QUESTION 1

ch 17 Theresa owns 50 shares of FloorMart Inc. The firm has a semiannual dividend policy of $0.75 per share or the option to reinvest the cash dividends into additional shares of company stock. If the stock is selling for $25.00 per share ex-dividend, how many shares of stock will Theresa receive in the next dividend period if she chooses the dividend reinvestment plan?

	6.7 shares
	0.73 shares
	1.5 shares
	0.67 shares

4 points

QUESTION 2

ch 10

The EBIT is $40,000, depreciation is $10,000, and taxes are $6,000. What is the operating cash flow (OCF)?

	$28,000
	$56,000
	$44,000
	$50,000

6 points

QUESTION 3

ch 10 A firm has revenue of $100,000, the cost of goods sold is $46,000, other expenses (from selling and administration) are $28,000, interest expenses are $8,000 and depreciation is $10,000. What is the EBIT?

	$16,000
	$54,000
	$26,000
	$8,000

ch 11.1 Jensen Motorsports has a new project that will require the company to borrow $5,000,000. Jensen's has made an agreement with three lenders for the needed financing. Citizens' Bank will give $2,500,000 and wants 9% interest on the loan. Visitors' Bank will give $2,000,000 and wants 13% interest on the loan. Peoples' Bank will give $500,000 and wants 16% interest on the loan. What is the weighted average cost of capital for this $5,000,000?

	10.45%
	11.3%
	11.67%
	12.26%

6 points

QUESTION 7

ch 11.1 The weighted average cost of capital is ______

	the average of the cost of each financing component, weighted by the proportion of each component
	the cost of capital for the firm as a whole
	made up of three financing components: the cost of debt, the cost of preferred stock, and the cost of equity
	All of the above

3 points

QUESTION 8

ch 11.2 Use the security market line to determine the required rate of return for the following firm's stock. The firm has a beta of 1.18, the required return in the market place is 13%, and the risk-free rate of return is 2%

	11.70%
	4.80%
	8.20%
	14.98%

Using the information provided, what is the inventory turnover for the firm? (hint: average inventory is the sum of beginning and ending inventory divided by 2)

Perfect Purchase Electronics

Selected Income Statement Items, 2014

Cash Sales $1,500,000

Credit Sales $7,500,000

Total Sales $9,000,000

COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts

12/31/2014 12/31/2013 Change

Accounts Receivable $270,000 $240,000 $30,000

Inventory $125,000 $100,000 $25,000

Accounts Payable $110,000 $90,000 $20,000

	48.00 times
	53.33 times
	60.00 times
	23.53 times

ch 17.4 Surf City Inc. has decided on a 4-for-1 stock split. If the firm currently has 7,000,000 shares outstanding, how many shares will be outstanding after the stock split?

	1,750,000 shares
	7,000,000 shares
	28,000,000 shares
	7,400,000 shares

QUESTION 30

ch 8

Candace owns the following portfolio of securities. What is the beta for the portfolio?

Company	Beta	Percent of Portfolio
Exxon-Mobil	.95	40%
Pacific Industries	1.20	35%
Payson Restaurants	1.35	25%
	1.0000
	1.1375
	0.9500
	1.1705

6 points

QUESTION 31

ch 8

Stock A B C D

Expected Return 5% 5% 7% 6%

Standard Deviation 10% 12% 12% 11%

Which of the following statements is true?

	A is a better investment than B
	C is a better investment than D
	D is a better investment than C
	B is a better investment than C

6 points

QUESTION 32

ch 8 Devon purchased Hampton Industries Inc. stock for $14.65 and sold it 6 months later for $17.38 after receiving a $0.25 dividend. What is Devon's holding period return (HPR), Annual Percentage Rate (APR), and Effective Annual Rate (EAR)?

Hint: The holding period is only 6 months, so the APR represents a whole year , which is twice the holding period return. The EAR can also be calculated with the financial calculator. The APR is the NOM%, 2 is the the P/YR, then calculate EFF%.

	20.34%, 40.68%, 9.70%
	18.63%, 37.27%, 40.74%
	20.34%, 40.68%, 44.82%
	17.15%, 34.29%, 37.23%

6 points

QUESTION 33

ch 8 JulieMarie bought a share of stock for $47.50 that paid a dividend of $.72 and sold one year later for $51.38. What was JulieMarie's dollar profit or loss and holding period return?

	$3.88, 8.95%
	$3.88, 9.68%
	$4.60, 9.68%
	$0.72, 7.55%

ch 9.3 Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $110,000. The future cash inflows from its project are $30,000, $25,000, $50,000 and $40,000 for years 1, 2, 3 and 4, respectively. Dweller uses the net present value method and has a discount rate of 10%. Will Dweller accept the project?
		Dweller rejects the project because the NPV is -$3,021
		Dweller rejects the project because the NPV is less than -$4,000
		Dweller accepts the project because the NPV is greater than $3000
		Dweller accepts the project because the NPV is greater than $2800

6 points

QUESTION 39

ch 9.3 Geronimo, Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $190,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $40,000, $70,000 and $45,000. Geronimo uses the net present value method and has a discount rate of 12%. Will Geronimo accept the project?

	Geronimo rejects the project because the NPV is about -$35,046.46
	Geronimo rejects the project because the NPV is about -$12,375.60
	Geronimo rejects the project because the NPV is about -$2,375.60
	Geronimo accepts the project because the NPV is greater than $20,000.00