1. The firm factors its accounts receivables immediately at a discount rate of 2 percent. The average collection period is one month. Assume all accounts are collected in full. What is the effective annual interest rate on this arrangement?

a) 21.92%

b) 24%

c) 24.49%

d)26.82%

e)27.43%

2. Company A is considering a merger with Company B. A has 43,000 shares outstanding at a market price of $32 a share. B has 12,800 shares outstanding priced at $44 a share. The merger is expected to create $5,400 of synergy. What will be the total value of the merged firm?

a) $563,200

b) $1,933,800

c) $1,376,000

d) $1,944,600

e) $1,939,200

3. The firm is an all-equity firm with assets worth $512,000 and 64,000 shares outstanding. It plans to borrow $120,000 and use these funds to repurchase shares. The firms marginal corporate tax is 21%, and it plans to keep its outstanding debt equal to $120,000 permanently. If the firm plan to repurchase shares at $9 per share, what is the expected per share value of equity for the leveraged firm?

a) $8 per share

b) $8.23 per share

c) $8.59 per share

d) $10.45 per share

e) repurchase will not be successful because the firm's offer is too low

4. Which one of the following statements is correct?

a) Marketable securities are generally low-risk, high-return investments.

b) The rate of return earned on short-term securities tends to exceed that earned on long-term securities.

c) The income earned on U.S. Treasury bills is exempt from all taxation.

d) Short-term investments tend to have high levels of default risk.

e) U.S. Treasury bills are highly liquid in terms of secondary market liquidity.