MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 1) A balance sheet portrays the value of a firm's assets and liabilitics 1) A) at any stated point in time. ) over any stated period of time. 15) over an annual period D) only M the end of the calendar year 2)How much interest iseamed in just the third year on a S1000 deposit that earns 7% 2) interest compounded annually? A) 580.14 B) $70.00 $140.00 D) $105.62 3) On the day you retire you have $1,000,000 saved. You expect to live another 25 years 3) during which time you expect to earn 6.19% on your savings while inflation averages 2.5% annually. Assume you want to spend the same amount cach year in real terms and die on the day you spend your last dime. What real amount will you be able to spend each year? A) $79,211.09 B) 561,931.78 9) $79,644.58 D) S61,334.36 4) Which one of the following would be considered a capital budgeting decision? A) Issuing debt in the form of long-term bonds B) Deciding to expand into a new line of products, at a cost of $5 million O Planning to issue common stock rather than issuing preferred stock D) Repurchasing shares of common stock 5) Planned Obsolescence has a $27.0 and liquidate the assets. As a result, forecast dividends are DIVI What is the stock price if the discount rate is 12%? $11.00, DIV2-$11.50, and DIV3 A) 48.5 B) 48.55 C) 38.21 D) 38.09 6) What dividend yield would be reported in the financial press for a stock that currently pays a S1 dividend per 6) quarter and the most recent stock price was $40? A)5.0% B) 4.0% C) 2.5% D) 10.0% 7) The coupon rate of a bond equals:? 7 A) the yield to maturity when the bond sells at a discount B) a defined percentage of its face value. C) its yield to maturity D) the annual interest divided by the current market price 8) Dan's juat puid an ansual dividend of S6 per share. What is the dividend expected so be in five years if th growth rate is 42%? A) $7.07 B) $7.44 $7.14 D) 57.37 9) Which of the follow ing statements is true for a corporation with S1 millioe market value of equity, $2 9) million market value of assets, and 1,000 shares of outstanding stock? A) Market value of liabilitics equals 51 million B) Market value per share equals $2,000. O Book value per share equals $1,000 D) Market valoe of liabilities exceeds book value of liabilities. 10) Wilt's has earnings per share of $2. 98 and dividends per share of S0.35, What is the firm's sustainable rate of 10) growth if its return on assets is 14.6% and its return on equity is 182167 B) 2.14% A) 1.71% C) 16.06% D) 12.89% 11) What should be the price for a common stock paying $3.50 annually in dividends if the growth rate is zero 11) and the discount rate is 8% A) 543.75 B) $22.86 S42.00 D) $28.00 12) Suzi owns 100 shares of AB stock. She expects to receive a $238 in dividends next year. 12) Investors expect the stock to sell for $46 a share one year from now. What is the intrinsic value of this stock if the dividend payout ratio is 40% and the discount rate is 13.5%? A) $38.19 B) $42.63 D) $40.53 13) Which one of the following is an intangible asser? 13) A) Cash C) Deferred income taxes B) Retained earnings D) Goodwill 14) A firm has 120,000 shares of stock outstanding, a sustainab le rate of growth of 3.8%, and S648.200 in nex, 14) year's free cash flow. What value would you place on a share of this firm's stock if you require a l 4% rate of A) $32.96 B) 534,02 C) $48.09 D) S61.58 15) What is the rate of returm for an investor who pays $1,054.47 for a 3-year bond with an annual coupon 15) payment of 6.5% and sells the bond i year later for $1,037. 197 B) 4.92% C) 4.53% D) 5.33% 16) How much does the $1,000 to be received upon a zero-coupon bond's maturity in 4 years add to the bond's 16) price if the appropriate discount rate is 6%? B) $792.09 A) S760.00 C) $209.91 D) $260.00 17) ABC Corp.'s balance sheet shows its long-term debt to be $20 million. The debt was 17) issued with a 10% interest rate, and the current interest rate is 7%. Based on this information alone, the market value of this debt is most likely: A) more than $20 million. B) equal to $20 million. c) less than $20 million. D) unknown without knowing the maturity of the debt. ohnson's Nursery has net income of $42,500, depreciation expense apense of s900, tases of .,apital of $1,800, interest15)_ expenditures of $11,700. What is the amount of the free cas A) $30,300 h flow? s) $28,700 Q 531,200 D) 534,400 19) What is the most likely valuc of the PVGO for a stock with a current price of S50 expected earnings of $6 per share, and a required return of 20%? 19) A) $25 B) $20 c 530 D) $10 20) Which one of the fellowing gives a corporation its permanence? A) Corproation taxation Q Multiple owners B) Separation of ownership and contro D) Limited liabuility 21) In a partaership form of oeganization, income tax liablity, if any, is incurred by 21) A) both the partnership and the partners Q) neither the partnership nor the partners B) the partnership itself D) the partners individually 22) When a corporation fails, the maximum that -can be lost by an individual shareholder is: 22) A) the amount of their initial investment B) he amount of their personal wealtdh ) the amount of their share of the profits D) their proportionate share required to pay the corporation's debts 23) Financing for public corporations fows through 23) A) the financial markets, financial intermediaries, or both. B) derivatives markets. financial intermediaries only D) the financial markets only 24) Which one of these is a money market security? 24) A) 2-year bond C Commercial paper B) 20-year bond D) Common Stocks 25) How much interest is eared in Just third year on a SI ,000 deposit that earns 7% interest compounded 25) A)7000 B) 105.62 C) 80.14 D) 140.00 26) Assume the sotal expense for your current year in college equals $20,000. How muach would your parents26) have noeded to invest 21 years ago in an account paying 8% compounded annually to cover this amount? A) 1600.00 B) 3973.11 ) 952.46 D) 1728.08 27) 27) An investment offers to pay S 100 a year forever starting at the end of year 6. Ifthe interest rate is 8%, what is the investment's value today? A) 1250 B) 1586.87 C) 850.73 D) 787.71 28 29An investment orsi00 pays interest of25% per quarter. What will be the value of this investment at the end of 3 years? A) 107.69 B) 134.49 C) 313.84 D) 133.10 you only have 12,000.lrthe interest me is 6%, bow ling dn it take save to buy the car? A) 6.76 years B) 8 years 877 years D) 6 years 30) The salesperson offers, -Bay this new car for $25,000 cash or, with an appropriate down payment, pay s500 per month for 48 months at 8%-esL. Assuning dat the two oe ers are equivalent, calculate the D) 4519.04 'appropriate. down payment. ) 100000 B) 8000.00 C) 5127.24 reeiving cash flows of $1,000 today, $2,000 at end of year 1, 54,000 at end of year 3, and of year 3. What is the present value of these cash flows at an inperest rate of 7%7 31) You will be 56,000 at end A) 11524.91 B) 10412 27 C) 10524.08 D) 9731.13 h more is a perpetuity of s1,000 worth tha an anuity of the same amount for 20 years? Assume an 32) interest rate ef l A) 2000.00 056 and e cash flows at the end of each period B) 297.29 1635.08 D) 1486.44 33) A stream of equal cash payments lasting forever is termed: A) a perpetuity Q) an annuity due B) an installment plan 34) what is the present value of a five-period aniity of $3,000 if the interest rate per period is 12% A) 1211205 B) 13200.00 C)965565 D) 10814.33 35) what is the effective annual interest rate on an account with an APR of 10% and monthly compounding? 35) A) 10.52% B) 1047% 11.09% D) 10.00% 36 what is the future value of $100 to be deposited today into an account paying 8% compounded semaannually 36 for 2 years? A) 100 ) 116,00 C) 85.48 D) 116.99 37) "Reinvestment" means: 37) A) the reinvestment of earnings into new projects B) new investment in new operations. C) new investment by new shareholders D) additional investment in existing operations 38) If a borrower promises to pay you $1,900 nine years from now in return for a loan of $1,000 today, what 35) interest rate is being offered if interest is compounded annually? A) 7.39% B) 9.00% C)1000% D) 5.26% 39) A bond has a coupon rate of 8%, pays interest semiannually, sells for S960, and matures in 3 years what is 39 its yield to maturity? A) 9.57% B) 4.78% C) 12.17% D) 5.48% 40) A car dealer offers payments of$522.59 per month for 48 months on a S21 ,000, what is the loan's APR? B)12% C)6% D)9%