Question 1 (1 point)

For pro forma purposes, the Martin-Jones Company uses a 7.5% profit margin and a 60 percent dividend payout ratio. Sales for next year are projected to be $267,000. What is the projected addition to retained earnings?

Question 1 options:

A)

$12,455

B)

$9,120

C)

$12,015

D)

$8,010

E)

$8,660

Question 2 (1 point)

A firm currently has sales of $1.32 million and $964,500 in fixed assets. Currently operations are at 84% of capacity. By how much can sales increase without requiring the firm to purchase any additional fixed assets?(Enter values in dollars)

Question 2 options:

A)

$251,429

B)

$355,500

C)

$154,320

D)

$211,200

E)

$183,714

Question 3 (1 point)

Calculate payout ratio given the following information: cash dividends paid = $4,200; sales = $80,000; cost of goods sold = $30,000; selling and administrative expenses = $8,000; interest expense = $2,000; tax rate = 30%.

Question 3 options:

A)

15%

B)

35%

C)

75%

D)

85%

E)

45%

Question 4 (1 point)

Financial planning:

Question 4 options:

A)	For capital acquisitions is done on a purely segregated basis.

B)	Is limited to projecting activities of a firm for the next twelve months.

C)	Is formulated based primarily on a net income assumption.

D)	Focuses solely on the assumptions that are most likely to occur.

E)	Formulates the way in which financial goals are to be achieved.

Question 5 (1 point)

Calculate cash given the following information. Total current assets $57,000; supplies $4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of goods sold 75,000.

Question 5 options:

A)

$22,000

B)

$24,000

C)

$16,000

D)

$20,000

E)

$18,000

Question 6 (1 point)

Jacob's Jewelers is considering carrying a new product line which is expected to produce annual sales of $450,000 and increase cash expenses by $305,001. If the product line is added, taxes will increase by $38,001. The additional depreciation expense will be $36,001. An initial cash outlay of $65,000 is required for net working capital. What is the amount of the operating cash flow using the top-down approach?

Question 6 options:

A)

$42,000

B)

$172,000

C)

$136,000

D)

$71,000

E)

$107,000

Question 7 (1 point)

Adaptomatic Corp. has just issued their latest financial statements. The statement of financial position contains the following information. Which one of the following statements is true?

	Beginning	Ending
Accounts receivable	$1,300	$1,400
Inventory	$2,000	$1,800
Accounts payable	$1,700	$1,600

Question 7 options:

A)	There was no change in net working capital.

B)	Net working capital increased by $200 during the period.

C)	Inventory required a use of cash during the period.

D)	Net working capital decreased by $200 during the period.

E)	Accounts receivable was a source of cash during the period.

Question 8 (1 point)

The most valuable investment given up if an alternative investment is chosen is a(n):

Question 8 options:

A)	Erosion cost.

B)	Net working capital expense.

C)	Sunk cost.

D)	Salvage value expense.

E)	Opportunity cost.

Question 9 (1 point)

Great Enterprises is analyzing two machines to determine which one they should purchase. The company requires a 13% rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $285,000, annual operating costs of $8,500, and a 3-year life. Machine B costs $210,000, has annual operating costs of $14,000, and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Great Enterprises should select machine ________ because it will save the company about ________ a year in costs.

Question 9 options:

A)	B; $16,204

B)	A; $10,688

C)	B; $14,987

D)	A; $17,716

E)

B; $5,500

Question 10 (1 point)

TreeTop Ltd. currently sells $189,000 of trees, $286,400 of evergreen shrubbery, and $62,800 of flowers. It is considering adding flowering shrubs to their product line. Given this change only, sales are estimated at $168,000 for trees, $239,700 for evergreen shrubbery, $59,900 for flowers, and $136,800 for the flowering shrubs. What is the amount of the erosion?

Question 10 options:

A)

$73,300

B)

$68,900

C)

$136,800

D)

$66,200

E)

$70,600

Question 11 (1 point)

Variable costs ________.

Question 11 options:

A)	comprise the sum total of all production expenses of the firm for some time period.

B)	change as a function of the next unit of output produced.

C)	(for a given time period) are constant no matter the quantity of output produced.

D)	comprise the sum total of all production expenses of the firm for some time period, expressed relative to the total output produced for that same time period.

E)	change as a function of the quantity of output produced.

Question 12 (1 point)

The possibility that errors in projected cash flows can lead to incorrect NPV estimates is called:

Question 12 options:

A)	Monte Carlo risk.

B)	Forecasting risk.

C)	Scenario risk.

D)	Accounting risk.

E)	Projection risk.

Question 13 (1 point)

A project that just breaks even on a cash basis ________.

Question 13 options:

A)	Does not pay back.

B)	Will pay back prior to the end of the project.

C)	Has an IRR equal to 0 %.

D)	Will exactly pay back by the end of the project.

E)	Has a profitability index of 2.

Question 14 (1 point)

A firm is considering a project with a cash break-even point of 8,100 units. The selling price is $12.50 a unit and the variable cost per unit is $6.25. What is the amount of the total fixed costs?

Question 14 options:

A)

$49,875

B)

$51,125

C)

$50,625

D)

$49,375

E)

$51,938

Question 15 (1 point)

The financial break-even identifies the minimum level of sales quantity required to:

Question 15 options:

A)	Accept a project based on the net present value.

B)	Accept a project based on the accounting rate of return.

C)	Have a positive internal rate of return.

D)	Cause the operating cash flow to equal zero.

E)	Have cash inflows equal cash outflows.

Question 16 (1 point)

The Green Shoe provision is engaged when the underwriters:

Question 16 options:

A)	Need to decrease the offer price to increase demand.

B)	Oversubscribe an issue.

C)	Opt to enforce a lockup agreement.

D)	Wish to forego the quiet period.

E)	Opt to increase the offer price.

Question 17 (1 point)

Calculate the number of rights to buy one share, given the following information: $3 per value of each right; subscription price of $9; $20 common share price during the rights-on period.

Question 17 options:

A)

2.30

B)

2.70

C)

2.90

D)

2.50

E)

3.10

Question 18 (1 point)

If an underwriter buys securities from an issuing firm and sells them directly to a small number of investors, the underwriter has:

Question 18 options:

A)	Used best efforts underwriting.

B)	Used regular underwriting to sell the securities.

C)	A bought deal.

D)	A firm commitment offer.

E)	A larger bid-ask spread on the securities.

Question 19 (1 point)

A Montreal firm faces direct costs of 8% of the amount of cash raised for new security sales. If $6 million needs to be raised for a new project, what is the total dollars of flotation costs?

Question 19 options:

A)

$480,000

B)

$750,000

C)

$0

D)

$521,739

E)

$542,726

Question 20 (1 point)

________ considered an indirect flotation cost.

Question 20 options:

A)	Taxes incurred as a result of the issue are.

B)	The underwriter's spread is.

C)	Legal fees are.

D)	Underpricing is.

E)	Filing fees are.