Archives: Quiz

Financial Management, 12e (Titman/Keown/Martin) Chapter 18 Working Capital Management 18.1 Working Capital Management and the Risk-Return Tradeof 1) An increase in ________ would increase net working capital. A) plant and equipment B) accounts payable C) accounts receivable D) both B […]

25) Home to House Distributors is preparing a cash budget. The initial conclusion is that the irm will need to borrow more money than its bank is willing to lend. Which of the following actions could Home to House Distributors […]

7) The function of a budget includes to A) indicate the amount and time of future inancing needs. B) provide a basis for corrective action. C) provide information for performance evaluations. D) all of the above. Question Status: Previous edition […]

Answer: TRUE Dif: 2 AACSB: 3. Analytic thinking Question Status: Previous edition Objective: 17.2 Use the percent of sales method to forecast the inancing requirements of a irm, including its discretionary inancial needs. Keywords: percent of sales method Principles: Principle […]

16) Assume that Gatsby Enterprises has sales of $83 million and ixed assets of $22.4 million in 2013. The corporation utilizes the percent-of-sales method of inancial forecasting. If Gatsby is expected to generate sales of $94 million in 2014, what […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 17 Financial Forecasting and Planning 17.1 An Overview of Financial Planning 1) Types of plans that businesses typically use to guide their operations include A) strategic plans. B) long-range inancial plans. C) short-range inancial plans. […]

18) According to the residual theory of dividends A) dividends are to be paid out only after investment inancing needs have been met. B) earnings remaining after payment of preferred stock dividends should be paid to common stockholders. C) dividend […]

50) Trevor Co.’s future earnings for the next four years are predicted below. Assuming there are 500,000 shares outstanding, what will the yearly dividend per share be if the dividend policy is as follows? a. A constant payout ratio of […]

16) Which of the following reasons is used to justify stock repurchases? A) The repurchase narrows ownership. B) The repurchase modiies the irm’s capital structure. C) The repurchase reduces the irm’s costs associated with servicing small stockholders. D) All of […]

31) The ex-dividend date occurs prior to the declaration date. Question Status: Previous edition Objective: 16.1 Distinguish between the use of cash dividends and share repurchases. Keywords: dividend policy Principles: Principle 4: Market Prices Relect Information 32) Dividends tend to […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 16 Dividend Policy 16.1 Do Firms Distribute Cash to Their Shareholders? 1) In response to a temporary decline in earnings per share, most companies would A) decrease their cash dividend. B) not decrease their cash […]

15) Zybeck Corp. projects operating income of $4 million next year. The irm’s income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no […]

40) In the original version of the Modigliani and Miller capital structure theorem, as a irm increases the amount of debt in its capital structure, the cost of equity will rise but the cost of capital will remain the same. […]

7) An optimal capital structure is achieved A) when a irm’s expected proits are maximized. B) when a irm’s expected EPS are maximized. C) when a irm’s break-even point is achieved. D) when a irm’s weighted average cost of capital […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 15 Capital Structure Policy 15.1 A Glance at Capital Structure Choices in Practice 1) The irm’s optimal capital structure is the mix of inancing sources that A) minimizes the risk of inancial distress. B) maximizes […]

9) Which of the following is a good reason to use divisional costs of capital? A) Division managers have no vested interest in underestimating the capital costs associated with their division. B) Divisional costs of capital reduce are relatively easy […]

7) How frequently do most irms update their cost of capital? A) Rarely, if ever B) At least once a year C) Daily D) Only when there are major changes in the irm’s capital structure Question Status: Previous edition Objective: […]

31) Given the following information, determine the risk-free rate. Cost of equity = 12% Beta = 1.50 Market risk premium = 6% A) 6.0% B) 3.0% C) 9.0% D) 6.5% Question Status: Revised Objective: 14.3 Calculate the after-tax cost of […]

14.3 Estimating the Cost of Individual Sources of Capital 1) PVE, Inc. has $15 million of debt outstanding with a coupon rate of 9%. Currently, the yield to maturity on these bonds is 7%. If the irm’s tax rate is […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 14 The Cost of Capital 14.1 The Cost of Capital: An Overview 1) In order to maximize irm value, management should invest in new assets when cash lows from the assets are discounted at the […]

35) Year 0 Year 0 Year 1 Year 2 Revenue $15,000 $15,000 Variable Cost ($5,000) ($5,000) Depreciation ($200) ($200) Fixed Cost ($350) ($350) Operating Income $9,450 $9,450 Taxes at 30% ($2,835) ($2,835) NOPAT $6,615 $6,615 Capital Investment ($5,753) Free Cash […]

4) Betty Gilmore plans to sell berry pies at a local farmer’s market. The permit and space rental will cost her $2,000 for the June through August season. The pies will sell for $7.00. Ingredients and overhead average $4.00 per […]

18) Boulangerie Boufard expects to sell 1 million croissants next year for $1.25 each. Variable cost of a croissant is $0.75. Fixed costs are $150,000, depreciation $200,000 and the tax rate is 25%. If the bakery can increase the price […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 13 Risk Analysis and Project Evaluation 13.1 The Importance of Risk Analysis 1) Which of the following is a reason why risk analysis is an important part of capital budgeting? A) The people who propose […]

6) National Geographic is replacing an old printing press with a new one. The old press is being sold for $350,000 and it has a net book value of $75,000. Assume that National Geographic is in the 40% income tax […]

60) What is the advantage, if any, to using MACRS rather than straight line depreciation? Question Status: Previous edition Objective: 12.2 Calculate and forecast project cash lows for expansion type projects. Keywords: incremental cash lows Principles: Principle 3: Cash Flows […]

26) Burr Habit Corporation is considering a new product line. The company currently manufactures several lines of snow skiing apparel. The new products, insulated ski shorts, are expected to generate sales less cost of goods sold of $1 million per […]

35) Anderson-EOG Inc. is evaluating the construction of a gas pipeline to bring natural gas from Western New York state to New York City. The controller argues that depreciation has to be included among the expenses. The Treasurer argues that […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 12 Analyzing Project Cash Flows 12.1 Identifying Incremental Cash Flows 1) Incremental cash lows from a project = A) Firm cash lows without the project plus or minus changes in net income. B) Firm cash […]

53) Black Friday Inc. has estimated the following cash lows for a project it is considering: Period Cash Flow 0 ($150,000) 1 $70,000 2 $80,000 3 ($100,0000) a. What is the payback period for this project? b. What is the […]

32) Aroma Candles, Inc. is evaluating a project with the following cash lows. Calculate the IRR of the project. (Round to the nearest whole percentage.) YearCash Flows 0 ($120,000) 1 $30,000 2 $70,000 3 $90,000 A) 18% B) 23% C) […]

8) Project Black Swan requires an initial investment of $115,000. It has positive cash lows of $140,000 for each of the next two years. Because of major demolition and environmental clean-up costs, cash low for the third and inal year […]

18) Which of the following is a correct equation to solve for the NPV of the project that has an initial outlay of $30,000, followed by incremental cash inlows in the next 3 years of $15,000, $20,000, and $30,000? Assume […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 11 Investment Decision Criteria 11.1 An Overview of Capital Budgeting 1) Which of the following are typical consequences of good capital budgeting decisions? A) The irm increases in value. B) The irm gains knowledge and […]

22) An issue of preferred stock currently sells for $52.50 per share and pays a constant annual expected dividend of $2.25 per share. The expected return on this security is A) 4.29%. B) 0.04%. C) 8.33%. D) 13.33%. Question Status: […]

10) Apple stock is now selling for $460 per share. The P/E ratio based on current earnings is 10.98 and the P/E ratio based on expected earnings is 10.16. The expected growth rate in Apples earnings must be A) 2.39%. […]

30) The shareholder can cast all votes for a single candidate or split them among various candidates through A) proxy ights. B) cumulative voting. C) call provisions. D) majority voting. Question Status: Previous edition Objective: 10.1 Identify the basic characteristics […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 10 Stock Valuation 10.1 Common Stock 1) The XYZ Company, whose common stock is currently selling for $40 per share, is expected to pay a $2.00 dividend in the coming year. If investors believe that […]

9.4 Types of Bonds 1) Eurobonds are A) issued in a country diferent from the one in whose currency the bond is denominated. B) issued only in Europe. C) the European equivalent of a junk bond. D) none of the […]

55) Garvin, Inc.’s bonds have a par value of $1,000. The bonds pay semiannual interest of $40 and mature in ive years. a. How much would you pay for Garvin bonds if your required rate of return is 10%? b. […]

15) Bond ratings directly afect a bond’s A) spread over the Treasury yield. B) coupon rate. C) maturity date. D) call provisions. Question Status: New question Objective: 9.2 Calculate the value of a bond and relate it to the yield […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 9 Debt Valuation and Interest Rates 9.1 Overview of Corporate Debt 1) The par value of a bond A) never equals its market value. B) is determined by the investor. C) generally is $1,000. D) […]

15) Marjen stock has a required return of 20%. The expected market return is 15%, and the beta of Marjen’s stock is 1.5. Calculate the risk-free rate. A) 4% B) 5% C) 6% D) 7% Question Status: Previous edition Objective: […]

31) Unsystematic risk can be eliminated through diversiication. Question Status: Previous edition Objective: 8.2 Understand the concept of systematic risk for an individual investment and calculate portfolio systematic risk (beta). Keywords: beta Principles: Principle 2: There Is a Risk-Return Tradeof […]

32) You are considering a portfolio consisting of equal investments in the stocks Northbank Inc. and Tropical Escapes Inc. Returns on the 2 stocks under various conditions are shown below. Scenario Return (%) Return % Return % Probability Northbank Tropical […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 8 Risk and Return-Capital Market Theory 8.1 Portfolio Returns and Portfolio Risk 1) Which of the following portfolios is clearly preferred to the others? Expected Standard Return Deviation A 14% 12% B 22% 20% C […]

7.3 Geometric vs. Arithmetic Average Rates of Return 1) Marcus Berger invested $9842.33 in Hawkeyehats, Inc. four years ago. He sold the stock today for $11,396.22. What is his geometric average return? A) 2.98% B) 3.73% C) 3.95% D) There […]

Financial Management, 12e (Titman/Keown/Martin) Chapter 7 An Introduction to Risk and Return-History of Financial Market Returns 7.1 Realized and Expected Rates of Return and Risk 1) You purchased the stock of Sargent Motors at a price of $75.75 one year […]

15) Assume that two investments have a three-year life and generate the cash lows shown below. Which of the two would you prefer? Year Investment A Investment B 1 $5,000 $8,000 2 $5,000 $5,000 3 $5,000 $2,000 A) Investment A, […]

6.3 Complex Cash Flow Streams 1) What is the value on 1/1/14 of the following cash lows? Use a 10% discount rate, and round your answer to the nearest $1.00. Date Cash Received Amount of Cash 1/1/16 $100 1/1/17 $200 […]