HARDD QUESSSTION,, PLEASEE THINK CAREFULL CAUSE IT'S TRICKY............

16. What is Fama's debt ratio? A. 55.56% B. 71.43% C. 28.00% D. 28.57% E. 14.29%

17. On its 2004 balance sheet, Sherman Books showed $510 million of retained earnings, and exactly the same amount was shown the following year. Assuming that no earnings restatements were issued, which of the following statements is CORRECT? A. The company must have paid no dividends in 2005. B. The company must have had zero net income in 2005. C. The company must have paid out half of its earnings as dividends. D. Dividends could have been paid in 2005, but they would have had to equal the earning for the year. E. If the company lost money in 2005, they must have paid dividends.

18. Suppose someone offered you the choice of two equally risky annuities, each paying $10,000 per year for five years. One is an ordinary (or deferred) annuity, while the other is an annuity due. Which of the following statements is CORRECT? A. The present value of the ordinary annuity must exceed the present value of the annuity due, but the future value of an ordinary annuity may be less than the future value of the annuity due. B. The present value of the annuity due exceeds the present value of the ordinary annuity, while the future value of the annuity due is less than the future value of the ordinary annuity. C. The present value of the annuity due exceeds the present value of the ordinary annuity, and the future value of the annuity due also exceeds the future value of the ordinary annuity. D. If interest rates increase, the difference between the present value of the ordinary annuity and the present value of the annuity due remains the same. E. The present value of the ordinary annuity exceeds the present value of the annuity due, and the future value of an ordinary annuity also exceeds the future value of the annuity due.

19. You are given the following information: Stockholders' equity $1,250; price/earnings ratio 5; shares outstanding 25; and market/book ratio 1.5. Calculate the market price of a share of the company's stock. A. $ 33.33 B. $ 75.00 C. $133.32 D. $ 10.00 E. $166.67

SCENARIO 4-5

Below are the 2004 and 2005 year-end balance sheets for Kewell Boomerangs:

2005 2004 Cash $ 100,000 $ 85,000 Accounts receivable 432,000 350,000 Inventories 1,000,000 700,000 Total current assets $1,532,000 $1,135,000 Net fixed assets 3,000,000 2,800,000 Total assets $4,532,000 $3,935,000 Accounts payable $ 700,000 $ 545,000 Notes payable 800,000 900,000 Total current liabilities $1,500,000 $1,445,000 Long-term debt 1,200,000 1,200,000 Common stock 1,500,000 1,000,000 Retained earnings 332,000 290,000 Total common equity $1,832,000 $1,290,000 Total liabilities and equity $4,532,000 $3,935,000

Kewell Boomerangs has never paid a dividend on its common stock. Kewell issued $1,200,000 of long-term debt in 1997. This debt was non-callable and is scheduled to mature in 2027. As of the end of 2005, none of the principal on this debt has been repaid. Assume that 2004 and 2005 sales were the same in both years.

20. Which of the following statements is most correct? A. Kewell's current ratio in 2005 was higher than it was in 2004. B. Kewell's inventory turnover ratio in 2005 was higher than it was in 2004. C. Kewell's debt ratio in 2005 was higher than it was in 2004. D. Since retained earnings increased, the company must have paid no dividends. E. Because fixed assets turnover increased slower than total assets, the total assets turnover is greater than the fixed assets turnover.

21. Last year, Martyn Company had $500,000 in taxable income from its operations, $50,000 in interest income, and $100,000 in dividend income. Using the corporate tax rate table given below, what was the company's tax liability for the year?

Tax on Base Percentage on Taxable Income of Bracket Excess above Base $0-$50,000 $ 0 15% $50,000-$75,000 7,500 25 $75,000-$100,000 13,750 34 $100,000-$335,000 22,250 39 $335,000-$10,000,000 113,900 34 $10,000,000-$15,000,000 3,400,000 35 $15,000,000-$18,333,333 5,150,000 38 Over $18,333,333 6,416,667 35

A. $182,274 B. $296,174 C. $197,200 D. $ 83,300 E. $210,800

22. Iken Berry Farms has $5 million in current assets, $3 million in current liabilities, and its initial inventory level is $1 million. The company plans to increase its inventory, funded by additional short-term debt (notes payable). Assume that the value of the remaining current assets will not change. The company's bond covenants require a current ratio greater than or equal to 1.5. How much inventory can be purchased before the covenants are violated? A. $1.00 million B. $1.66 million C. $1.33 million D. $2.33 million E. $0.50 million

23. Today is your 23rd birthday, and you just received a gift of $1,000. You have used the money to open up a brokerage account. Your plan is to contribute an additional $2,000 to the account each year on your birthday, up through and including your 65th birthday, starting next year. The account has an annual expected return of 12%. How much do you expect to have in the account right after you make the final $2,000 contribution on your 65th birthday? A. $1,811,996 B. $2,292,895 C. $2,045,442 D. $2,031,435 E. $1,824,502

24. Which of the following statements is NOT CORRECT, assuming positive interest rates? A. A 5-year $100 annuity due will have a higher present value than similar ordinary annuity. B. A 15-year, $100,000 mortgage will have larger monthly payments than an otherwise similar 30-year mortgage. C. If an investment pays 10% interest compounded annually, its effective rate will also be 10%. D. Securities A and B offer the same nominal rate of interest, but A pays interest quarterly and B pays semiannually. Investment B will have the higher present value. E. An investment's nominal interest rate will always be equal to or greater than its effective annual rate.