Practice Exam #$1$

A firm has a total debt ratio of $0\mathrm{.}47.$ This means the firm has $$0\mathrm{.}47$ in debt for every

A$)$ $$1\mathrm{.}47$ in equity

B$)$ $$0\mathrm{.}53$ in equity

C$)$ $$1\mathrm{.}53$ in equity

D$)$ $$1$ in equity

E$)$ $$0\mathrm{.}47$ in equity

Song Partners Test Prep Services generated its first annual cash$-$flow yesterday, of

$$120,000.$ Analysts expect its cash$-$flows to grow at $10\%,$ forever. If the appropriate

discount rate for Song is $16\%$ per year, what is the present value of its future cash$-$flows?

A$)$ $$825,000$

B$)$ $$2,000,000$

C$)$ $$1,200,000$

D$)$ $$750,000$

E$)$ $$2,200,000$

Which one of these is an intangible asset?

A$)$ Building

B$)$ Machinery

C$)$ Vehicle

D$)$ Loan

E$)$ Trademark

Which one of the following is a capital budgeting decision?

A$)$ Deciding whether or not to open a new store

B$)$ Determining how much inventory to keep on hand

C$)$ Determining how much debt should be borrowed from a particular lender

D$)$ Deciding if stock shares should be repurchased

E$)$ Determining how much cash to keep on hand

Use the following to answer questions $8-12$:

M & I Industries, Inc. reported the following information for fiscal $2018.$ All figures in

the table are in millions of dollars. M & I maintains a $25\%$ plowback ratio.

Use the following information to construct the company's balance sheet and income

statement:

On average, how long does it take M & I to pay its suppliers?

A$)58$ days

B$)5$ days

C$)60$ days

D$)145$ days

E$)2$ days

How much Operating Cash$-$Flow did M & I generate?

A$)$ $$2,910$

B$)$ $$2,230$

C$)$ $$2,090$

D$)$ $$4,210$

E$)$ $$3,050$

$10.$ How much did M & I pay in dividends?

A$)$ $$1,425$ B$)$ $$440$ C$)$ $$1,935$ D$)$ $$1,770$ E$)$ $$1,320$

$11.$ At what rate can M & I increase their sales revenue without raising any external funds?

A$)12\mathrm{.}0\%$ B$)8\mathrm{.}1\%$ C$)13\mathrm{.}3\%$ D$)15\mathrm{.}3\%$ E$)14\mathrm{.}6\%$

$12.$ M & I is forecasting sales for $2019$ of $$5\mathrm{.}936$ billion. Using the percentage of sales approach, what should the company forecast for $2019$ Cost of Goods Sold?

A$)$ $$254$ B$)$ $$893$ C$)$ $$2,332$ D$)$ $$2,374$ E$)$ $$2,120$

$13.30$ years from now, you want to be a millionaire. Suppose your savings earn $5\%$ per year, compounded monthly. How much do you need to save each month, starting next month?

A$)$ $$31,363$

B$)$ $$1,202$

C$)$ $$2,778$

D$)$ $$15,051$

E$)$ $$33,333$

$14.$ What if you start saving right now, instead?

A$)$ $$842$ B$)$ $$1,200$ C$)$ $$14,132$ D$)$ $$1,195$ E$)$ $$32,258$

$15.$ I$-$Man Athletics Co$.$ just borrowed $$600,000$ at $3\%,$ compounded semi$-$annually. The loan is fully amortized and has a $5-$year term. How much interest will I$-$Man pay in the second year?

A$)$ $$116,376$ B$)$ $$8,159$ C$)$ $$14,610$ D$)$ $$13,745$ E$)$ $$18,000$

$16.$ When the debt ratio rises,

A$)$ the debt$-$to$-$equity ratio falls and the equity multiplier increases B$)$ the debt$-$to$-$equity ratio falls and the equity multiplier falls

C$)$ the debt$-$to$-$equity ratio rises and the equity multiplier falls

D$)$ the debt$-$to$-$equity ratio rises and the equity multiplier rises

E$)$ the debt$-$to$-$equity ratio falls and the equity multiplier stays constant $17.$ The goal of the corporation is to

A$)$ Minimize income tax expense

B$)$ Maximize the market value of the firm$$s existing equity shares. C$)$ Avoid financial distress and bankruptcy

D$)$ Maintain steady earnings growth

E$)$ Have a higher stock price than the firm$$s competitors.

$18.$ A client agreed to pay your firm $$23,000$ in four years, plus an additional $$12,000$ in six years. If your discount rate is $3\%,$ what is the present value of these payments?

A$)$ $$35,000\mathrm{.}00$

B$)$ $$31,399\mathrm{.}56$

C$)$ $$20,435\mathrm{.}20$ D$)$ $$30,485\mathrm{.}01$ E$)$ $$33,049\mathrm{.}81$

$19.$ Which ratio calculates the amount of sales generated by each $$1$ of debt and equity invested in the firm?

A$)$ Total Asset Turnover B$)$ Return on Assets

C$)$ Equity Multiplier

D$)$ Return on Equity

E$)$ DuPont Identity

$20.$ Yesterday, ImYong Pharmaceuticals stock sold for $$32$ a share. Today, the overall market fell, and ImYong stock is now selling for $$30$ a share. Which of these ratios will be affected by this market reaction? Assume all else is held constant.

A$)$ Enterprise value multiple and price$-$earnings ratio B$)$ Earnings per share and price$-$earnings ratio

C$)$ Return on equity and return on assets

D$)$ Return on book equity and market$-$to$-$book ratio E$)$ Price$-$earnings ratio and return on book equity