FIN 370 324 Questions and Answers

FIN 370 324 Questions and Answers


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The true owners of the corporation are the:

Which of the following categories of owners have limited liability?

Which of the following best describes the goal of the firm?

Which of the following would increase the need for external equity?

Which of the following does NOT involve underwriting by an investment banker?

__________ is a method of offering securities to a limited number of investors.

Difficulty in finding profitable projects is due to:

According to the agency problem, _________ represent the principals of a corporation.

Which of the following is NOT a principle of basic financial management?

Another name for the acid test ratio is the:

Marshall Networks, Inc. has a total asset turnover of 2.5% and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshalls debt ratio.

The accounting rate of return on stockholders investments is measured by:

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compounded) daily using a 365-day year. What is the effective annual rate of return (APY)?

You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years?

When George Washington was president of the United States in 1797, his salary was $25,000. If you assume an annual rate of inflation of 2.5%, how much would his salary have been in 1997?

Which of the following is NOT a basic function of a budget?

The primary purpose of a cash budget is to:

All of the following are found in the cash budget EXCEPT:

Which of the following is a non-cash expense?

The break-even model enables the manager of a firm to:

A plant can remain operating when sales are depressed:

If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?

At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

The present value of a single future sum:

Which of the following is considered to be a spontaneous source of financing?

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with:

Which of the following is NOT considered a permanent source of financing?

For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________.

We compute the profitability index of a capital-budgeting proposal by:

Dieyard Battery Recyclers is considering a project with the following cash flows:

Initial outlay = $13,000 Cash flows: Year 1=$5,000 Year 1=$3,000 Year 3=$9,000

If the appropriate discount rate is 15%, compute the NPV of this project.

Which of the following statements about the MIRR is false?

Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk.

You have been asked to analyze a capital investment proposal. The projects cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the projects MIRR?

The NPV assumes cash flows are reinvested at the:

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

The firm should accept independent projects if:

The average cost associated with each additional dollar of financing for investment projects is:

Cost of capital is:

PepsiCo uses 30-year Treasury bonds to measure the risk-free rate because:

J & B, Inc. has $5 million of debt outstanding with a coupon rate of 12%. Currently, the yield to maturity on these bonds is 14%. If the firms tax rate is 40%, what is the cost of debt to J & B?

Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt10%; preferred stock11%; and common stock18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%?

Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

Zybeck Corp. projects operating income of $4 million next year. The firms income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year?

Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%?

Which of the following statements about exchange rates is true?

A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

Capital markets in foreign countries:

If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

A spot transaction occurs when one currency is:

Buying and selling in more than one market to make a riskless profit is called:

One reason for international investment is to reduce:

An important (additional) consideration for a direct foreign investment is:

Which of the following best describes the goal of the firm?

Which of the following categories of owners have limited liability?

The true owners of the corporation are the:

When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored?

Which of the following would increase the need for external equity?

Money market instruments include:

Difficulty in finding profitable projects is due to:

Which of the following is NOT a principle of basic financial management?

According to the agency problem, _________ represent the principals of a corporation.

The accounting rate of return on stockholders investments is measured by:

Marshall Networks, Inc. has a total asset turnover of 2.5% and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshalls debt ratio.

Another name for the acid test ratio is the:

Edward Johnson decided to open up a Roth IRA. He will invest $1,800 per year for the next 35 years. Deposits to the Roth IRA will be made via a $150 payroll deduction at the end of each month. Assume that Edward will earn 8.75% over the life of the IRA. How much will he have at the end of 35 years?

When George Washington was president of the United States in 1797, his salary was $25,000. If you assume an annual rate of inflation of 2.5%, how much would his salary have been in 1997?

You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years?

All of the following are found in the cash budget EXCEPT:

Which of the following statements about the percent-of-sales method of financial forecasting is true?

The primary purpose of a cash budget is to:

A plant can remain operating when sales are depressed:

Which of the following is a non-cash expense?

The break-even model enables the manager of a firm to:

Which of the following is the formula for compound value?

The present value of a single future sum:

How long will it take $750 to double at 8% compounded annually?

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with:

Which of the following is NOT considered a permanent source of financing?

Which of the following is considered to be a spontaneous source of financing?

Compute the payback period for a project with the following cash flows, if the companys discount rate is 12%.

Initial outlay = $450 Cash flows: Year 1=$325 Year 1=$ 65 Year 3=$100

For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________.

We compute the profitability index of a capital-budgeting proposal by:

Which of the following statements about the MIRR is false?

Most firms use the payback period as a secondary capital-budgeting technique, which, in a sense, allows them to control for risk.

You have been asked to analyze a capital investment proposal. The projects cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the projects MIRR?

The NPV assumes cash flows are reinvested at the:

The firm should accept independent projects if:

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

The most expensive source of capital is:

The marginal cost of preferred stock is equal to:

The average cost associated with each additional dollar of financing for investment projects is:

The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%?

Given the following information, determine the risk-free rate.

Cost of equity=12% Beta=1.50 Market risk premium=3%

The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

Zybeck Corp. projects operating income of $4 million next year. The firms income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year?

Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%?

_________ risk is generally considered only a paper gain or loss.

Capital markets in foreign countries:

A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

A spot transaction occurs when one currency is:

If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

An important (additional) consideration for a direct foreign investment is:

One reason for international investment is to reduce:

Buying and selling in more than one market to make a riskless profit is called:

In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost?

Which of the following best describes the goal of the firm?

Which of the following categories of owners have limited liability?

Which of the following does NOT involve underwriting by an investment banker?

Money market instruments include:

Which of the following would increase the need for external equity?

Difficulty in finding profitable projects is due to:

Which of the following is NOT a principle of basic financial management?

According to the agency problem, _________ represent the principals of a corporation.

Marshall Networks, Inc. has a total asset turnover of 2.5% and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshalls debt ratio.

The accounting rate of return on stockholders investments is measured by:

Which of the following financial ratios is the best measure of the operating effectiveness of a firms management?

You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years?

Edward Johnson decided to open up a Roth IRA. He will invest $1,800 per year for the next 35 years. Deposits to the Roth IRA will be made via a $150 payroll deduction at the end of each month. Assume that Edward will earn 8.75% over the life of the IRA. How much will he have at the end of 35 years?

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compounded) daily using a 365-day year. What is the effective annual rate of return (APY)?

Which of the following statements about the percent-of-sales method of financial forecasting is true?

Which of the following is NOT a basic function of a budget?

All of the following are found in the cash budget EXCEPT:

The break-even model enables the manager of a firm to:

Which of the following is a non-cash expense?

A plant can remain operating when sales are depressed:

At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

How long will it take $750 to double at 8% compounded annually?

If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?

Which of the following is NOT considered a permanent source of financing?

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with:

Which of the following is considered to be a spontaneous source of financing?

Compute the payback period for a project with the following cash flows, if the companys discount rate is 12%. Initial outlay = $450 Cash flows: Year 1 = $325 Year 2 = $ 65 Year 3 = $100

Arties Soccer Ball Company is considering a project with the following cash flows: Initial outlay = $750,000 Incremental after-tax cash flows from operations Years 14 = $250,000 per year Compute the NPV of this project if the companys discount rate is 12%.

Dieyard Battery Recyclers is considering a project with the following cash flows: Initial outlay = $13,000 Cash flows: Year 1 = $5,000 Year 2 = $3,000 Year 3 = $9,000 If the appropriate discount rate is 15%, compute the NPV of this project.

Most firms use the payback period as a secondary capital-budgeting technique, which, in a sense, allows them to control for risk.

Which of the following statements about the MIRR is false?

Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk.

The firm should accept independent projects if:

The NPV assumes cash flows are reinvested at the:

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

The most expensive source of capital is:

The marginal cost of preferred stock is equal to:

The average cost associated with each additional dollar of financing for investment projects is:

J & B, Inc. has $5 million of debt outstanding with a coupon rate of 12%. Currently, the yield to maturity on these bonds is 14%. If the firms tax rate is 40%, what is the cost of debt to J & B?

Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt10%; preferred stock11%; and common stock18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

Zybeck Corp. projects operating income of $4 million next year. The firms income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year?

Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%?

_________ risk is generally considered only a paper gain or loss.

A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

Capital markets in foreign countries:

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

A spot transaction occurs when one currency is:

Buying and selling in more than one market to make a riskless profit is called:

An important (additional) consideration for a direct foreign investment is:

One reason for international investment is to reduce:

Which of the following best describes the goal of the firm?

The true owners of the corporation are the:

In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost?

Which of the following would increase the need for external equity?

When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored?

Money market instruments include:

Which of the following is NOT a principle of basic financial management?

According to the agency problem, _________ represent the principals of a corporation.

Difficulty in finding profitable projects is due to:

Which of the following financial ratios is the best measure of the operating effectiveness of a firms management?

The accounting rate of return on stockholders investments is measured by:

Marshall Networks, Inc. has a total asset turnover of 2.5% and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshalls debt ratio.

You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years?

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compouned) daily using a 365-day year. What is the effective annual rate of return (APY)?

Suppose that you wish to save for your child's college education by opening up an educational IRA. You plan to deposit $100 per month into the IRA for the next 18 years. Assume that you will be able to earn 10%, compounded monthly, on your investment. How much will you have accumulated at the end of 18 years?

All of the following are found in the cash budget EXCEPT:

The primary purpose of a cash budget is to:

Which of the following statements about the percent-of-sales method of financial forecasting is true?

The break-even model enables the manager of a firm to:

Which of the following is a non-cash expense?

A plant can remain operating when sales are depressed:

If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?

The present value of a single future sum:

How long will it take $750 to double at 8% compounded annually?

Which of the following is considered to be a spontaneous source of financing?

Which of the following is NOT considered a permanent source of financing?

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with:

Dieyard Battery Recyclers is considering a project with the following cash flows: Initial outlay = $13,000 Cash flows:Year 1=$5,000 Year 2=$3,000 Year 3=$9,000 If the appropriate discount rate is 15%, compute the NPV of this project.

Arties Soccer Ball Company is considering a project with the following cash flows: Initial outlay = $750,000 Incremental after-tax cash flows from operations Years 14 = $250,000 per year Compute the NPV of this project if the companys discount rate is 12%.

Compute the payback period for a project with the following cash flows, if the companys discount rate is 12%. Initial outlay = $450 Cash flows:Year 1=$325 Year 2=$ 65 Year 3=$100

Which of the following is considered to be a deficiency of the IRR?

Most firms use the payback period as a secondary capital-budgeting technique, which, in a sense, allows them to control for risk.

You have been asked to analyze a capital investment proposal. The projects cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the projects MIRR?

The firm should accept independent projects if:

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

The NPV assumes cash flows are reinvested at the:

The most expensive source of capital is:

The marginal cost of preferred stock is equal to:

The average cost associated with each additional dollar of financing for investment projects is:

The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt10%; preferred stock11%; and common stock18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

Given the following information, determine the risk-free rate. Cost of equity=12% Beta=1.50 Market risk premium=3%

Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

Zybeck Corp. projects operating income of $4 million next year. The firms income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year?

Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%?

A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

Capital markets in foreign countries:

Which of the following statements about exchange rates is true?

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

A spot transaction occurs when one currency is:

If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

One reason for international investment is to reduce:

Buying and selling in more than one market to make a riskless profit is called:

An important (additional) consideration for a direct foreign investment is:

Which of the following categories of owners have limited liability?

In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost?

Which of the following best describes the goal of the firm?

Which of the following would increase the need for external equity?

When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored?

Which of the following does NOT involve underwriting by an investment banker?

Difficulty in finding profitable projects is due to:

According to the agency problem, _________ represent the principals of a corporation.

Which of the following is NOT a principle of basic financial management?

Another name for the acid test ratio is the:

The accounting rate of return on stockholders investments is measured by:

Which of the following financial ratios is the best measure of the operating effectiveness of a firms management?

Suppose that you wish to save for your child's college education by opening up an educational IRA. You plan to deposit $100 per month into the IRA for the next 18 years. Assume that you will be able to earn 10%, compounded monthly, on your investment. How much will you have accumulated at the end of 18 years?

If you are an investor, which of the following would you prefer?

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compouned) daily using a 365-day year. What is the effective annual rate of return (APY)?

Which of the following statements about the percent-of-sales method of financial forecasting is true?

Which of the following is NOT a basic function of a budget?

The primary purpose of a cash budget is to:

A plant can remain operating when sales are depressed:

Which of the following is a non-cash expense?

The break-even model enables the manager of a firm to:

If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?

Which of the following is the formula for compound value?

The present value of a single future sum:

Which of the following is NOT considered a permanent source of financing?

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with:

Which of the following is considered to be a spontaneous source of financing?

Dieyard Battery Recyclers is considering a project with the following cash flows:

Initial outlay = $13,000 Cash flows: Year 1=$5,000 Year 1=$3,000 Year 3=$9,000

If the appropriate discount rate is 15%, compute the NPV of this project.

For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________.

Compute the payback period for a project with the following cash flows, if the companys discount rate is 12%.

Initial outlay = $450 Cash flows: Year 1=$325 Year 1=$ 65 Year 3=$100

Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk.

Which of the following is considered to be a deficiency of the IRR?

You have been asked to analyze a capital investment proposal. The projects cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the projects MIRR?

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

The firm should accept independent projects if:

The NPV assumes cash flows are reinvested at the:

The average cost associated with each additional dollar of financing for investment projects is:

PepsiCo uses 30-year Treasury bonds to measure the risk-free rate because:

Cost of capital is:

The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%?

Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt10%; preferred stock11%; and common stock18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

Zybeck Corp. projects operating income of $4 million next year. The firms income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year?

Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%?

Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

Capital markets in foreign countries:

A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

_________ risk is generally considered only a paper gain or loss.

A spot transaction occurs when one currency is:

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

One reason for international investment is to reduce:

An important (additional) consideration for a direct foreign investment is:

Buying and selling in more than one market to make a riskless profit is called:

The true owners of the corporation are the:

Which of the following categories of owners have limited liability?

In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost?

When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored?

Which of the following does NOT involve underwriting by an investment banker?

__________ is a method of offering securities to a limited number of investors.

Difficulty in finding profitable projects is due to:

According to the agency problem, _________ represent the principals of a corporation.

Which of the following is NOT a principle of basic financial management?

Marshall Networks, Inc. has a total asset turnover of 2.5% and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshalls debt ratio.

The accounting rate of return on stockholders investments is measured by:

Which of the following financial ratios is the best measure of the operating effectiveness of a firms management?

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compouned) daily using a 365-day year. What is the effective annual rate of return (APY)?

You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years?

Suppose that you wish to save for your child's college education by opening up an educational IRA. You plan to deposit $100 per month into the IRA for the next 18 years. Assume that you will be able to earn 10%, compounded monthly, on your investment. How much will you have accumulated at the end of 18 years?

All of the following are found in the cash budget EXCEPT:

The primary purpose of a cash budget is to:

Which of the following statements about the percent-of-sales method of financial forecasting is true?

The break-even model enables the manager of a firm to:

A plant can remain operating when sales are depressed:

Which of the following is a non-cash expense?

If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?

Which of the following is the formula for compound value?

At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

Which of the following is NOT considered a permanent source of financing?

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with:

Which of the following is considered to be a spontaneous source of financing?

Dieyard Battery Recyclers is considering a project with the following cash flows:

Initial outlay = $13,000 Cash flows: Year 1=$5,000 Year 1=$3,000 Year 3=$9,000

If the appropriate discount rate is 15%, compute the NPV of this project.

We compute the profitability index of a capital-budgeting proposal by:

Compute the payback period for a project with the following cash flows, if the companys discount rate is 12%.

Initial outlay = $450 Cash flows: Year 1=$325 Year 1=$ 65 Year 3=$100

Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk.

Most firms use the payback period as a secondary capital-budgeting technique, which, in a sense, allows them to control for risk.

Which of the following is considered to be a deficiency of the IRR?

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)

The firm should accept independent projects if:

The NPV assumes cash flows are reinvested at the:

PepsiCo uses 30-year Treasury bonds to measure the risk-free rate because:

The average cost associated with each additional dollar of financing for investment projects is:

The marginal cost of preferred stock is equal to:

The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%?

Given the following information, determine the risk-free rate.

Cost of equity=12% Beta=1.50 Market risk premium=3%

Lever Brothers has a debt ratio (debt to assets) of 20%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,680,000, with 457,143 shares of common stock outstanding. If the firm were to instead have a debt ratio of 40%, additional interest expense would cause profits available to stockholders to decline to $1,560,000, but only 342,857 common shares would be outstanding. What is the difference in EPS at a debt ratio of 40% versus 20%?

Zybeck Corp. projects operating income of $4 million next year. The firms income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will projected EPS be next year?

Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brotherss present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

_________ risk is generally considered only a paper gain or loss.

Capital markets in foreign countries:

A spot transaction occurs when one currency is:

If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

An important (additional) consideration for a direct foreign investment is:

One reason for international investment is to reduce:

Buying and selling in more than one market to make a riskless profit is called:

FIN 370
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Excerpt from file: Finance Tutorial 1) The true owners of the corporation are the: A. B. C. D. board of directors of the firm. preferred stockholders. common stockholders. holders of debt issues of the firm. 2) Which of the following categories of owners have limited liability? A. B. C. D. General partners Sole

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Excerpt from file: BHM443Module 5 SLP Patient Consent/Patient Rights & Responsiblities/End of Life Session Long Project: Patient Rights For your session-long project, you will be performing a case study analysis. The final paper is due in this module. It should be about the Robert Courtney case. The analysis will be

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