Question 17.17.The length of the operating cycle for a firm is equal to the length of the (Points : 3)

payables deferral period cash conversion cycle receivables conversion period a plus b

Question 18.18.The rate of return on fixed assets is normally assumed to be ____ the rate of return on current assets (especially cash and marketable securities). (Points : 3)

less than greater than equal to none of the above

Question 19.19.All other things being equal, a policy of holding a relatively ____ proportion of the firm's total assets in the form of current assets will tend to result in a ____ expected profitability or rate of return on the total assets of the firm. (Points : 3)

large, higher small, higher constant, higher constant, lower

Question 20.20.When the level of working capital is increased, all of the following are expected to occurexcept(Points : 3)

expected profitability decreases expected profitability increases risk decreases none of the above

Question 21.21.Which of the following major factorsaffect the firm's level of investment in working capital? (Points : 3)

the length of the firm's operating cycle the firm's sales level the firm's inventory and credit policies all of the above

Question 22.22.Historically, the yield curve has generally been ____, which indicates that long-term interest rates usually have been ____ short-term interest rates. (Points : 3)

upward sloping, lower than downward sloping, higher than upward sloping, higher than level, about equal to

Question 23.23.Commercial paper is: (Points : 3)

long-term with maturities greater than one year. short-term with maturities under six months. short-term with maturities that do not exceed nine months. long-term with maturities of greater than five years.

Question 24.24.For Ejection Air Seats Airlines new project, the initial outlay required is $22 million. Net cash flows over the 4-year life cycle and the corresponding certainty-equivalents of the new model are as follows:

Year	Net Cash Flow	Certainty-equivalent
1	$15 million	0.90
2	13 million	0.75
3	11 million	0.55
4	9 million	0.30

The firm's cost of capital is 14% and the risk-free rate is 6%. Bull uses the certainty-equivalent approach in evaluating above-average risk investments such as this one. What is the project's certainty-equivalent NPV? (Points : 3)

$20,083,000 $ 6,628,400 $13,905,000 $ 3,019,400

Question 25.25.The risk-adjusted discount rate approach is preferable to the weighted cost of capital approach when (Points : 3)

all projects have the same risk characteristics the risk-free rate is known with certainty the projects under consideration have different risk characteristics the firm is unlevered

Question 26.26.Injection Aluminium Mines, Inc. is considering adoption of a new project requiring a net investment of $10 million. The project is expected to generate 5 years of net cash inflows of $5 million per year. In the project's sixth, and final year, it is expected to have a net cash outflow of $1 million. What is the project's risk adjustednet present value? The company's cost of capital is 7% but projects of this nature are usually judged by a risk adjusted rate that is 5% higher than cost of capital. (Points : 3)

about $8.52 million about $8.00 million about $7.52 million none of the above

Question 27.27.The expected rate of return for 3COM is 18 percent, with a standard deviation of 10.98 percent. The expected rate of return for Just the Fax is 25 percent with a standard deviation of 15.86%. Which firm would be considered the riskier from a total risk perspective? (Points : 3)

3COM Just the Fax Neither, both have the same risk Cannot be determined

Question 28.28.Dan Goldiehas $3,000 invested in AT&T with an expected return of 11.6 percent; $10,000 in IBM with an expected return of 12.8 percent; and $6,000 in GM with an expected return of 12.2 percent. What is Dan's expected return on his portfolio? (Points : 3)

12.42% 12.20% 11.81% Cannot be determined

Question 29.29.Sandra Gates Industries current common stock dividend (year 0) is $2.50 per share and is expected to continue growing at a rate of 5% per year for the foreseeable future. Currently the risk-free rate is 7.5% and the estimated market risk premium (i.e., k_m- r_f) is 8.3%. Value Line has estimated Sandra Gates Industries' beta to be 1.10. Determine the expected price for Sandra Gates Industries' common stock. (Points : 4)

$21.50 $15.03 $15.78 $22.57

Question 30.30.The cost of external equity is greater than the cost of internal equity because (Points : 3)

it decreases the earnings per share it increases the market price of the stock of the flotation costs dividends are increased

Question 31.31.American Dental Laser is selling a 10 year $1,000 face value bond with a 8% coupon rate. Interest is paid annually. The price to the public is $820 and the issue costs per bond are $10 each. Compute the pretax cost of debt for these bonds. (Points : 3)

11.1% 11.3% 11.5% 11.8%

Question 32.32.Kevin John Wright Express(KJWE) has a capital structure of 30% debt and 70% equity. KJWE is considering a project that requires an investment of $2.6 million. To finance this project, KJWE plans to issue 10-year bonds with a coupon interest rate of 12%. Each of these bonds has a $1,000 face value and will be sold to net KJWE $980. If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for KJWE? Assumethe companyhas a beta of 1.20 and a marginal tax rate of 40%. (Points : 3)

14.9% 12.4% 13.4% 16.0%

Question 33.33.The most appropriate weights to use in calculating a firm's cost of capital are the proportions of the components in the firm's ____ capital structure. (Points : 3)

historical average long-range target current industry average