1) Which of the statements below is FALSE?

A. Project A has a higher yaxis intercept for its NPV profile than mutually exclusive Project B. As long as the profile of Project A is above the profile of Project B, Project A will have a higher NPV value for that particular discount rate.

B. Project A has a higher yaxis intercept for its NPV profile than mutually exclusive Project B. As we proceed past the crossover rate to the right on the xaxis, Project B's profile will be above Project A's profile.

C.Project A has a higher yaxis intercept for its NPV profile than mutually exclusive Project B. This means that Project A has a lower NPV than Project B when the discount rate is zero.

D. Project A and Project B are mutually exclusive. The two projects intersect in terms of NPV at a discount rate labeled the crossover rate

2) One method a company may use to handle a cash shortfall is to draw cash from savings.

A) True

B) False

3) Harris Electronics bills its clients on the first of the month. For example, any sale made in the month of July is billed August 1 and is due September 1. Clients traditionally pay as follows: 50% by the end of the first month August), 40% by the end of the second month (September), 8% by the end of the third month (October), and 2% default on their bills. What is the dollar value of January billings collected in April?

First Quarter Sales -Jan $88,000 Feb $74,000 March $96,000

Second Quarter Sales - April $99,000 May $82,000 June $63,000

A. $29,600

B.$0.00

C.$7,040

D.$5,920

4) In terms of the float, the buyer of a product wants to ________ and the seller wants to ________.

A. increase the collection float; decrease the disbursement float

B. increase the disbursement float; decrease the collection float

C. decrease the collection float; decrease the disbursement float

D. decrease the disbursement float; decrease the collection float

5) Pacific Automotive has a $250,000 compensating balance loan with its bank. The terms of the loan call for Pacific to keep 10% of the loan as a compensating balance and pay interest at an annual rate of 6.50% on the entire amount. If the firm borrows the maximum amount for one year, what is the EAR on this loan?

A. 6.50%

B. 7.39%

C. 7.22%

D. 6.87%

6) Bestor Bookkeeping has a $150,000 compensating balance loan with its bank. The terms of the loan call for Bestor to keep 8% of the loan as a compensating balance and pay interest at an annual rate of 7.50% on the entire amount. If the firm borrows the maximum amount for one year, what is the EAR on this loan?

A. 8.15%

B. 7.50%

C. 8.67%

D. 8.35%

7) New York Investments (NYI), an investment banking firm, has proposed two types of payment plans for the IPO being considered by Albany Exploration. The first is a firm commitment of $40,000,000. The second is a best efforts arrangement in which NYI will receive $2.00 for every share sold up to a maximum of $3,600,000 for the 1,800,000 shares being offered. How much money will NYI earn under the firm commitment method if it is able to sell only 95% of the offering at a price of $25.00 per share?

a) $800,000

b) $1,080,000

c) $2,750,000

d) $2,200,000

7) Pacific Motors Inc. plans to issue $3,000,000 of commercial paper with a

6month maturity at 98% of par value. What is the EAR?

A.4.08%

B.4.12%

C.4.00%

D.2.00%

8) Often, in bankruptcy, the current managers continue to run the business while it operates under the reorganization plan, but the court may also appoint a trustee to oversee the operations and protect the rights of the claimants during this period of time.

True

False