| Question 2. 2. The interest rate expressed in terms of the interest payment made each period is called the _____ rate. (Points : 5) | stated annual interest compound annual interest effective annual interest periodic interest daily interest 3. Paying off long-term debt by making installment payments is called ________. (Points : 5) foreclosing on the debt amortizing the debt funding the debt calling the debt none of these | Question 4. 4. A portfolio of large company stocks would contain which one of the following types of securities? (Points : 5) | Stocks of the firms which represent the smallest 20% of the companies listed on the NYSE U.S. Treasury bills Long-term corporate bonds Stocks of firms included in the S&P 500 index Long-term government bonds | | Question 5. 5. Risk that affects at most a small number of assets is called _____ risk. (Points : 5) | portfolio nondiversifiable market unsystematic total | | Question 6. 6. The _____ premium is that portion of a nominal interest rate or bond yield that represents compensation for expected future overall price appreciation. (Points : 5) | default risk taxability liquidity inflation interest rate risk | | Question 7. 7. The present value of cash flows is important in ________. (Points : 5) | multiples analysis discounted cash flow analysis time series analysis growth projections none of these | | Question 8. 8. A bond that makes no coupon payments and is initially priced at a deep discount is called a _____ bond. (Points : 5) | treasury municipal floating-rate junk zero coupon | | Question 9. 9. ________ standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively. (Points : 5) | Tax reconciliation statement Statement of standardization Statement of cash flows Common-base year statement Common-size statement | | Question 10. 10. Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios. (Points : 5) | asset management long-term solvency short-term solvency profitability market value | | Question 11. 11. The person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the ________. (Points : 5) | treasurer director controller chairman of the board chief executive officer | | Question 12. 12. The long-term debts of a firm are liabilities ________. (Points : 5) | that come due within the next 12 months that do not come due for at least 12 months owed to the firm's suppliers owed to the firm's shareholders the firm expects to incur within the next 12 months | | Question 13. 13. Systematic risk is defined as ________. (Points : 5) | a risk that specifically affects an asset or small group of assets any risk that affects a large number of assets any risk that has a huge impact on the return of a security the random component of return none of these | | Question 14. 14. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model. (Points : 5) | zero growth dividend growth capital pricing earnings capitalization differential growth | | Question 15. 15. The average compound return earned per year over a multi-year period is called the _____ average return. (Points : 5) | arithmetic standard variant geometric real | | Question 16. 16. You spent $500 last week fixing the transmission in your car. Now, the brakes are acting up and you are trying to decide whether to fix them or trade the car in for a newer model. In analyzing the brake situation, the $500 you spent fixing the transmission is a(n) _____ cost. (Points : 5) | opportunity fixed incremental sunk relevant | | Question 17. 17. The highest effective annual rate that can be derived from an annual percentage rate of 9% is computed as ________. (Points : 5) | .09e 1 e.09 q e (1 + .09) e.09 1 (1 + .09)q | | Question 18. 18. The amount of loan a person or firm borrows from a lender is the: (Points : 5) | creditor indenture debenture principal amortization | | Question 19. 19. One of the reasons why cash flow analysis is popular is because ________. (Points : 5) | cash flows are more subjective than net income cash flows are hard to understand it is easy to manipulate, or spin the cash flows it is difficult to manipulate, or spin the cash flows none of these | | Question 20. 20. A company owning gold mines will probably have a _____ inflation beta because an ___ increase in inflation is usually associated with an increase in gold prices. (Points : 5) | negative; anticipated positive; anticipated negative; unanticipated positive; unanticipated None of these | | Question 21. 21. The formula for calculating beta is given by the dividing the ___________ of the stock with the market portfolio by the ___________ of the market portfolio. (Points : 5) | variance; covariance covariance; variance standard deviation; variance expected return; variance expected return; covariance | | Question 22. 22. If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, I, would result in a change in any security return of ___ I. (Points : 5) | 9.2 3.2 3.2 3.0 6.2 | | Question 23. 23. The characteristic line is graphically depicted as _________. (Points : 5) | the plot of the relationship between beta and expected return the plot of the returns of the security against the beta the plot of the security returns against the market index returns the plot of the beta against the market index returns none of these | 24. The internal rate of return tends to be ________. (Points : 5) easier for managers to comprehend than the net present value extremely accurate even when cash flow estimates are faulty ignored by most financial analysts used primarily to differentiate between mutually exclusive projects utilized in project analysis only when multiple net present values apply | Question 25. 25. Erosion can be explained as the ________. (Points : 5) | additional income generated from the sales of a newly added product loss of current sales due to a new project being implemented loss of revenue due to employee theft loss of revenue due to customer theft loss of cash due to the expenses required to fix a parking lot after a heavy rain storm | | Question 26. 26. A bond with semi-annual interest payments, all else equal, would be priced _________ than one with annual interest payments. (Points : 5) | higher lower the same it is impossible to tell either higher or the same | r < g a single period investment | Question 27. 27. The net present value of a growth opportunity, NPVGO, can be defined as _________. (Points : 5) | the initial investment necessary for a new project the net present value per share of an investment in a new project a continual reinvestment of earnings when 28. Which of the following are all components of the statement of cash flows? (Points : 5) Cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities Cash flow from operating activities, cash flow from investing activities, and cash flow from divesting activities Cash flow from internal activities, cash flow from external activities, and cash flow from financing activities Cash flow from brokering activities, cash flow from profitable activities, and cash flow from non-profitable activities None of these | Question 29. 29. Over the period of 1926 to 2011, small company stocks had an average return of ____%. (Points : 5) | 8.8 10.2 12.4 14.6 16.5 30. You are comparing two annuities which offer monthly payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first of each month while annuity B pays on the last day of each month. Which one of the following statements is correct concerning these two annuities? (Points : 5) Both annuities are of equal value today. Annuity B is an annuity due. Annuity A has a higher future value than annuity B. Annuity B has a higher present value than annuity A. Both annuities have the same future value as of ten years from today. | Question 31. 31. Consider a bond which pays 8% semiannually and has 8 years to maturity. The market requires an interest rate of 10% on bonds of this risk. What is this bond's price? (Points : 5) | $530.58 $891.62 $893.30 $3129.17 None of these | | Question 32. 32. Assume that the single factor APT model applies and a portfolio exists such that 2/3 of the funds are invested in Security Q and the rest in the risk-free asset. Security Q has a beta of 1.5. The portfolio has a beta of ________. (Points : 5) | 0.00 0.50 0.75 1.00 1.50 | | Question 33. 33. It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart? (Points : 5) | 83 years 1.14 years 1.83 years 2.14 years 2.83 years | | Question 34. 34. A firm has $450 in inventory, $700 in fixed assets, $210 in accounts receivable, $50 in accounts payable, and $60 in cash. What is the amount of the current assets? (Points : 5) | $510 $560 $600 $660 $720 | | Question 35. 35. Winslow, Inc. stock is currently selling for $40 a share. The stock has a dividend yield of 3.8%. How much dividend income will you receive per year if you purchase 500 shares of this stock? (Points : 5) | $152 $190 $329 $760 $1,053 | | Question 36. 36. Your firm has sales of $628,000 and cost of goods sold of $402,000. At the beginning of the year, your inventory was $31,000. At the end of the year, the inventory balance was $33,000. What is the inventory turnover rate? (Points : 5) | 11.23 times 12.56 times 18.60 times 19.63 times 29.06 times | | Question 37. 37. Catherine's Consulting has a net income of $1,400 and a total equity of $12,000. The debt-equity ratio is 1.0 and the plowback is 30%. What is the internal growth rate for Catherine's consulting? (Points : 5) | 1.6% 1.78% 1.98% 2.21% None of these | | Question 38. 38. Calhoun Computech used internal financing as a source of long-term financing for 80% of its total needs in 2011. The company borrowed an additional 15% of its total needs in the long-term debt markets in 2011. What were Calhoun's net new stock issues, in percentage terms, for 2011? (Points : 5) | 10% 5% 5% 10% 15% | | Question 39. 39. The Timberline firm expects a total cash need of $12,500 over the next 3 months. They have a beginning cash balance of $1,500, and cash is replenished when it hits zero. The fixed cost of selling securities to replenish cash balances is $3.50. The interest rate on marketable securities is 8% per annum. There is a constant rate of cash disbursement and no cash receipts during the month. What is the total opportunity cost for a month based on the firm's current practice? (Points : 5) | $5.00 $18.98 $27.92 $60.00 None of these | | Question 40. 40. If you have a choice to earn simple interest on $10,000 for three years at 8% or annually compounded interest at 7.5% for three years which one will pay more and by how much? (Points : 5) | Simple interest by $50.00 Compound interest by $22.97 Compound interest by $150.75 Compound interest by $150.00 None of these. | | Question 41. 41. The common stock of Grady Co. had an 11.25% rate of return last year. The dividend amount was $.70 a share which equated to a dividend yield of 1.5%. What was the rate of price appreciation on the stock? (Points : 5) | 1.50% 8.00% 9.75% 11.25% 12.75% | | Question 42. 42. A project has an initial cost of $2,100. The cash inflows are $0, $500, $900, and $700 over the next four years, respectively. What is the payback period? (Points : 5) | 1 year 2 years 3 years 4 years Never | | Question 43. 43. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt? Corporate tax rate: 34% Personal tax rate on income from bonds: 20% Personal tax rate on income from stocks: 0% (Points : 5) | $0.175 $0.472 $0.528 $0.825 None of these | | Question 44. 44. The systematic response coefficient for productivity, p, would produce an unexpected change in any security return of ____ P if the expected rate of productivity was 1.5% and the actual rate was 2.25%. (Points : 5) | 0.75% 0.75% 2.25% 2.25% 1.5% | | Question 45. 45. Phil's Carvings, Inc. wants to have a weighted average cost of capital of 9%. The firm has an after-tax cost of debt of 5% and a cost of equity of 11%. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital? (Points : 5) | .33 .40 .50 .60 .67 | | Question 46. 46. An investment is available that pays a tax-free 6%. The corporate tax rate is 30%. Ignoring risk, what is the pre-tax return on taxable bonds? (Points : 5) | 4.20% 6.00% 7.67% 8.57% None of these | | Question 47. 47. Holden Bicycles has 1,000 shares outstanding each with a par value of $0.10. If they are sold to shareholders at $10 each, what would the capital surplus be? (Points : 5) | $100 $900 $9,900 $10,000 $11,000 | | Question 48. 48. Bradley Snapp has deposited $6,000 in a guaranteed investment account with a promised rate of 6% compounded annually. He plans to leave it there for 4 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make? (Points : 5) | $2,397.00 $3,288.00 $6,321.32 $7,574.86 $8,857.59 | | Question 49. 49. Your firm has average daily receipts of $2,500. These receipts are available after 6 days on average. The interest rate that could be earned is .02% (.0002) per day. What is the approximate cost of the float per day? (Points : 5) | $2.50 $3.00 $30.00 $50.00 None of these | | Question 50. 50. Jamestown Ltd. currently produces boat sails and is considering expanding its operations to include awnings for homes and travel trailers. The company owns land beside its current manufacturing facility that could be used for the expansion. The company bought this land ten years ago at a cost of $250,000. Today, the land is valued at $425,000. The grading and excavation work necessary to build on the land will cost $15,000. The company currently owns some unused equipment valued at $60,000. This equipment could be used for producing awnings if $5,000 is spent for equipment modifications. Other equipment costing $780,000 will also be required. What is the amount of the initial cash flow for this expansion project? (Points : 5) | $800,000 $1,050,000 $1,110,000 $1,225,000 $1,285,000 | | | |
