1. A company uses long-term bonds to invest heavily in new equipment to reduce its safety risk exposure. While revenues are unaffected by the change, the new equipment increases cash flow from operations. Which of the following ratios would likely be reduced due to this investment?
2. 1. Current asset turnover
   2. Cash conversion efficiency
   3. Fixed asset turnover
   4. Total liabilities to total assets

2. If a company uses its weighted average cost of capital (WACC) as its required return and WACC is 6%, which of the following projects would be acceptable: Project A with an IRR of 7.6% or Project B with an IRR of 5.6%? Which of the following gives the correct reason why the project is acceptable?
3. 1. Project B. IRR is the discount rate at which NPV equals zero; therefore, a lower IRR indicates a higher expected profit expressed as an annual rate.
   2. Project A. IRR is the break-even point at which the expected cost equals the gross revenue; therefore, a higher IRR means the project will be more easily profitable.
   3. Project B. IRR is the break-even point at which the expected cost equals the gross revenue; therefore, a lower IRR means the project will be more easily profitable.
   4. Project A. IRR is the discount rate at which NPV equals zero; therefore, an IRR higher than WACC indicates an increase in firm value.

3. Company XYZ reports net income of $40,000 and total assets of $150,000. What is Company XYZ's return on assets?
4. 1. 3.7%
   2. 6.5%
   3. 26.7%
   4. 34.5%

4. Which of the following uses of cash would not allow the time value of money to be effective?
5. 1. Selling zero coupon bonds
   2. Investing in equipment that will have 100% idle capacity
   3. Repaying debts
   4. Investing in short-term commercial paper