1.)What is the present value of a growing perpetuity that makes a payment of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.

• $ 2,000
• $ 3,500
• $ 2,500
• $ 4,000

2.) The phenomenon of compounding connotes which of the following?

• Investment of principal for a prolonged period
• Interest earned over a prolonged period
• Earning income on previously earned income
• Rising interest rates over time

3.) Biases can and should always be eliminated in financial forecasts.

• True
• False

4.) Which of the following is commonly forecasted as a percent of sales:

• Common stock
• Gross profit
• Long-term debt
• Revolving credit

5.) A project with an internal rate of return greater than the cost of capital should always be accepted.

• True
• False

6.) Which of the following ratios appears on a common-size balance sheet?

I. Debt to asset ratio

II. Net working capital to total assets

III. Net profit margin

• I , II, III
• I only
• I and III
• III only

7.) The cash conversion cycle is calculated as:

• Days in Inventory + Collection Period
• Days in Inventory - Payables Period
• Days in Inventory + Collection Period - Payables Period
• None of the above

8.)

A company has net working capital of $0, current liabilities of $25 and total assets equal to $100. What is its current ratio?

• 0.0
• 1.0
• 0.5
• 4.0

9.) The sustainable growth rate is the maximum growth rate achievable over an extended period of time.

• True
• False

10.) Common-size financial statements are constructed in order to:

• Adjust for inflation and risk
• Facilitate comparisons of different-sized companies
• To comply with SEC requirements
• All of the above

11.) Enterprise Free Cash Flows should include which of the following:

I. Capital expenditures

II. Financing costs

III. Taxes

IV. Working capital requirements

• I and IV
• I, II and IV
• I , III and IV
• I, II, III, IV

12.) GoodTimes, Inc. has asset turnover of 0.5 times, a net profit margin of 10% and average total assets of $100, what is its net income (assuming no unusual items)?

• $50
• $500
• $5
• The answer cannot be determined with the information provided.

13.)In general, an increase in a liability is a source of funds.

• True
• False

14.)A perpetuity is a stream of cash flows that lasts forever.

• True
• False