1.Richardson Motors uses ten units of Part Number T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented below.

Direct materials

P2,000

Material handling (20% of direct material cost)

400

Direct labor

16,000

Manufacturing overhead (150% of direct labor)

24,000

Total manufacturing cost

P42 400

Material handling, which is not included in manufacturing overhead, represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. Richardson's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Simpson Castings, one of Richardson's reliable vendors, has offered to supply T305 at a unit price of P30,000.

Assume Richardson Motors is able to rent all idle capacity for P40,000 per month. If Richardson decides to purchase the ten units from Simpson Castings, Richardson's monthly cost for T305 would

a. increase P46,000.

b. Decrease P14,000

c. increase P36,000

d. increase P56,000.

e. Decrease P46,000

2.) Statement 1. Long-term bonds have more price risk but less reinvestment risk than short-term bonds.

Statement 2. If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less price risk.

a. Statement 2 is true.

b. Both statements are false.

c. Both statements are true.

d. Statement 1 is true.

3.) Wallace Corporation will be paying a dividend of P2.00 per common share next year. Historical data indicate Wallace's dividends grow at a steady rate of 5% per year, however this is expected to stop next year. The required rate of return for investing in such stock is 18%. The current value of one share of Wallace's common stock is

a. 15.38

b. 11.11

c. 16.15

d. 11.67

Cooper Industries is considering a project that would require an initial investment of P235,000. The project would result in cost savings of P70,110 annually for the next five years. The internal rate of return is:

a. 13%

b. 11%

c. 18%

d. 15%

I.the best capital structure is one that maximizes the intrinsic value / market price of the stock.

II.the best capital structure is one that maximizes the weighted average cost of capital.

III.the best capital structure is one that maximizes the earnings per share of stock.

IV.the best capital structure is one that minimizes the weighted average cost of capital.

Which of the following is(are) correct?

a. I, II and III only

b. I and IV only

c. I and III only

d. I, III and IV only