Home Builders is adding a new product to their sales lineup. They will initially stock $30,000 of inventory, which will be purchased on 30-days credit from their supplier. They will re-stock during the second week of sales. During the first week, they expect to sell $20,000 of this product. They also expect their customers to pay cash for 70 percent of their purchases and charge the remaining 30 percent on their store credit cards. What is the amount of the effect this new product will have on the net working capital of the firm from the initial start-up through week one? Select one: a. C. $9.000 b. E. $39.000 c. D. $30,000 d. A. -$6,000 e. B. SO You are analyzing a project and have developed the following estimates. The depreciation is $8,000 a year and the tax rate is 34 percent. What effect would a decrease of $1 in the variable cost per unit have on the operating cash flow? Projections Base Case Unit sale 2,500 price per unit $190 variable cost per unit $120 Fixed costs $25,000 Select one: a. A. $1,625 b. C. $1,675 c. E. $2,250 d. D. $2,225 e. B. $1,650 0 You are considering the following two mutually exclusive projects. The crossover point is __and project_should be accepted at a 14 percent discount rate. Year Project A Project B -$32,000 -$32,000 13,000 19,000 13,000 12,000 19,000 12,000 1 2 3 Select one: a. D. 16.67 percent: A b. C. 15.47 percent; B c. B. 15.47 percent; A d. A. 12.98 percent; B e. E. 16.67 percent: B You are considering the following two mutually exclusive projects. The crossover point is and Project should be accepted if the discount rate for the project exceeds the crossover rate. Year Project A 0 -$4,500 Project B $4,500 2,500 2,000 1 1.300 2 1,000 3 3,500 1,000 Select one: a. D. 8.56 percent: B b. B. 6.91 percent: B c. C. 8.56 percent: A d. A 6.91 percent: A e. E. 8.78 percent: A as Over the past four years, large-company stocks and U.S. Treasury bills have produced the returns stated below. During this period, inflation averaged 2.9 percent. Given this information, the average real rate of return on large company stocks was percent as compare to ___ percent for Treasury bills and the standard deviation for large-company stocks was compared to_for Treasury bills. Year1 year2 year3 year4 Percent return on large company stocks 12 5 18 Percent return on U.S. Treasury bills 2 3 3 4 Select one: a. B. 11.00; .03:5.48; 0.82 b. E. 7.87; 1.00; 6.24; 1.01 c. D. 7.87;0.10: 5.48; 0.82 d. A. 11.00; .03; 6.24; 1.01 e. C. 7.87: 0.10: 4.87: 0.67 Last year, when the stock of Ward, Inc., was selling for $28 a share, the dividend yield was 3.5%. Today, the stock is selling for $35 a share. What is the required return on this stock if the company maintains a constant dividend growth rate of 5 percent? Select one: a. D. 8.78 b. B. 8.28% c. C. 8.72% d. E. 8,93% e. A. 7.94% A cost-cutting project will decrease costs by $25,000 a year. The annual depreciation on the project's fixed assets will be $6,800 and the tax rate is 34 percent. What is the amount of the change in the firm's operating cash flow created by this project? Select one: a. D. $18.812 b. B. -$6.212 c. A. -$14,18B d. C. $10,812 e. E. $20,988 The risk premium on long-term government bonds is equal to: Select one: a. A. zero b. D. the rate of return on the bonds minus the risk-free rate C. E. the rate of return on the bonds minus the inflation rate d. C. the rate of return on the bonds plus the risk-free rate e. B. one