CoursHeroTranscribedText: A 5-year loan in the amount of $48,000 is to be repaid in equal annual payments. What is the remaining principal balance after the third payment if the interest rate is 5 percent, compounded annually? Multiple Choice O $22,173.58 $20,614.89 $22,998.30 O $18,677.70 O $18,294.24The expected dividend yield is equal to Multiple Choice O Dividend yield * Next year's stock price. O Expected cash dividend/Current stock price. O (Dividend payout ratio * Expected earnings)/Next year's stock price. O (Retention ratio * Expected earnings)/Current stock price. O Expected cash dividend/Next year's stock price.Which formula computes the actual real rate of return on an investment? Multiple Choice O 1= (1 + R) / (1+m) O R= (1 + 1) * (1+/)-1 1=(1+ R) - 1+171-1 O 1= (1 + R)- (1+ /) 1= (1+ R) 1(1 +1)-1The upper and lower limits on the coupon rate of a floating-rate bond are referred to as the bond's Multiple Choice O put. O call. O "make-whole" provision. O collar. O Income limit.TJ Machine bonds have a coupon rate of 5.3 percent, a face value of $1,000, and pay interest semiannually. The bonds mature in 23 years and have a yield to maturity of 5.4 percent. What will be the percentage change in the bond's price if the market rate increases by 1 percent to 6.4 percent? Multiple Choice O 13.32% O -12.00% O 12.02% O -13.13% O -11.96%A project with a current negative net present value Multiple Choice O should be permanently rejected. O will always have a higher (less negative) net present value further into the future. O might have a positive net present value further into the future. O should still be accepted if it can break-even on an accounting profit basis. O should still be accepted if its projected sales quantity is less than the financial break-even point.Today, the Future Trust Co. purchased an investment that will pay $6,000 at the end of five years. Every year thereafter, the payment will increase by 1.6 percent. What is the value of this investment today if the required rate of return is 7.4 percent? Multiple Choice O $62,300.00 O $73,894.23 O $77,751.03 O $83,984.23 O $65,647.81For tax purposes, the implicit annual interest for any one year on a zero coupon bond is equal to Multiple Choice O the face value multiplied by the current market rate of Interest. O the face value minus the current market value. O the annual change In the bond's value as determined by amortizing the loan. O the current yield. O zero.Used Auto Sales has sales for this year of $418,000, current liabilities of $190,400, and net working capital of $21,700. The projected sales for next year are $450,000. All current accounts change directly with sales. What is the projected value of current assets for next year? Multiple Choice O $205,706.56 O $204,013.11 O $200,306.56 O $192,626.23 O $228,337.32Which one of the following accounts is generally the most liquid? Multiple Choice O Inventory O Building O Equipment O Patent O Accounts receivableWhich one of the following is a disadvantage of sensitivity analysis? Multiple Choice O Sensitivity analysis assumes most variables will achieve their most optimistic value. O Sensitivity analysis falls to Identify the key variable that affects a project's net present value. O A sophisticated computer program is required to conduct sensitivity analysis. O Sensitivity analysis may decrease the false sense of security among managers. O Each variable In sensitivity analysis is treated In Isolation.The investment timing decision relates to Multiple Choice O the decision as to when a project should be started. O the decision to elther finance a project over time or pay out the Initial cost In cash. O how frequently the Interest on the debt incurred to finance a project is compounded. O how long the cash flows last once a project is Implemented. O how frequently the cash flows of a project occur.Which one of these is a requirement when computing the net present value of a capital project? Multiple Choice O Nominal cash flows must be discounted using a real rate. O Real cash flows must be converted to nominal cash flows. O The discount rate must be stated In real terms. O Real cash flows must be discounted using a real rate. O The discount rate used must be a nominal rate.Assume a project currently has a negative net present value. Which one of these expectations would indicate that the timing option for that project may have a positive value? Multiple Choice O Competition In the project's product market is Increasing. O The project's cash flow projections are expected to remain constant over time. O The contribution margin for the project is expected to Improve next year. O The demand for the project's product is expected to decrease within six months. O The life of the project's product is expected to decrease each year.Project A has an initial cost of $16,400 and cash flows of $5,100, $6,800, and $6,900 for Years 1 to 3, respectively. Project B has an initial cost of $21,200 and cash flows of $8,300, $7,900, and $7,700 for Years 1 to 3, respectively. What is the incremental IRRB-A Multiple Choice O 4.07% O 5.91% O 6.75% O 2.89% O 7.90%HanLee Marketing expects a new project to produce sales of 10,000 units, $7 percent. The expected variable cost per unit is $17 and the expected fixed costs are $35,000. Cost estimates are considered accurate within a range of $5 percent. The depreciation expense is $24,600. The sale price is estimated at $39 a unit, +2 percent. What is the amount of the fixed cost per unit under the pessimistic case scenario? Multiple Choice O $3.32 O $3.58 O $3.43 O $3.68 O $3.95A stock had returns of 8 percent, 13 percent, and -3 percent for the past three years. Based on these returns, what is the approximate probability that this stock will earn at least 14.19 percent in any one given year? Multiple Choice O 15.87% O 31.74% O 4.56% O 2.28% O 8.00%What is the effective annual rate if the APR is 5.25 percent, compounded semiannually? Multiple Choice O 5.319% O 5.306% O 5.299% O 5.313% O 5.278%%Bonds backed by assets with long-term payments are referred to as Multiple Choice O securitized bonds. O cash-flow bonds. O payment bonds. O time value bonds. O Inflation bonds.The sustainable rate of growth can be increased by Multiple Choice O Increasing the capital intensity ratio. O Increasing the profit margin. O decreasing the equity multiplier. O Increasing the dividend payout ratio. O decreasing the debt-equity ratio.Suppose a portfolio had an arithmetic average annual return of 9 percent during a 4-year period. Which one of these statements must be true regarding this portfolio for the period? Multiple Choice O If the standard deviation of the portfolio is greater than zero, then the geometric average portfolio return is less than 9 percent. O If the standard deviation of the portfolio is zero, then the geometric average return must also be zero. O The 4-year holding period return must be less than 9 percent O At least one of the 4 years produced an annual rate of return of 9 percent. O The standard deviation of the portfolio must be lower than the standard deviation of a comparable portfolio that had an arithmetic average return of 10 percent.Detamore Co. is evaluating a project that requires a year zero cash outflow of $107,000, followed by aftertax operating cash inflows of $54,000 per year for 10 years. Also, in the 10th year will be a one-time aftertax terminal cash outflow of $42,000. The required rate of return is 10%. What is the net present value of the project? Multiple Choice O $240,999 O -$454,999 O -$208,614 O $315,614 O $208,614The Dixit Company had a PE ratio of 7.2 last year. This year, the PE ratio is 5.3. Based on this information, it can be stated with absolute certainty that Multiple Choice O the price per share Increased. O either the price per share, the earnings per share, or both, changed. O Investors are receiving a lower rate of return this year. O the earnings per share decreased. O Investors are paying a lower price for each share of stock purchased.Assume a project has estimated fixed costs of $61,200, variable costs per unit of $84.29, a selling price of $199, and an initial cost of $402,000 for fixed assets. Depreciation is straight-line to zero over the project's 4-year life. The tax rate is 30 percent, and the discount rate is 12 percent. What is the financial break-even point? Multiple Choice O 1,422 units O 1,366 units O 1,806 units O 1,698 units O 1,228 unitsSystematic risk is measured by Multiple Choice O the arithmetic average. O standard deviation. O the geometric average. O beta. O covariance.Which one of these terms refers to a conflict of interest between the stockholders and managers of a corporation? Multiple Choice O Legal liability O Agency problem O Breach of Indemnity O Corporate activism O Stakeholder claimA stock had annual returns of 3.5 percent, -11 percent, and 11.5 percent over the past three years. What is the standard deviation of these returns? Multiple Choice O 1.30% O 11.41% O 4.34% O 9.31% O 35.41%If the bondholder has any rights that can force repayment of the bond prior to maturity, the bond Multiple Choice O Is an Income bond. O has a call provision. O Is a structured note. O Is convertible. O has a put provision.A portfolio has a beta of 1.27. The portfolio consists of 25 percent U.S. Treasury bills, 38 percent Stock A, and 37 percent Stock B. Stock A has a risk level equivalent to that of the overall market. What is the beta of Stock B? Multiple Choice O 1.54 O 1.79 O 202 O 1.49 O 241Which one of these is calculated as: 365/(Cost of goods sold/Inventory)? Multiple Choice O Capital Intensity ratio O Total asset turnover O Inventory turnover O Days' sales In Inventory O Days' sales In receivablesThe owner of preferred stock Multiple Choice O has the right to collect payment on any unpaid dividends as long as the stock is noncumulative. O has the right to veto the outcome of an election held by the common shareholders. O Is guaranteed voting rights similar to a common shareholder. O is entitled to a distribution of income prior to distribution to the common shareholders. O owns shares that generally have a stated liquidating value of $1,000 per share.You have just obtained a 5-year pure discount loan in the amount of $75,000 at 6.28 percent interest, compounded monthly. What total amount will you have to repay? Multiple Choice O $96,100.84 O $102,582.70 O $105,260.13 O $84,219.16 O $87,370.00A project has an initial cash outflow of $22,400 and cash inflows of $13,400 a year for Years 1 and 2 and a final cash inflow in Year 6 of $7,500. The required return is 15.5 percent. What is the NPV? Multiple Choice O $2,405.66 O $2,671.02 O $1,608.14 O $1,919.08 O $2,134.85An annuity stream where the payments occur forever is called a(n) Multiple Choice O perpetuity. O ordinary annuity. O amortized cash flow stream. O annuity due. O Indemnity.Jensen's Shipping wants to expand as soon as it can save $112 million. Towards that goal, the firm started saving three years ago and currently has $38.2 million saved. Starting today, the firm will add $15,000 a month to this savings account. The rate of return is 7.1 percent, compounded monthly. How long will it be from now before the company can expand? Multiple Choice O 16.52 years O 15.67 years O 14.60 years O 15.39 years O 16.08 yearsTwo of the primary differences between a corporate bond and a Treasury bond with identical maturity dates are related to Multiple Choice O Inflation and Interest rate risk. O time value of money and Inflation. O taxes and Inflation. O taxes and potential default. O Interest rate risk and time value of money.Rossiter's currently has total assets of $203,000, long-term debt of $78,400, and current liabilities of $36,700. The dividend payout ratio is 25 percent and the profit margin is 5.8 percent. Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity. What is the external financing need if the current sales of $185,000 are projected to increase by 5 percent? Multiple Choice O $387.40 O $162.09 O $182.40 O -$134.88 O -$54.82Which one of these is both a product cost and a fixed cost in the short run? Multiple Choice O Overtime pay for production employees O Monthly lease payment for production equipment O Sales commission paid based on monthly sales O Salary for company CEO O Monthly electric bill for manufacturing facilityComeaux Travel has spent $53,400 to design a new airline carry on bag. It spent another $37,800 testing various materials for durability. An additional $64,000 was spent on test marketing to determine both the market demand and color preference. Since the test marketing proved successful, the firm is now compiling data to evaluate the addition of this bag to its production runs. The estimated production start-up costs are $863,400 with annual costs thereafter of $42,700. The discount rate is 11 percent and the estimated life of the project is five years. What value should be used for the Time 0 cash flow? Multiple Choice O -$1,061,300 O -$1,018,600 O -$906,100 O -$863,400 O -$1,076,900Two key weaknesses of the IRR rule are the Multiple Choice O failure to consider initial expenditures and fallure to correctly analyze mutually exclusive projects. O failure to consider all cash flows and the multiple rate of return problem. O arbitrary determination of a discount rate and failure to consider Initial expenditures. O failure to correctly analyze mutually exclusive projects and the multiple rate of return problem. O failure to correctly analyze mutually exclusive projects and the lack of a clear-cut decision rule.Based on historical performance from 1900-2010, the U.S. equity risk premium was approximately Multiple Choice O 7.2 percent O 5.4 percent. O 9.0 percent. O 8.3 percent. O 6.1 percentThe Soy Pod has computed its fixed costs to be $.38 per pound given an average daily sales level of 500 pounds. It charges $5.59 a pound for packaged tofu. The variable cost per pound is $2.64. The tax rate is 34 percent. The accounting profit break-even point is 211.5 pounds per day. What is the amount of the depreciation expense? Multiple Choice O $128.09 O $233.33 O $433.93 O $384.01 O $266.67Duncan Street Mills is an all-equity firm with 32,000 shares of stock outstanding. The firm expects sales of $520,000 next year. Sales are expected to grow by 8 percent for the following two years and then level off to a constant 3 percent growth rate. Net cash flow varies in direct proportion to sales and is currently equal to 16 percent of sales. The required return is 17 percent. What is the estimated current value of one share of stock? Multiple Choice O $22.03 O $18.01 O $19.76 O $18.94 O $20.10If the nominal rate of return on a bond is 7.47 percent and the real rate is 3.49 percent, what is the rate of inflation? Multiple Choice O 3.85% O 3.98% O 11.22% O 3.92% O 10.96%The Securities Act of 1933 focuses on Multiple Choice O Federal Deposit Insurance Corporation (FDIC) Insurance. O the issuance of new securitles. O all new and outstanding stock transactions. O the redemption of outstanding debt. O Insider trading.You are comparing the returns of two portfolios for a 10-year period. Portfolio I has a lower dispersion of returns and a higher average rate of return than Portfolio II. Given this, what do you know with certainty? Multiple Choice O Portfolio II consists of more individual stocks than Portfolio I. O Portfolio I has a lower standard deviation than Portfolio II. O Portfolio I is riskier than Portfolio II. O Portfolio II has less total risk than Portfolio I. O Portfolio I will outperform Portfolio II over the next 10 years.The selection of an appropriate discount rate for a particular project is primarily dependent upon the project's Multiple Choice O time to closure. O expected dollar return. O level of risk. O Initial cost. O starting date.Alejandro has a portfolio with a beta of 1.42 but wants to lower his investment risk. Adding which one of the following securities to his portfolio will most assuredly lower the risk of the portfolio? Multiple Choice O U.S. Treasury bills O A security with a beta of 1.56 O A security that has a standard deviation of 9 percent O A mix of small-company and large-company stocks O A stock that has a covariance with the market of .73The Garden Mart is analyzing a proposed 3-year project. Expected sales are 16,000 units, #6 percent. The expected variable cost per unit is $4, and the expected fixed costs are $16,000. The fixed and variable cost estimates have a range of +1 percent. The sales price is estimated at $15 a unit, +3 percent. The project requires an initial investment of $41,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $12,000 at the end of the project. The project requires $5,600 in net working capital. The discount rate is 16 percent, and the tax rate is 35 percent. What is the operating cash flow (OCF) under the optimistic case scenario? Multiple Choice O $117,947.60 O $121,153.09 O $118,542.27 O $122,694.40 O $120,063.17Which one of the following statements is correct concerning the standard deviation of a portfolio? Multiple Choice O The greater the diversification of a portfolio, the greater the standard deviation of that portfolio. O The standard deviation of a portfolio must equal the weighted average of the standard deviations of the Individual securities held within the portfolio. O The standard deviation of a portfolio could potentially be lowered by changing the weights of the securities In the portfolio. O Standard deviation measures only the systematic risk of a portfolio. O Standard deviation is employed to determine the amount of risk premium that should apply to a portfolio

A 5-year loan in the amount of $48,000 is to be repaid in equal annual payments. What is the remaining principal balance after the third payment if the interest rate is 5 percent, compounded annually? Multiple Choice $22,173.58 $20,614.89 $22,998.30 $18,677.70 $18,294.24