20. A bank has determined that its marginal cost of raising funds is 4.5 percent and that its nonfunds costs to the bank are 0.5 percent. It has also determined that its margin to compensate the bank for default risk for a particular customer is 0.30 percent. It has also determined that it wants to have a profit margin of 0.3 percent. If this customer wants to borrow $10,000,000, how much in total interest costs will this customer pay in one year?

A. $450,000 B. $480,000 C. $510,000 D. $560,000

21. A bank has a prime rate of 6 percent for its best customers. It has determined that the default risk premium for a particular customer is 0.4 percent and the term-risk premium for this loan is 0.25 percent. If this customer wants to borrow $5.0 million from the bank, how much in interest will this customer pay in one year?

A. $332,500 B. $665,000 C. $300,000 D. $320,000

22. A bank has determined the information below for one of its customers. This customer wants to borrow $1,000,000 but will maintain an average deposit balance in its account of $200,000. What is the expected net rate of return on this loan?

A. 10.00 percent B. 8.20 percent C. 10.25 percent D. 13.75 percent

23. Hager Smith, a customer of Standard Bank, maintains an average balance of $420,000. The float from uncollected funds from his balance, accounts for $21,000. The applicable legal reserve requirement at this checking account is 10 percent. Determine Smith's net usable funds.

A. $359,100 B. $396,900 C. $378,000 D. $399,000

24. A firm submits their financial records to a bank. Upon examination, the bank discovers that this firm has $500 in cash, $2,500 in accounts receivables, $1,000 in inventory, $5,000 in plant and equipment, and that their assets totaled $9,000. In addition, this bank discovered that the firm had $2,000 in current liabilities, $2,500 in long-term debt, and $4,500 in net worth. Finally, this bank discovered that this firm had $20,000 in net sales and $2,000 in net income. What is this firm's net profit margin?

A. 10.00 percent B. 22.22 percent C. 44.44 percent D. 50.00 percent

25. A firm submits their financial records to a bank. Upon examination, the bank discovers that this firm has $500 in cash, $2,500 in accounts receivables, $1,000 in inventory, $5,000 in plant and equipment and that their assets totaled $9,000. In addition this bank discovered that the firm had $2,000 in current liabilities, $2,500 in long-term debt, and $4,500 in net worth. Finally, this bank discovered that this firm had $20,000 in net sales (all of which are on credit) and $2,000 in net income. What is this firm's average collection period?

A. 18days B. 45 days C. 72 days D. 162 days

26. A firm submits their financial records to a bank. Upon examination, the bank discovers that this firm has $500 in cash, $2,500 in accounts receivables, $1,000 in inventory, $5,000 in plant and equipment and that their assets totaled $9,000. In addition this bank discovered that the firm had $2,000 in current liabilities, $2,500 in long-term debt, and $4,500 in net worth. Finally, this bank discovered that this firm had $20,000 in net sales and $2,000 in net income. What is this firm's net working capital?

A. $9,000 B. $4,500 C. $4,000 D. $2,000

27. A firm submits their financial records to a bank. Upon examination, the bank discovers that this firm has $500 in cash, $2,500 in accounts receivables, $1,000 in inventory, $5,000 in plant and equipment and that their assets totaled $9,000. In addition this bank discovered that the firm had $2,000 in current liabilities, $2,500 in long-term debt, and $4,500 in net worth. Finally this bank discovered that this firm had $20,000 in net sales and $2,000 in net income. What is this firm's leverage ratio?

A. 22.50 percent B. 44.44 percent C. 50.00 percent D. 88.89 percent

28. A firm submits their financial records to a bank. Upon examination, the bank discovers that this firm has $500 in cash, $2,500 in accounts receivables, $1,000 in inventory, $5,000 in plant and equipment and that their assets totaled $9,000. In addition this bank discovered that the firm had $2,000 in current liabilities, $2,500 in long-term debt, and $4,500 in net worth. Finally this bank discovered that this firm had $20,000 in net sales and $2,000 in net income. What is this firm's acid test ratio?

A. 1.00 times B. 2.00 times C. 1.50 times D. 3.00 times

29. A firm has net sales of $25,000, costs of goods sold of $10,000, selling, general and administrative expenses of $8,000 (of which $2,000 are depreciation expenses), and taxes (in cash) of $3,000. What is this firm's operating cash flow (using the traditional or direct method)?

A. $4,000 B. $15,000 C. $6,000 D. $8,000

30. A bank has a listed prime rate of 7 percent. They have estimated that the marginal cost of raising funds is 5 percent, their default risk premium on a loan is 1.5 percent and that they want a profit margin of 2 percent. They have also estimated that the term risk premium is 0.5 percent. What is the interest rate this bank will charge if they use the price leadership model (and the prime rate is their base rate)?

A. 8.5 percent B. 9 percent C. 12 percent D. 9.5 percent