1. Scenario 1 The financial statements and data shown below are to be used for the next three (3) questions. All figures are in millions except the tax rate and the year-end stock price.

   BALANCE SHEET
   Cash	$ 140.0		Accounts payable	$ 800.0
   Accts. receivable	880.0		Notes payable	600.0
   Inventories	1,320.0		Accruals	400.0
   Total current assets	$2,340.0		Total current liabilities	$1,800.0
   			Long-term bonds	1,000.0
   			Total debt	$2,800.0
   			Common stock	200.0
   			Retained earnings	1,000.0
   Net plant & equip.	1,660.0		Total common equity	$1,200.0
   Total assets	$4,000.0		Total liabilities & equity	$4,000.0
   INCOME STATEMENT
   Net sales	$6,000.0
   Operating costs	5,599.8
   Depreciation	100.2
   EBIT	$ 300.0
   Less: Interest	96.0
   EBT	$ 204.0
   Less: Taxes	81.6
   Net income	$ 122.4
   OTHER DATA
   Shares outstanding	60.00
   Common dividends	$42.8
   Federal plus state income tax rate	40%
   Year-end stock price	$30.60

   Use Scenario 1 to answer the question. What is the firm's quick ratio?

   0.57

   0.83

   1.10

   1.30

   1.43

2. Scenario 1 The financial statements and data shown below are to be used for the next three (3) questions. All figures are in millions except the tax rate and the year-end stock price.

   BALANCE SHEET
   Cash	$ 140.0		Accounts payable	$ 800.0
   Accts. receivable	880.0		Notes payable	600.0
   Inventories	1,320.0		Accruals	400.0
   Total current assets	$2,340.0		Total current liabilities	$1,800.0
   			Long-term bonds	1,000.0
   			Total debt	$2,800.0
   			Common stock	200.0
   			Retained earnings	1,000.0
   Net plant & equip.	1,660.0		Total common equity	$1,200.0
   Total assets	$4,000.0		Total liabilities & equity	$4,000.0
   INCOME STATEMENT
   Net sales	$6,000.0
   Operating costs	5,599.8
   Depreciation	100.2
   EBIT	$ 300.0
   Less: Interest	96.0
   EBT	$ 204.0
   Less: Taxes	81.6
   Net income	$ 122.4
   OTHER DATA
   Shares outstanding	60.00
   Common dividends	$42.8
   Federal plus state income tax rate	40%
   Year-end stock price	$30.60

   Use Scenario 1 to answer the question. What is the firm's current ratio?

   0.57

   0.83

   1.10

   1.30

   1.43

3. Scenario 1 The financial statements and data shown below are to be used for the next three (3) questions. All figures are in millions except the tax rate and the year-end stock price.

   BALANCE SHEET
   Cash	$ 140.0		Accounts payable	$ 800.0
   Accts. receivable	880.0		Notes payable	600.0
   Inventories	1,320.0		Accruals	400.0
   Total current assets	$2,340.0		Total current liabilities	$1,800.0
   			Long-term bonds	1,000.0
   			Total debt	$2,800.0
   			Common stock	200.0
   			Retained earnings	1,000.0
   Net plant & equip.	1,660.0		Total common equity	$1,200.0
   Total assets	$4,000.0		Total liabilities & equity	$4,000.0
   INCOME STATEMENT
   Net sales	$6,000.0
   Operating costs	5,599.8
   Depreciation	100.2
   EBIT	$ 300.0
   Less: Interest	96.0
   EBT	$ 204.0
   Less: Taxes	81.6
   Net income	$ 122.4
   OTHER DATA
   Shares outstanding	60.00
   Common dividends	$42.8
   Federal plus state income tax rate	40%
   Year-end stock price	$30.60

   Use Scenario 1 to answer the question. What is the firms P/E ratio?

   10.0

   12.5

   15.0

   17.5

   20.0

4. Smiths Dairy Products reported sales of $1.5 million in 2012 and $2.25 million in 2013. The firms EBIT was $550,000 in 2012 and rose to $925,000 in 2013. What is the companys operating leverage?

   		0.59
   		1.36
   		1.50
   		2.25

According to the capital asset pricing model (CAPM), the security market line is a straight line. The intercept of this line should be equal to

zero

the expected risk premium on the market portfolio

the risk-free rate

the expected return on the market portfolio

You want to find out at which point a projects profits and costs are equal. You will more likely conduct

a sensitivity analysis

a breakeven analysis

a decision tree analysis

a scenario analysis

1. A bond has a $1,000 par value, a market price of $1,036, and pays an annual coupon of $70. What is the bonds coupon rate?

   7%

   7.71%

   7.79%

   8%

2. The 8%, $1,000 face value bond of Glenmore Foods is currently selling at $1,027. The bond has 16 years left to maturity. What is the current yield (also known as coupon yield) of this bond?

   		7%
   		7.71%
   		7.79%
   		8%

3. Which of the following cannot be calculated?

   		Present value of an annuity.
   		Future value of an annuity.
   		Present value of a perpetuity.
   		Future value of a perpetuity.

4. The process of identifying which investment projects a firm should undertake is called:

   		Capital investment
   		Capital spending
   		Capital budgeting
   		Capital rationing