Archives: Quiz

A trader has just agreed to exchange $2 million U.S. dollars for $1.55 million Euros six months from today. This exchange is an example of a: A. spot trade. B. forward trade. C. currency swap. D. floating swap. E. triangle […]

The most recent financial statements for Moose Tours, Inc. follow. Sales for 2009 are projected to grow by 16 percent. Interest expense will remain constant; the tax rate and dividend payout rate will also remain constant. Costs, other expenses, current […]

Which one of the following variables is the exponent in the present value formula? A. present value B. future value C. interest rate D. time E. There is no exponent in the present value formula. According to the Statement of […]

The common stock of United Industries has a beta of 1.34 and an expected return of 14.29 percent. The risk-free rate of return is 3.7 percent. What is the expected market risk premium? A. 7.02 percent B. 7.90 percent C. […]

Morrison Industrial Tool can either lease or buy some equipment. The lease payments would be $12,400 a year. The purchase price is $34,900. The equipment has a 3-year life after which it is expected to have a resale value of […]

An analysis of the change in a project’s NPV when a single variable is changed is called _____ analysis. A. forecasting B. scenario C. sensitivity D. simulation E. break-even The final decision on which one of two mutually exclusive projects […]

Jill is the CFO of Summertime Adventures which is a seasonal firm specializing in products related to water sports. The firm purchases inventory one month before it is sold and pays for its purchases 60 days after the invoice date. […]

Which of the following statements are correct concerning warrants? I. Warrants are similar to put options. II. Warrants are similar to call options. III. When a warrant is exercised, the issuer is not involved in the transaction. IV. When a […]

The delta of a call option on a firm’s assets is 0.767. This means that a $50,000 project will increase the value of equity by: A. $21,760. B. $25,336. C. $38,350. D. $54,627. E. $65,189. You observe that the inflation […]

An investment project provides cash flows of $1,190 per year for 10 years. If the initial cost is $8,000, what is the payback period? A. 3.36 years B. 5.28 years C. 6.72 years D. 8.13 years E. never To convince […]

Which one of the following is most indicative of a totally efficient stock market? A. extraordinary returns earned on a routine basis B. positive net present values on stock investments over the long-term C. zero net present values for all […]

Recently, you discovered a putable income bond that is convertible. If you purchase this bond, you will have the right to do which of the following? I. force the issuer to repurchase the bond prior to maturity II. choose when […]

We are examining a new project. We expect to sell 9,000 units per year at $45 net cash flow apiece for the next 20 years. In other words, the annual operating cash flow is projected to be $45 × 9,000 […]

Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.7119. The expected inflation rate in Norway is 4 percent and in the U.S. 3 percent. A risk-free asset in the U.S. is yielding 4.5 percent. What approximate […]

Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March and September. The bonds are investment grade and sell at par. The bonds are callable at a price equal to the present value of […]

Which one of the following terms is applied to the financial planning method which uses the projected sales level as the basis for determining changes in balance sheet and income statement account values? A. percentage of sales method B. sales […]

Steve just computed the present value of a $10,000 bonus he will receive in the future. The interest rate he used in this process is referred to as which one of the following? A. current yield B. effective rate C. […]

Incorporating flotation costs into the analysis of a project will: A. cause the project to be improperly evaluated. B. increase the net present value of the project. C. increase the project’s rate of return. D. increase the initial cash outflow […]

The items included in an indenture that limit certain actions of the issuer in order to protect bondholder’s interests are referred to as the: A. trustee relationships. B. bylaws. C. legal bounds. D. “plain vanilla” conditions. E. protective covenants. Which […]

Precise Machining is considering a rights offer. The company has determined that the ex-rights price would be $46. The current price is $53 per share, and there are 7 million shares outstanding. The rights offer would raise a total of […]

You invested $1,650 in an account that pays 5 percent simple interest. How much more could you have earned over a 20-year period if the interest had compounded annually? A. $849.22 B. $930.11 C. $982.19 D. $1,021.15 E. $1,077.94 The […]

An 8 percent corporate bond that pays interest semi-annually was issued last year. Which two of the following most likely apply to this bond today if the current yield-to- maturity is 7 percent? I. a structure as an interest-only loan […]

A financial lease: A. is generally called a capital lease by accountants. B. requires the lessor to maintain the asset. C. is a partially amortized lease. D. is often called a single net lease. The accounting manager of Gateway Inns […]

The standard deviation of a portfolio: A. is a weighted average of the standard deviations of the individual securities held in the portfolio. B. can never be less than the standard deviation of the most risky security in the portfolio. […]

What is the effective annual rate if a bank charges you 9.50 percent compounded quarterly? A. 9.62 percent B. 9.68 percent C. 9.72 percent D. 9.84 percent E. 9.91 percent How many dollars of sales are being generated from every […]

Which one of the following has the greatest tendency to increase the percentage of debt included in the optimal capital structure of a firm? A. exceptionally high depreciation expenses B. very low marginal tax rate C. substantial tax shields from […]

Denver Shoppes will pay an annual dividend of $1.46 a share next year with future dividends increasing by 4.2 percent annually. What is the market rate of return if the stock is currently selling for $38.90 a share? A. 6.55 […]

Crystal Glass recently paid $3.60 as an annual dividend. Future dividends are projected at $3.80, $4.10, and $4.25 over the next 3 years, respectively. Beginning 4 years from now, the dividend is expected to increase by 3.25 percent annually. What […]

Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within […]

The Miller-Orr model assumes that: A. the cash balance is depleted at regular intervals. B. all cash flows are known with certainty. C. the average change in the daily cash flows is positive. D. management will set both the lower […]

An ordinary annuity is best defined by which one of the following? A. increasing payments paid for a definitive period of time B. increasing payments paid forever C. equal payments paid at regular intervals over a stated time period D. […]

Jenningston Mills has a market value equal to its book value. Currently, the firm has excess cash of $1,200, other assets of $5,800, and equity valued at $3,750. The firm has 250 shares of stock outstanding and net income of […]

Which one of the following statements correctly applies to U.S. industrial firms based on the period of 1984 -2004? A. Earnings growth rates tend to lag dividend growth rates. B. Dividends tend to fluctuate significantly from quarter to quarter. C. […]

Which of the following are advantages of the corporate form of business ownership? I. limited liability for firm debt II. double taxation III. ability to raise capital IV. unlimited firm life A. I and II only B. III and IV […]

The optimal investment in current assets for an operating firm occurs at the point where: A. both shortage costs and carrying costs equal zero. B. shortage costs are equal to zero. C. carrying costs are equal to zero. D. carrying […]

Rackin Pinion Corporation’s assets are currently worth $1,260. In one year, they will be worth either $1,200 of $1,610. The risk-free interest rate is 5 percent. Suppose Rackin Pinion has an outstanding debt issue with a face value of $1,200. […]

Zylo, Inc. preferred stock pays a $7.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock today if your required return is 9.75 percent? A. $32.26 B. $35.48 C. $72.68 D. […]

Fama’s Llamas has a weighted average cost of capital of 10.5 percent. The company’s cost of equity is 15.5 percent, and its pretax cost of debt is 8.5 percent. The tax rate is 34 percent. What is the company’s target […]

The length of time a firm must wait to recoup the money it has invested in a project is called the: A. internal return period. B. payback period. C. profitability period. D. discounted cash period. E. valuation period. Princeton Enterprises […]

Which one of the following capital intensity ratios indicates the largest need for fixed assets per dollar of sales? A. 0.70 B. 0.86 C. 1.00 D. 1.06 E. 1.15 Sales can often increase without increasing which one of the following? […]

According to the Statement of Cash Flows, an increase in interest expense will _____ the cash flow from _____ activities. A. decrease; operating B. decrease; financing C. increase; operating D. increase; financing E. increase; investment Sessler Manufacturers made two announcements […]

Which one of the following statements is true? A. Market crashes tend to be accompanied by low market volume. B. The Asian market crash was followed by a quick recovery. C. The market crash of 1929 and the crash of […]

Which one of the following will generally have the highest priority when assets are distributed in a bankruptcy proceeding? A. consumer claim B. dividend payment to preferred shareholder C. company contribution to the employees’ retirement account D. payment to an […]

Which one of the following risks would a floating-rate bond tend to have less of as compared to a fixed-rate coupon bond? A. real rate risk B. interest rate risk C. default risk D. liquidity risk E. taxability risk Which […]

Which one of the following best states the primary goal of financial management? A. maximize current dividends per share B. maximize the current value per share C. increase cash flow and avoid financial distress D. minimize operational costs while maximizing […]

Today, you are retiring. You have a total of $411,016 in your retirement savings and have the funds invested such that you expect to earn an average of 7.10 percent, compounded monthly, on this money throughout your retirement years. You […]

Which of the following are inversely related to variable costs per unit? I. contribution margin per unit II. number of units sold III. operating cash flow per unit IV. net profit per unit A.I and II only B.III and IV […]

Typically, the primary difference between interviewing and interrogating a subject is: a.Miranda rights are read prior to interrogating. b.Miranda rights are read prior to interviewing. c.Interviewing always occurs with a lawyer present. d.Interrogating always takes place at a police station. […]

Describe the parameters set forth in Section 203 of SOX in regards to the Rotation of Auditing Partners. Describe the fraud detection process. Answer: The fraud detection process involves identifying indicators of fraud that suggest a need for further investigation. […]

In which way does the AICPA support Forensic Accountants? a.Through its Forensic Accountants division. b.Through its Business Valuation and Forensic & Litigation Services section. c.Through its credentialing of Forensic Accountants. d.The AICPA does not support Forensic Accountants. Define alternative dispute […]