BFIN 322

CH7 Quiz 6: Venus, Inc. has an issue of preferred stock outstanding that pays a $9.00 dividend every year, in perpetuity. If this issue currently sells for $164.60 per share, what is the required return? 7.69% 6.81% 5.47% 8.23%

5.47%

CH10/11 Quiz9: You invest 60% of your money in SPY and rest in Treasury Bill. SPY is expected to give an annual return of 9% while the annual T-bill rate is 0.5%. Find out the total return of your portfolio. Can not be determined 3.96% 19.90% 5.6%

5.6%

Ch4 Quiz 3: Suppose that in 2010, a $10 silver certificate from 1898 sold for $11,200. For this to have been true, what would the annual increase in the value of the certificate have been? 6.47 percent 7.49 percent 7.97 percent None of the above

6.47 percent

Ch9 Quiz 8: A project has sales of $462,000, costs of $274,000, depreciation of $26,000, interest expense of $3,400, and a tax rate of 35 percent. What is the value of the depreciation tax shield? 9,100 None of the above 9,500 10,650

9,100

CH6 Quiz5: A bond has a yield to maturity of 9.38 percent, a 7.5 percent annual coupon, a $1,000 face value, and a maturity date 21 years from today. What is the current yield? 9.04% 9.54% 9.14% 9.34%

9.04%

CH7 Quiz 6: Delfino's expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually? $1.50 × (1.02)4 $1.50 × (1.02)1 $1.50 × (1.02)5 $1.50

$1.50 × (1.02)4

CH4 Quiz 3: You are scheduled to receive $7,500 in three years. When you receive it, you will invest it for eight more years at 7.5 percent per year. How much will you have in eleven years? $13,376.08 $14,428.09 $15,110.24 $16,617.07

$13,376.08

Ch7 Quiz 6: This morning, you purchased a stock that will pay an annual dividend of $1.90 per share next year. You require a 12 percent rate of return and the annual dividend increases at 3.5 percent annually. What will your capital gain be on this stock if you sell it three years from now? $2.43 $2.23 $2.63 $2.83

$2.43

CH7 Quiz 6: Braxton's Cleaning Company stock is selling for $32.60 a share based on a 14 percent rate of return. What is the amount of the next annual dividend if the dividends are increasing by 5 percent annually? $2.93 $2.71 $2.75 $2.86

$2.93

Ch7 Quiz 6: Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 a share at a required return of 14 percent. What is the amount of the last dividend this company paid? $3.75 $3.85 $3.65 $3.50

$3.50

CH8 Quiz 7: What is the net present value of a project with the following cash flows if the discount rate is 15 percent? Year 0: -$39,400 Year 1: $12,800 Year 2: $21,700 Year 3: $18,100 $39.40 $42.97 $48.22 $48.30

$39.40

CH2/3 Quiz 2: Mike's Place has total assets of $123,900, a debt-equity ratio of 2. How much equity does the firm have? $61,950 $41,300 247,800 None of the above

$41,300

CH5 Quiz4: Ellery wants to have $25,000 in an investment account four years from now. The account will pay 0.2 percent interest per month. If she saves money every month, starting one month from now, how much will she have to save each month to reach her goal? $496.75 $501.03 $497.75 $497.03

$496.75

CH2/3 Quiz 2: MountainState Farm has total owners' equity of $18,800. The firm has current assets of $23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of the long-term debt? $5,400 $43,000 $29,800 $12,500

$5,400

CH8 Quiz 7: The Greasy Spoon Restaurant is considering a project with an initial cost of $525,000. The project will not produce any cash flows for the first three years. Starting in year 4, the project will produce cash inflows of $721,000 a year for three years. This project is risky, so the firm has assigned it a discount rate of 16 percent. What is the project's net present value? $417,294.85 $451,786.86 $492,255.56 $512,408.23

$512,408.23

CH4 Quiz 3: Ten years from now, you will be inheriting $100,000. What is this inheritance worth to you today if you can earn 5.5 percent interest, compounded annually? $63,215.46 $58,543.06 $74,003.15 $72,419.05

$58,543.06

CH4 Quiz 3: When you were born, your parents opened an investment account in your name and deposited $500 into the account. The account has earned an average annual rate of return of 4.8 percent. Today, the account is valued at $36,911.22. How old are you? 74.47 years 87.33 years 91.75 years 76.67 years

91.75 years

CH6 Quiz 5: A 1,000 bond matures in seven years, pays semiannual coupons, and has a yield to maturity of 6.23 percent. If the annual coupon rate is 5.5 percent, what is the current market price of the bond? 965.71 959.09 947.23 945.08

959.09

CH8 Quiz 7: Molly is considering a project with cash inflows of $918, $867, $528, and $310 over the next four years, respectively. The relevant discount rate is 10 percent. What is the net present value of this project if it the start-up cost is $2,100? $59.50 $148.08 $223.45 $229.50

$59.50

CH12 Quiz10: Danny's Home Remedy has a $30 million bond issue outstanding with an annual yield of 8 percent. What is the annual amount of the tax shield if the tax rate is 30 percent? (not the present value) $10.2 million $720,000 Around $630,000 $8.16 million

$720,000

CH2/3 Quiz 2: YellowJacket, Inc. currently has $3,600 in cash. The company owes $41,800 to suppliers for merchandise and $21,500 to the bank for a long-term loan. Customers owe YellowJacket $18,000 for their purchases. The inventory has a book value of $53,300 and an estimated market value of $61,200. If the store compiled a balance sheet as of today, what would be the book value of the current assets? $74,900 $96,500 $55,600 $46,800

$74,900

CH1 QUIZ 1: Which one of the following is most apt to create a situation where an agency conflict could arise? (A) Decreasing employee turnover (B) Downsizing a firm (C) Increasing the size of a firm's operations (D) Separating management from ownership

(D) Separating management from ownership

Ch10/11 Quiz9: MyBook's stock has a beta of -0.22. The T-bill (annual) rate is 0.75%. If the market is expected to go up by 11.5% this year, how much the MyBook stock is expected to move according to CAPM. 4.97% Incorrect Response 6.62% 3.12% Correct Answer -1.62%

-1.62%

CH10/11 Quiz9: Beta of market is Correct Answer 1 Excess return of any asset/ Excess return of S&P500 Incorrect Response Depends on the market condition 0

1

CH4 Quiz3: How long (approximately) will it take to double your savings if you earn 7.2 percent interest, compounded annually? 10 years 11 years 12 years Can not be determined

10 years

CH12 Quiz 10: Cromwell's Interiors is considering a project that is equally as risky as the firm's current operations. The firm has a cost of equity of 13.7 percent and a pretax cost of debt of 8.4 percent. The debt-equity ratio is .65 and the tax rate is 40 percent. What is the cost of capital for this project? 9.97% 10.29% 11.23% 8.07%

10.29%

Ch5 Quiz4: You deposit $990 today in a bank account that pays $10 every month for the next 22 years. It also pays you an extra $1000 at the end of the 22nd year. What is the interest rate that you are receiving (in EAR)? 13.37% Correct Answer 12.83% None of the above Incorrect Response 12.13%

12.83%

CH10/11 Quiz9: Say you have $1000 to invest and you invest $400 in stock A and rest in stock B. You know that the expected returns of stocks A and B are 0.2 and 0.1, respectively. If the correlation coefficient between the returns of the two assets is 0.67, find out the expected portfolio return. 16% Can not be determined Incorrect Response 15% Correct Answer 14%

14%

CH10/11 Quiz9: Find the annualized return if the average monthly return is 1.1%. Incorrect Response 13.2% Correct Answer 14.03% 4.47% Can not be determined

14.03%

CH4 Quiz 3: Isaac only has $690 today but needs $800 to buy a new laptop. How long will he have to wait to buy the laptop if he earns 5.4 percent compounded annually on his savings? 2.77 years 2.81 years 2.48 years 2.51 years

2.81 years

CH9 Quiz 8: Hi-As-A-Kite is considering making and selling custom kites in two sizes. The small kites would be priced at $10 and the large kites would be $24. The variable cost per unit is $5 and $11, respectively. Jill, the owner, feels that she can sell 2,600 of the small kites and 1,700 of the large kites each year. The fixed costs would be only $2,100 a year and the tax rate is 34 percent. What is the annual operating cash flow if the annual depreciation expense is $900? 22,086 22,848 20,064 23,309

22,086

CH9 qUiz 8: A debt-free firm has net income of $228,400, taxes of $46,200, and depreciation of $21,300. What is the operating cash flow? 107,100 295,900 249,700 None of the above

249,700

Ch10/11 Quiz9: If a stock with 0.40 beta has a risk premium of 11%, find out the market's return assuming zero risk-free rate. Incorrect Response 11.4% None of the above Correct Answer 27.5% 4.4%

27.5%

CH8 Quiz7: What is the payback period for a project with the following cash flows? Year0: -$60,700 Year1: 20,600 Year2: 23,300 Year3: 14,800 Year4: 11,600 2.56 years 3.17 years 3.74 years never

3.17 years

CH5 Quiz 4: If the real interest rate is 2.3% and the rate of inflation is 1.2%, the nominal interest rate is Incorrect Response 1.1% 1.92% Correct Answer 3.5% 2.76%

3.5%

CH2/3 Quiz 2: Which one of the following is an intangible asset? Copyright Cash Account receivable Inventory

Copyright

Ch12 Quiz 10: Which one of the following represents the present value of the interest tax shield? D=value of the existing debt Tc = corporate tax rate D/(1 - Tc) D/Tc D × (1 - Tc) D x Tc

D x Tc

Ch9 Quiz 8 : Which one of the following refers to a method of increasing the rate at which an asset is depreciated? non cash expenses straight line method Accelerated cost recovery system market-based depreciation

Accelerated cost recovery system

CH1 QUIZ 1: The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict? Agency Structural Political Financial

Agency

CH5 Quiz 4: Which one of the following statements concerning annuities is correct? The present value of an annuity is equal to the cash flow amount divided by the discount rate. An annuity is an unending stream of equal payments occurring at equal intervals of time. The future value of an annuity decreases as the interest rate increases. An annuity due has payments that occur at the beginning of each time period.

An annuity due has payments that occur at the beginning of each time period.

CH5 Quiz4: Which one of the following compounding will make the EAR same as the APR? Monthly Continous Daily Annual

Annual

CH4 Quiz 3: Travis is buying a house and will finance it with a home loan that requires annual payments of $6,265 for the next 20 years. His loan payments can be described by which one of the following terms? Perpetuity Lump sum Factor Annuity

Annuity

CH2/3 Quiz 2: Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship? Equity multiplier Net Current Assets Dupont Ratio Assets Turnover

Assets Turnover

CH5 Quiz4: Interest rate is also known as Mean rate Discount rate None of the above Premium rate

Discount rate

CH7 Quiz 6: The required return on a stock is equal to which one of the following? Dividend yield - capital gain yield Dividend yield + capital gain yield Dividend yield * capital gain yield (P0/D1) - g

Dividend yield + capital gain yield

CH12 Quiz10: Which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities? Weighted average cost of capital CAPM Internal rate of return Bond's yield to maturity

Weighted average cost of capital

CH6 Quiz 5: Which one of the following terms refers to a bond's rate of return that is required by the marketplace? Coupon rate Call yield Yield to maturity Call rate

Yield to maturity

CH8 Quiz 7: If an investment is producing a return that is equal to the required return, the investment's NPV will be Positive Negative Zero more than IRR

Zero

CH2/3 Quiz 2: The financial statement that summarizes a firm's accounting equity value as of a particular date is called the cash flow statement income statement liquidity position balance sheet

balance sheet

CH10/11 Quiz 9: Through diversification one can eliminate systematic risk. True False

FALSE

CH4Quiz3: Which one of the following is the correct formula for the future value of $500 invested today at 7 percent interest for 8 years? FV = $500/(0.07 × 8) FV = $500 (1 + 0.07)8 FV = $500/(1 + 0.07)8 FV = $500 (1 + 0.08)7

FV = $500 (1 + 0.07)8

CH1 QUIZ 1: Jamie is employed as a commercial loan officer for a regional bank centered in the midwestern section of the U.S. Her job falls into which one of the following areas of finance? International finance Financial institutions Corporate finance Capital management

Financial institutions

CH2/3 Quiz 2: Debt/Equity is a ratio of Profitability Financial leverage Return on Investment Operating Efficiency

Financial leverage

CH1 QUIZ 1: Liabilities are not limited for the Owners of a S-Corporation General Partners in a Partnership Shareholders of a C-Corporation Shareholders of a Limited Liability Company

General Partners in a Partnership

CH4 Quiz3: Which of the following will increase the future value of a lump sum investment? I. Decreasing the interest rate II. Increasing the interest rate III. Increasing the time period IV. Decreasing the amount of the lump sum investment II and III only I and III only II, III, and IV only I and IV only

II and III only

Ch12 Quiz10: Which of the following will increase the cost of equity for a firm with a beta of 1.1? I. Decrease in the security's beta II. Decrease in the market risk premium III. Decrease in the risk-free rate (market risk premium remains unchanged) IV. Increase in the risk-free rate (market risk premium remains unchanged) III Only I and II Only I, II, II, and IV I, II, and III only

III Only

Ch12 Quiz10: Which one of the following will decrease the after-tax cost of debt for a firm? Decrease in the market price of the debt Decrease in a bond's yield to maturity Increase in tax rates Increase in the risk-free rate of return

Increase in tax rates

CH9 Quiz8: Any changes to a firm's projected future cash flows that are caused by adding a new project are referred to as which one of the following? Eroded cash flows Incremental cash flows Dividends Depreciations

Incremental cash flows

CH12 Quiz10: Paying interest reduces the taxes owed by a firm. Which one of the following terms applies to this relationship? Depreciation tax shield Financial distress cost Interest tax shield Static theory of interest rates

Interest tax shield

CH8 Quiz 7: Which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyze a variety of investment opportunities? Payback IRR ARR NPV

NPV

CH9 Quiz 8: Which one of the following terms refers to the best option that was foregone when a particular investment is selected? Sunk cost Opportunity cost Marginal cost Erosion cost

Opportunity cost

CH9 Quiz 8: A cost that should be ignored when evaluating a project because that cost has already been incurred and cannot be recouped is referred to as which type of cost? Fixed cost Variable cost Opportunity cost Sunk Cost

Sunk Cost

CH4 Quiz 3: Martha is investing $5 today at 6 percent interest so she can have $10 later. The $10 is referred to as the true value present value discounted value future value

future value

CH1 QUIZ 1: A sole proprietorship has an unlimited life can generally raise significant capital from nonowner sources provides limited liability for its owner has its profits taxed as personal income

has its profits taxed as personal income

CH1 QUIZ 1: A corporation is ultimately controlled by its board of directors has its existence regulated by the rules set forth in its charter has its identity defined by its bylaws is a legal entity separate from its owners

is a legal entity separate from its owners

CH8 Quiz 7: The possibility that more than one discount rate can cause the net present value of an investment to equal zero is referred to as duplication the net present value profile multiple rates of return the dual dilemma

multiple rates of return

CH2/3 Quiz 2: The equity multiplier is equal to one plus the total asset turnover one plus the debt-equity ratio one plus the debt-asset ratio total debt divided by total equity

one plus the debt-equity ratio

CH6 Quiz5: When a bond's annualized yield to maturity is less than the bond's annualized coupon rate, the bond is traded at par $100 discount premium

premium

Ch8 Quiz 7: The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to produce a positive annual cash flow offset its fixed expenses recoup its initial cost produce a positive cash flow from assets

recoup its initial cost

CH4 Quiz 3: Given an interest rate of zero percent, the future value of a lump sum invested today will always be equal to $0 decrease if the investment time period is shortened be infinite in value remain constant, regardless of the investment time period

remain constant, regardless of the investment time period

CH2/3 Quiz 2: Net working capital is defined as: total current assets minus total current liabilities available cash minus current liabilities total assets minus total liabilities the depreciated book value of a firm's fixed assets

total current assets minus total current liabilities

CH12 Quiz10: All else constant, an increase in a firm's cost of debt: could be caused by an increase in the firm's tax rate. will result in an increase in the firm's cost of capital. will lower the firm's weighted average cost of capital. will lower the firm's cost of equity.

will result in an increase in the firm's cost of capital.

CH5 Quiz4: You want to purchase a new condominium that costs $329,000. Your plan is to pay 20 percent down in cash and finance the balance over 25 years at 6.25 percent (EAR). What will be your monthly mortgage payment? $1908 $1835 $1740 $1708

$1708

CH7 Quiz 6: Classic Pickles is a mature manufacturing firm. The company just paid a $4 annual dividend, but management expects to reduce the payout by 4 percent per year, indefinitely. If you require a 12 percent return on this stock, what will you pay for a share today? $22.00 $23.00 $24.00 $27.00

$24.00

CH6 Quiz 5: Blue Mountain, Inc. bonds have a face value of $1,000. The bonds carry a 7 percent coupon, pays coupons semiannually, and mature in 13.5 years. What is the current price of these bonds if the yield to maturity is 6.82 percent? 994.56 961.93 1015.72 1001.99

1015.72

CH10/11 Quiz 9: If the market's risk premium is 9.2% and the risk-free rate is 1%, find out the expected return for a stock with a beta of 1.1. 10.02% 1.82% 11.12% 9.76%

11.12%

Ch10/11 Quiz 9: Say you have $1000 to invest and you invest $600 in stock A and rest in stock B. You also know that the variance of returns of stocks A and B are 0.02 and 0.01, respectively. If the correlation coefficient between the returns of the two assets is 0.67, find out the measure of portfolio risk. Incorrect Response 9.38% Correct Answer 11.55% 1.50% 10.65%

11.55%

CH4 Quiz3: You buy a machine worth $200,000 and finance it with a debt/equity ratio of 3. The debt is in the form of a term loan. You need to make equal annual payments of $30,080 for the next 8 years in order to fully repay the term loan. What is the interest rate on the loan? 4.88 percent 6.66 percent 11.89 percent 13.90 percent

11.89 percent

CH5 QUiz4: You just received a loan offer from Friendly Loans. The company is offering you $5,000 at 14.3 percent interest. The monthly payment is only $100. If you accept this offer, how long will it take you to pay off the loan? 5.84 years 7.59 years 6.81 years 6.37 years

6.37 years

CH8 Quiz 7: Chasteen, Inc. is considering an investment with an initial cost of $185,000 that would be depreciated straight-line to a zero book value over the life of the project. The cash inflows generated by the project are estimated at $76,000 for the first two years and $30,000 for the following two years. What is the internal rate of return? 6.44% 6.94% 7.55% 8.11%

6.94%

CH7 Quiz 6: Vegan Delite stock is valued at $124.20 a share. The company pays a constant annual dividend of $8.80 per share. What is the total return on this stock? 7.82% 7.49% 7.09% 6.62%

7.09%

CH6 Quiz 5: A bond has a $1,000 face value, a market price of $1,045, and pays annual coupons of $80 every year. What is the coupon rate? 0% 16% 4% 8%

8%

CH12 Quiz10: A firm has a cost of equity of 13.7 percent and a pretax cost of debt of 8.4 percent. The debt to asset ratio of the firm is 0.65 and the tax rate is 40 percent. What is the cost of capital for this company? Correct Answer 8.07% 11.23% 9.97% Incorrect Response 10.29%

8.07%

CH2/3 Quiz 2: A corporation's book value of equity is $420 million. What is its market capitalization (in $ million) if its market-to-book ratio is 2.02. 848.4 8.5 Can't be determined 207.9

848.4

CH1 QUIZ 1: Which one of the following functions should be assigned to the treasurer rather than the controller? Data processing Cost Accounting Tax management Capital Budgeting

Capital Budgeting

CH8 Quiz 7: Which one of the following indicates that a project is expected to create value for its owners? Payback period greater than the requirement Positive net present value Internal rate of return that is less than the requirement Positive IRR

Positive net present value

CH1 QUIZ 1: Which one of the following situations is most apt to create an agency conflict? Hiring an independent consultant to study the operating efficiency of the firm Selling an underproducing segment of the firm Compensating a manager based on his or her division's net income Rejecting a profitable project to protect employee jobs

Rejecting a profitable project to protect employee jobs

CH2/3 Quiz 2: An increase in which one of the following will increase net income? (everything else remaining same) Depreciation Marginal Tax Rate Fixed costs Revenue

Revenue

CH1 QUIZ 1: The primary goal of financial management is to maximize which one of the following for a corporation? Incorrect Response Market share Correct Answer Shareholder wealth Number of shares outstanding Revenue growth

Shareholder wealth

CH7 Quiz 6: Dividends are paid to the Managers Bondholders Employees Shareholders

Shareholders

CH1 QUIZ 1: Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts? General partnership Limited partnership Corporation Sole proprietorship

Sole proprietorship

CH9 Quiz 8: Weston Steel purchased a new coal furnace six years ago at a cost of $2.2 million. Last year, the government changed the emission requirements and this furnace cannot meet those standards. Thus, Weston can no longer use the furnace, nor has it been able to locate anyone willing to purchase the furnace. Given the current situation, the furnace is best described as which type of cost? Erosion Amortization Sunk cost Market cost

Sunk cost

Ch10/11 Quiz9: Which of the following risks can not be eliminated through diversification: Idiosyncratic Individual Incorrect Response Unsystematic Correct Answer Systematic

Systematic

CH12 Quiz10: A decrease in a firm's WACC will increase the attractiveness of the firm's investment options, all else held constant. True False

TRUE

CH6 Quiz 5: Under normal circumstances, zero coupon bonds are discounted bonds. True False

TRUE

CH9 Quiz 8: A pro forma financial statement is a financial statement that projects future years' operations. True False

TRUE

CH9 Quiz 8: The amount by which a firm's tax bill is reduced as a result of the depreciation expense is referred to as the depreciation tax shield. True False

TRUE

CH9 Quiz8: Jamie is analyzing the estimated net present value of a project under various what if scenarios. The type of analysis that Jamie is doing is best described as scenario analysis True False

TRUE

Ch10/11 Quiz9: CAPM assumes that only market risk matters, unsystematic risk does not matter in asset pricing. True False

TRUE

Ch6 Quiz 5: The face value of a bond is repaid on the date of maturity. True False

TRUE

Ch8 Quiz 7: NPV decreases as the required rate of return increases method of analysis cannot be applied to mutually exclusive projects is directly related to the discount rate is unaffected by the timing of an investment's cash flows

decreases as the required rate of return increases