares outstanding but does not increase the value of owners equity? A. Stock repurchase B. Reverse stock split C. Stock split D. Cash distribution E. Liquidating dividend A firm grants credit […]

Shoe Box Stores is currently an all-equity firm with 28,000 shares of stock outstanding. Management is considering changing the capital structure to 40 percent debt. The interest rate on the debt would be 9 percent. Ignore taxes. Jamie owns 400 […]

If a firm has a negative cash flow from assets every year for several years, the firm: A. may be continually increasing in size. B. must also have a negative cash flow from operations each year. C. is operating at […]

Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation?I. Current tax lawsII. Corporate tax exclusionIII. Bond indenture covenantIV. State laws pertaining to retained earnings A. I and II only […]

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners? A. Sole proprietorship B. General partnership C. Limited partnership D. Limited liability company E. Corporation Charliess […]

A U.S. firm has total assets valued at 687,000 located in Germany. This valuation did not change from last year. Last year, the exchange rate was 0.94 = $1. Today, the exchange rate is .0.75 = $1. By what amount […]

Traditional Bank has an issue of preferred stock with a $4.80 stated dividend that just sold for $80 a share. What is the banks cost of preferred stock? A. 5.91 percent B. 6.00 percent C. 6.23 percent D. 6.47 percent […]

Which one of the following is the abbreviation for the U.S. government coding system that classifies a firm by its specific type of business operations? A. BEC B. SED C. BID D. SIC E. SBC You are analyzing a project […]

You are analyzing a project and have developed the following estimates. The depreciation is $14,800 a year and the tax rate is 35 percent. What is the base case operating cash flow? A. $18,770 B. $18,972 C. $21,433 D. $21,690 […]

ADP, Inc. needs to raise $43 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The SEC filing fee and associated administrative expenses […]

Which of the following should be included in the analysis of a proposed investment?I. Erosion effectsII. Opportunity costsIII. Sunk costsIV. Side effects A. I only B. II only C. I and IV only D. I, II, and IV only E. […]

The Blue Lagoon is considering a project with a five-year life. The project requires $110,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 71 percent of sales, fixed costs are $9,600, and the tax […]

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. […]

Phil and Terry started a new business three years ago. Two years ago, they incorporated the business and issued themselves each 20,000 shares of stock. Last year, they took the company public in an IPO and issued an additional 100,000 […]

The expected return on a security depends on which of the following?I. Risk-free rate of returnII. Amount of the securitys unique riskIII Market rate of returnIV. Standard deviation of returns A. I and III only B. II and IV only […]

Redneck Farm Equipment owes $48,329 in tax on a taxable income of $549,600. The company has determined that it will owe $56,211 in tax if its taxable income rises to $565,000. What is the marginal tax rate at this level […]

Tennessee Valley Antiques would like to issue new equity shares if its cost of equity declines to 10.5 percent. The company pays a constant annual dividend of $1.80 per share. What does the market price of the stock need to […]

Holly Farms has sales of $581,600, costs of $479,700, depreciation expense of $32,100, and interest paid of $8,400. The tax rate is 42 percent. How much net income did the firm earn for the period? A. $25,788 B. 35,612 C. […]

Which one of the following statements is correct? A. Firms should generally finance all of their assets with long-term debt. B. Firms that follow restrictive financial policies can generally avoid short-term debt financing. C. Short-term borrowing is generally more expensive […]

Skyline Industries will need $1.8 million 5 years from now to replace some equipment. Currently, the firm has some extra cash and would like to establish a savings account for this purpose. The account pays 5.25 percent interest, compounded annually. […]

Scenario analysis asks questions such as: A. How will changing the number of units sold affect the outcome of this project? B. What is the best outcome that should reasonably be expected? C. How much will a $1 increase in […]

You are considering an investment for which you require a 14 percent rate of return. The investment costs $61,900 and will produce cash inflows of $26,000 for three years. Should you accept this project based on its internal rate of […]

The tax shield approach to computing the operating cash flow, given a tax-paying firm: A. ignores both interest expense and taxes. B. separates cash inflows from cash outflows. C. considers the changes in net working capital resulting from a new […]

Which one of the following statements is correct? A. The APR is equal to the EAR for a loan that charges interest monthly. B. The EAR is always greater than the APR. C. The APR on a monthly loan is […]

Which one of the following is an advantage of being a limited partner? A. Nontaxable share of any profits B. Control over the daily operations of the firm C. Losses limited to capital invested D. Unlimited profits without risk of […]

The average net income of a project divided by the projects average book value is referred to as the projects: A. required return. B. market rate of return. C. internal rate of return. D. average accounting return. E. discounted rate […]

Both Projects A and B are acceptable as independent projects. However, the selection of either one of these projects eliminates the option of selecting the other project. Which one of the following terms best describes the relationship between Project A […]

A negative cash flow to stockholders indicates a firm: A. had a negative cash flow from assets. B. had a positive cash flow to creditors. C. paid dividends that exceeded the amount of the net new equity. D. repurchased more […]

Which one of the following tends to be true for the average investor? A. They frequently earn initially high returns on IPOs when shares are undersubscribed. B. They generally receive their full allocation of shares even when an IPO is […]

The Priceville Bull Dogs offers credit terms of 2/15, net 40 to all of its customers. Historically, 80 percent of its customers take advantage of the discount. What is the firms average collection period? A. 17.60 days B. 17.87 days […]

Augustinos has the following estimated sales. Purchases are equal to 64 percent of the following quarters sales. The accounts receivable period is 45 days and the accounts payable period is 60 days. Assume there are 30 days in each month. […]

Browns Ferry Furniture Outlet has an accounts receivable period of 45 days and an accounts payable period of 96 days. The company turns over its inventory 2.8 times per year and marks up the inventory an average of 45 percent […]

Dividends are best defined as: A. cash payments to shareholders. B. cash payments to either bondholders or shareholders. C. cash or stock payments to shareholders. D. cash or stock payments to either bondholders or shareholders. E. distributions of stock to […]

Which one of the following statements related to the static theory of capital structure is correct? A. A firm begins to lose value as soon as the first dollar of debt is incurred. B. The actual value of a firm […]

A 5.5 percent $1,000 bond matures in seven years, pays interest semiannually, and has a yield to maturity of 6.23 percent. What is the current market price of the bond? A. $945.08 B. $947.21 C. $959.09 D. $959.60 E. $962.40 […]

Heidi owns 400 shares of Boyd Enterprises stock, which is valued at $17 a share. Boyd Enterprises just declared a 10 percent stock dividend. How many shares will Heidi own and what will the price per share be after the […]