2 On January 1,2018, ASU's application for a patent was granted. Legal and registration costs incurred were $80,000. The patent legal life is 20 years. The manufacturing process will be useful to ASU for 10 years. 3. ASU spent $600,000 developing a new manufacturing process. patent, and it believes that its application will be successful. it has applied for a 4. ASU incurred $150,000 in successfully defending one of its patents in an infringemernt suit. The patent expires in five (5) years January 1,2018 December 31.2018 ASU paid Fort Valley Laboratories $500,000 for research and development work performed by Fort Valley under contract for ASU. The benefits are expected to last ten (10) years. January 1,2018 5. Multiple Choice Questions. 1. Investors want a return that satisfies the following expectations: A. A return for delaying consumption B. An additional return for taking a risk. C. An additional return for accepting dividends rather than capital gains D. Both A and B 2. Which of the following items is not normally considered to be a current asset? A. Accounts Receivable B. Inventory C. Bonds D. Cash Global corp. has cash of $75,000, short-term notes payable of $100,000, account receivable of $275,000, accounts payable of $135,000, inventories of $350,000 and accrued expenses of $75,000. What is Global Corp's net operating working Capital? 3. A. $490,000 B. $390,000 C. $700,000 D. $210,000 4. The current ratio of ASU corporation would be increased by which of the following? A. B. C. D. Land held for investment is sold for cash. Equipment is purchased, financed by a long-term debt issue. Inventories are sold for cash. Inventories are sold on a credit basis You are considering an investment in a US Treasury bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%, inflation is expected to be 1.5%, the maturity risk premium is 2.5% and the default risk premium for AAA rated corporate bonds is 3.5%, what rate of interest should the US treasury bond pay? 5. A, 8.5% B. 6.0% C. 5.0% Inventory Bonds Cash al corp. has cash of $75,000, short-term notes payable of $100,000, account receivable of 5,000, accounts payable of $135,000, inventories of $350,000 and accrued expenses of $75,000. at is Global Corp's net operating working Capital? A. $490,000 B. $390,000 C. $700,000 D. $210,000 The current ratio of ASU corporation would be increased by which of the following? A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue C. Inventories are sold for cash. D. Inventories are sold on a credit basis You are considering an investment in a US Treasury bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%, inflation is expected to be 1.5%, the maturity risk premium is 2.5% and the default risk premium for AAA rated corporate bonds is 3.5%, what rate of interest should the US treasury bond pay? A. 8.5% B. 6.0% C. 5.0% Williams corporation has a current ratio equal to 3, quick ratio equal to 1.8 and total current assets of $6 million. Williams' inventory balance is nM IsionsniR to noitsbnuo 6. A. $2,000,000 B. $2,400,000 C. $4,000,000 D. $4,800,000 7, Andrew now has $500. How much would he have after 6 years if he leaves it invested at 5.5% with annual compounding? A. $591.09 B. $622.20 C. $654.95 D. $689.42 8. Suppose you have $2,000 and plan to purchase a ten year certificate of deposit that pays 6.5% interest compounded annually. How much will you have when the CD matures? A. $3,754.27 B. $3,941.99 C. $4,139.09 D. $4,346.04 9. The following are the cashflows from a $60,000 investment: Yr. 1-$15,000, Yr. 2-$12,000, Yr. 3- $20,000, Yr. 4-$10,000, Yr. 5-$8,000. What is the payback for this investment? A. 5.4 Years B. 2.45 Years C. 4.5 Years D. 5.0 Years 10. At maturity, the value of a bond must A. Be greater than its market value B. Be less than its market value C. Be equal to its par value D. Be amortized 11. A 10 years, 9% annual compound bond sells for $887 and has a face value of $1,000. The current yield will be A. 15.10% B. 10.15% C. 0.76% D. D 10.76%