47.) To determine the present value of a future amount, one should ________ the future cash flows.

A) annuitize

B) compound

C) discount

D) multiply

48.) Earnings per share is the ________.

A) price per share divided by the earnings per share

B) net income divided by the number of outstanding shares

C) market value per shares divided by the book value per share

D) P/E ratio divided by the earnings growth rate times 100

49.) From the financial statements, we can look at specific performance areas of a company by selecting key pieces of information and analyzing this information ________.

A) at a point in time

B) over a specific time horizon

C) at a point in time or over a specific time horizon

D) All of these

50.) Which one of the answers below is NOT one of the three components of the "Cash Flow from Assets"?

A) Operating Cash Flow

B) Net Capital Spending

C) Noncash Expenses

D) Change in Net Working Capital

51.) The ________ is/are critical to business decisions, business growth, and ultimately business success.

A) risk and timing but not the amount of cash flow

B) currency denomination of profits

C) risk and profits but not the amount of cash flow

D) timing and amount of cash flow

52.) The projected revenues and costs that form the basis of the potential for a project's acceptance or rejection are estimates of ________.

A) future activity

B) past activity

C) known activity

D) current activity

53.) The typical payments on a consumer loan are made at ________.

A) the end of each day

B) the end of each week

C) the end of each month

D) the beginning of each month

54.) Stocks A, B, C, and D have standard deviations, respectively, of 20%, 5%, 10%, and 15%. Which one is the riskiest?

A) Stock A

B) Stock B

C) Stock C

D) Stock D

55.) Elizabeth is seeking to expand her rare coin collection. Each year, rare coins increase in price at a three percent rate. She believes that if she invests her money for one year, she should be able to buy 26 coins for what 25 coins would cost today. What is her real interest rate or reward for waiting?

A) 4.00%

B) 3.00%

C) 2.00%

D) 1.00%

56.) In ________, current prices already reflect the price history and volume of the stock as well as all available public information.

A) weak-form efficient markets

B) strong-form efficient markets

C) semi-strong-form efficient markets

D) operationally efficient markets

57.) Concern with the multinational elements of financial activities" best describes which of the four main areas of finance?

A) Investments

B) International finance

C) Corporate finance

D) Financial institutions and markets

58.) Zero-coupon bonds are priced at deep discounts.

A) TRUE

B) FALSE

59.) Bonds may be issued through either a ________ or a ________.

A) private auction; federal auction

B) state agency; federal agency

C) public auction; private placement

D) None of the above

60.) Angel financing is ________.

A) rare

B) usually for medium-term loans

C) usually limited to the early development of a business

D) All of the above

61.) You just won a lotteryCONGRATULATIONS! Your parents have always told you to plan for the future, so since you already have a well-paying job you decide to invest rather than spend your lottery winnings. The payment schedule from the lottery commission is $100,000 after taxes at the end of year one and 19 more payments of exactly $100,000 after taxes in equal annual end-of-the-year deposits (i.e., 20 deposits of $100,000 each, the first deposit is one year from today) into your account paying 7% compounded annually. How much money will be in your account after the last deposit is made?

A) $2,000,000.00

B) $3,637,896.48

C) $4,099,549.23

D) $4,486,517.68

62.) Which of the statements below is FALSE?

A) The current book value of an asset serves as the basis for determining the gain or loss at disposal.

B) Book value is the original cost of the asset plus the accumulated depreciation.

C) A gain on disposal is recognized when the selling price of the asset is greater than the book value.

D) A loss on disposal is recognized when the selling price of the asset is less than the book value.

63.) When a depreciable asset is sold, a tax gain or tax loss on disposal is calculated, based on the book value of the asset at the time of disposal. If a ________ has occurred, ________ are incurred.

A) gain, tax reductions

B) gain, taxes

C) gain, tax credits

D) loss, taxes

64.) An example of a financial statement is ________.

A) the Income Statement

B) the Sources and Uses of Cash

C) the Statement of Financial Position (Balance Sheet)

D) All of these

65.) Consider the TVM equation: A decrease in the time period will increase the future value, other things remaining equal.

A) TRUE

B) FALSE

66.) The number of periods for a consumer loan (n) is equal to the ________.

A) number of years times compounding periods per year

B) number of years

C) number of years in a period

D) number of compounding periods

67.) Commercial paper has a minimum denomination of ________.

A) $10,000

B) $50,000

C) $100,000

D) $500,000

68.) A company selling a bond is ________ money.

A) borrowing

B) lending

C) taking

D) reinvesting

69.) A firm is considering purchasing two assets. Asset L will have a useful life of 20 years and cost $5 million; it will have installation costs of $1 million but no salvage or residual value. Asset S will have a useful life of 8 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000. Which asset will have a greater annual straight-line depreciation?

A) Asset L has $12,500 more in depreciation per year.

B) Asset L has $37,500 more in depreciation per year.

C) Asset S has $12,500 more in depreciation per year.

D) Asset S has $37,500 more in depreciation per year.

70.) The most common shape for a yield curve is upward sloping.

A) TRUE

B) FALSE

71.) ________ of a project are those that have already been incurred and cannot be reversed.

A) Erosion costs

B) Opportunity costs

C) Sunk costs

D) Working capital costs

72.) To convert a balance sheet into a common-size balance sheet statement, we restate all the numbers as percentages of ________.

A) revenue

B) total assets

C) total owners' equity

D) total liabilities

73.) The SEC has a site named EDGAR that ________.

A) provides, at a cost, on-line access to a company's financial reports

B) offers investors free advice on what stocks to pick

C) provides an on-line tutorial on how to understand the government's role in affecting stock prices

D) provides an on-line tutorial that will help new viewers find a company and its financial statements

74.) Which of the following are issued with the shortest time to maturity?

A) Treasury bills

B) Treasury notes

C) Treasury bonds

D) Treasury stocks

75.) The revenue is $40,000, the cost of goods sold is $26,000, the selling, general and administrative expenses are $7,000, interest expense is $2,000, and depreciation is $3,000. What is the EBIT?

A) $2,000

B) $4,000

C) $7,000

D) $14,000

_____________________________________________________________________________________________

Bonus Questions are worth 5 points each, and will be added to your Final Exam score. Your Final Exam score will not exceed 250 points.

Bonus 1.) Hammer Securities, LLC., has outstanding $1,000 face value 8% coupon bonds that make semiannual payments, and have 14 years remaining to maturity. If the current price for these bonds is $1,118.74, what is the annualized yield to maturity?

A) 6.68%

B) 6.67%

C) 6.12%

D) 6.00%

Bonus 2.) Wilson Pharmaceutical Inc. has a profitability ratio of 0.19, an asset turnover ratio of 1.1, a price to earnings ratio of 15.4, and a total asset to equity ratio of 1.30. What is the firm's ROE?

A) 18.64%

B) 27.17%

C) 38.08%

D) 44.35%

Bonus 3.) The debt-to-equity ratios for Firm 1, Firm 2, Firm 3, and Firm 4 are 0.2, 0.3, 0.35, and 0.4, respectively. The earnings per share for Firm 1, Firm 2, Firm 3, and Firm 4 are $4, $3, $2.5, and $2, respectively. Everything else equal, which firm is placing more burdens on its borrowing?

A) Firm 1

B) Firm 2

C) Firm 3

D) Firm 4

Bonus 4) Which of the statements below is FALSE?

A) When the current ratio is greater than 1, we are also saying that net working capital is positive as current assets are greater than current liabilities.

B) Financial leverage ratios deal with long-term solvency and the use of debt as a financing tool.

C) The debt ratio is total assets minus total equity divided by equity.

D) Times interest earned equals EBIT divided by interest expense.

Bonus 5.) If you borrow $50,000 at an annual interest rate of 12% for six years, what is the annual payment (prior to maturity) on a discount loan?

A) $0.00

B) $6,000.00

C) $8,333.33

D) $12,161.29

Bonus 6.) Johnson Construction Inc. has issued 20-year $1,000 face value, 8% annual coupon bonds, with a yield to maturity of 10%. The current price of the bond is ________.

A) $1,000.00

B) $1,196.36

C) $829.73

D) There is not enough information to answer this question.

Bonus 7.) A more risky stock has a higher ________.

A) expected return

B) standard deviation

C) variance

D) B and C

Bonus 8.) Which of the statements below is FALSE?

A) Under the modified accelerated cost recovery system (MACRS) system of depreciation, the government classifies all assets into groups that are assigned specific "lives" for the purpose of depreciation.

B) Under the modified accelerated cost recovery system (MACRS) system of depreciation, once the assigned class life is established, an adjustable percentage of the cost is expensed each year as depreciation.

C) Under the modified accelerated cost recovery system (MACRS) system of depreciation, it can be assumed that an asset's assigned life class is the shortest allowable recovery period for allocating the capital expenditure costs and reducing taxes.

D) Depreciation or "expired" costs each year do not reflect cash flows because the actual purchase and installation (outflow of dollars) of the machines have already taken place.

Bonus 9.) The four steps to determining the price of a bond are:

A) determine the amount and timing of the present cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of the principal and coupons.

B) determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the future value of the lump-sum principal and the annuity stream of coupons, and add the FVs of the principal and coupons.

C) determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and multiply the PVs of the principal and coupons.

D) determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of the principal and coupons.

Bonus 10.) Average U.S. wages in 1990 were $28,960, far larger than the average wage in 1930 of $1,970. What was the average annual increase in wages over this 60-year period?

A) 3.31%

B) 2.45%

C) 24.50%

D) 4.58%