1. An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?

		Put
		Naked
		Covered
		Out-of-the-money
		In-the-money

1. Aubey Aircraft recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance?

		The company's operating income declined.
		The company's expenditures on fixed assets declined.
		The company's cost of goods sold increased.
		The company's depreciation and amortization expenses declined.
		The company's interest expense increased.

1. Brinkley Resources stock has increased significantly over the last five years, selling now for $175 per share. Management feels this price is too high for the average investor and wants to get the price down to a more typical level, which it thinks is $25 per share. What stock split would be required to get to this price, assuming the transaction has no effect on the total market value? Put another way, how many new shares should be given per one old share?

		6.65
		6.98
		7.00
		7.35
		7.72

1. Bloome Co.'s stock has a 25% chance of producing a 30% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -18% return. What is the firm's expected rate of return?

		7.72%
		8.12%
		8.55%
		9.00%
		9.50%

1. Assume that your cousin holds just one stock, Eastman Chemical Bonding (ECB), which he thinks has very little risk. You agree that the stock is relatively safe, but you want to demonstrate that his risk would be even lower if he were more diversified. You obtain the following returns data for Wilder's Creations and Buildings (WCB). Both companies have had less variability than most other stocks over the past 5 years. Measured by the standard deviation of returns, by how much would your cousin's risk have been reduced if he had held a portfolio consisting of 60% in ECB and the remainder in WCB? (Hint: Use the sample standard deviation formula.)

			Year	ECB	WCB
			2007	40.00%	40.00%
			2008	-10.00%	15.00%
			2009	35.00%	-5.00%
			2010	-5.00%	-10.00%
			2011	15.00%	35.00%
Average return =				15.00%	15.00%
Standard deviation =				22.64%	22.64%
		3.29%
		3.46%
		3.65%
		3.84%
		4.03%

1. Barnes' Brothers has the following data for the year ending 12/31/12: Net income = $600; Net operating profit after taxes (NOPAT) = $700; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Total operating capital = $2,100. Barnes' weighted average cost of capital is 10%. What is its economic value added (EVA)?

		$399.11
		$420.11
		$442.23
		$465.50
		$490.00

1. A venture capital investment group received a proposal from Wireless Solutions to produce a new smart phone. The variable cost per unit is estimated at $250, the sales price would be set at twice the VC/unit, fixed costs are estimated at $750,000, and the investors will put up the funds if the project is likely to have an operating income of $500,000 or more. What sales volume would be required in order to meet this profit goal?

		4,513
		4,750
		5,000
		5,250
		5,513

1. Billy Thornton borrowed $20,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Billy have to pay in a 30-day month?

		$120.83
		$126.88
		$133.22
		$139.88
		$146.87

1. Barette Consulting currently has no debt in its capital structure, has $500 million of total assets, and its basic earning power is 15%. The CFO is contemplating a recapitalization where it will issue debt at a cost of 10% and use the proceeds to buy back shares of the company's common stock, paying book value. If the company proceeds with the recapitalization, its operating income, total assets, and tax rate will remain unchanged. Which of the following is most likely to occur as a result of the recapitalization?

		The ROA would remain unchanged.
		The basic earning power ratio would decline.
		The basic earning power ratio would increase.
		The ROE would increase.
		The ROA would increase.