Fin 3310 Exam

Bower Enterprises has total equity of $120,000, a profit margin of 5.5 percent, an equity multiplier of 1.1, and a total asset turnover of 1.7. What is the amount of the net income?

$12,342* 5.5*1.1*1.7 = .10285 = NI/120 12342

Your coin collection contains 50 silver dollars. If your parents purchased them for $3 each in 1980, how much will your collection be worth when you retire in 2050, assuming they appreciate at a 5 percent annual rate?

$4,563.96* 3*50(1.05)^70 = $4563.96

The matching principle of accounting advocates:

matching costs with revenues.*

The secondary market is

the market in which securities are bought and sold after original sale.*

You deposit $1,500 in an account earning 6% per year for 16 years. How much money will be in the account at the end of 16 years?

1500(1.06)^16 = 3810.53

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is one.

Cash sale of inventory with a profit

Cash flow to stockholders:

is positive when the amount of the dividends paid exceeds the amount of net new equity raised.*

Agency costs are

costs resulting from managers' incentives to make decisions that are not in line with the goal of stockholders.*

You are 22 years old today. You want to retire at age 55 and have $3 million at that time. Assume you can earn an average annual rate of return of 8.8 percent. Your hope is that you will win the lottery today and be able to fund your retirement dream with one lump sum deposit today. How much would you have to win, after taxes, to make an investment today sufficient to fund your dream?

d. $185,510.16 $3,000,000 / (1 + 0.088)(55 − 22) = $185,510.16

The process of calculating the present value of a future cash flow is called:

discounting.*

Corporations are allowed to deduct all of the following expenses for tax purposes except

dividends paid.*

The daily financial operations of a firm are primarily controlled by managing the:

working capital.*