FIN MGT FInal
you are considering two independent projects. Project a has an initial cost of $125,000 and cash inflows of $46,000 $79,000 and $51,000 for year is 1 to3. Project B costs $135,000 with expected cash inflows four years 1 to 3 of $50,000 $30,000 and $100,000 respectively. The required return for both projects is 16% based on IRR you should
accept project a and reject project b
an agent who arranges a transaction between a buyer and a seller of equity securities is called a
broker
A supplier who requires a payment within 10 days it should be more concerned with which one of the following ratios when granting credit
cash
which one of the following types of stocks instead find by receives no preferential treatment in respect to either dividends or bankruptcy proceedings?
common
You recently purchased a grocery store at the time of the purchase the stores market value equal to its book value the purchase included the building the fixtures and the inventory which of the following is the most apt to cause the market value of the store to be lower than the book value
construction of a new restricted access highway located between the store in the surrounding residential areas
Textile mills borrows money at a rate of 13.5% interest rate is referred to as a
cost of debt
A group of individuals got together and purchased all of the outstanding shares of common stock of DL smith inc. what is the return that these individuals require on this investment called?
cost of equity
A firm has an interval measure of 48. this means that the firm has sufficient liquid assets to do which of the following?
cover its operating cost for the next 48 days
Bert owns a bond that will pay him $75 each year in interest a $1000 principle payment G maturity. what is the $1000 called
face value
which one of the following is a project acceptance indicator given an independent project with investing types cash flow
modified internal rate of return that exceeds the required rate
hey security market primarily composed of dealers who buy and sell their own inventories this is referred to which type of market
over the counter
Which one of the following terms is applied to the financial planning method which uses the projected sales level as the basis for determining changes in balance sheet and income statement account values?
percentage of sales method
Suzie owns five different bonds valued at $36,000 and twelve different stocks valued at $82,500 total. Which one of the following terms most applies to Suzie's investments?
portfolio
which one of the following is a type of equity security that has a fixed dividend and priority status over the other equity securities
preferred stock
National trucking has paid an annual dividend of one dollar per share on its common stock for the past 15 years it is expected to continue paying a dollar a share long into the future given this one share of the firms stock is
priced the same as $1 perpetuity
The Fisher effect is defined as the relationship between which of the following variables?
real rates, inflation rates, and nominal rates
which of the following terms can be defined as the net income that a firm reinvests itself?
retention ratio
Which one of the following will decrease the value of a firm's net working capital
selling inventory at a loss
the difference between the price thag a dealer is willing to pay and the price at which he or she will sell is called the
spread
which of the following is a risk that applies to most securities
systematic
A news flash just appeared that caused about a dozen stocks to suddenly drop in value by about 20 percent. What type of risk does this news flash represent?
unsystematic
which of the following is a primary determinant for the firm's cost of capital
use of the funds
The expected return on a stock given various states of the economy is equal to the
weighted average of the returns for each economic state.
The bond market requires a return of 9.8% on five years bond issued by JW industry. The 9.8% is referred to as which of the following
yield to maturity
A ffloor broker on the NYSE does which of the following
execute order is on the half of a commissions broker
The 2008 balance sheet of Maria's tennis shop showed long-term debt of $3 million and then 2009 balance sheet showed long-term debt of $3.95 million the 2009 income statement showed an interest expense of $340000 what was the firms cash flow to creditors during 2009
$-610,000
what is the net present value of a project that has an initial cash outflow of $36,300 and cash inflows of $11,500 $21,700.00 dollars and $10,400 in years one through four respectively the required rate of return is 15%
-$3945.45
if the firm has a debt equity ratio of onethan the total debt ratio must be which of the following
.5
you only stock portfolio invested 20% in stock Q 15% in stock R and 60% in stock T. The betas of these four stocks or 0.47, 0.41, one, and 1.24. What is the portfolio beta
.96
papa roach extermination has sales of $704,000 costs of $235,000 depreciation expense of 53,300 intrest expense of $34,000 and a tax rate of 30%. what is the net income for the firm
267,400
do you want to have $1 million in your savings account when you retire you plan on investing a single lump some today to from the school you will earn a 7.5% annual interest which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire 1. interest in different account paying a higher rate of interest 2. interest in a different account paying a lower rate of interest 3. retire later 4. retire sooner
1 & 3 only
An investment project has a normal cash flows of $5500 $6600 $7400 and $8700 and a discount rate of 11% what is the discounted payback period of these cash flows if the initial cost is $9000
1.76 years
A firm has a net working capital of $590 net fixed assets of $2336 sales all the $7000 and current liabilities of $900. How many dollars worth of sales are generated from every one dollar in total assets
1.83
you are preparing to make monthly payments of $75 at the beginning of this month into an account that pays 6% interest compounded monthly how many payments will you have made when your account balance reaches 10,000
102
Penguin parks in corporation has a current asset for $4200, net fixed assets of $18,500 current liabilities of $3700 and long term debt of 7,200. What is the value of the shareholders equity account of this? How much is networking capital?
11,800 & 500
The next dividend payment by hot wings will be $4.45 per share. The dividends anticipated to maintain a 4% growth rate forever. Required: if the stock currently sells for $56 per share what is the required return
11.95%
the bell weather is a new firm In a rapidly growing industry. The company is planning on increasing its annual dividend by 15% a year for the next four years and then decreasing the growth rate to 5% per year the company just paid it's any dividends in the amount of $2.20 per share what is the current value of one share of the stock if the required rate of return is 7.7%
121.61
Grill Works has 7 percent preferred stock outstanding that is currently selling for $49 a share. The market rate of return is 14 percent and the firm's tax rate is 37 percent. What is the firm's cost of preferred stock?
14.29 percent
The common stock of Eadies engines in corporation sells for $27.81 a share the stock is expected to pay $2.70 per share next year ED has established a pattern of increasing their dividends by 4.8% annually and expects to continue doing so what is the market rate of return on this stock
14.51%
Shares of common stock of the Samson Co. offer an expected total return of 20.8 percent. The dividend is increasing at a constant 5.2 percent per year. The dividend yield must be:
15.60%
Your car dealer is willing to lease you a new car for $429 a month for 48 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 5.3%, what is the current value of the lease?
18,600.76
Which of the following ratios are measures of a firms liquidity 1. cash coverage ratio 2. interval measure 3. debt equity ratio 4. quick ratio
2 and 4 only
impurdential inc. has an unfounded Pension liability of 600 million dollars that must be paid in 17 years to assess the value of the firms stock financial analysis want to discount this liability back to the present. If the relevant discount rate is 6% what is the present value of this liability
222,818,651
Leslies you need clothing store offers a common stock that pays annually dividend of $2.90 a share the company has promised to maintain a constant level dividend how much are you willing to pay for one share of this stuff if you want to earn 11.7% return on your equity investments
24.79
marko inc. is considering the purchase of ABC it go. Marco believes that ABC can generate cash flows of $5900 $10,900 and $17,100 over the next three years respectively. after the time they feel the business will be worthless Margot has determine the rate of return of 13% is Acabor to this potential purchase what is Marco willing to pay today to buy abc
25,608.70
One year ago, the Jenkins Center opened an investment account and deposited $4,600. Today, it is depositing another $6,400 and will make a final deposit of $8,600 one year from now. How much will the firm have saved four years from now if it earns an average annual return of 7 percent?
26,376.20
You have just made your first $1500 contribution of your retirement account assuming that you earn 7% rate of return and make no additional contributions what will your account be worth when you retire in 45 years? what will your account be worth if you wait 5 years before contributing ?
31,503.68 & 22,461.69
Fashion Wear has bonds outstanding that mature in 12 years, pay interest annually, and have a coupon rate of 7.5 percent. These bonds have a face value of $1,000 and a current market price of $1,060. What is the company's aftertax cost of debt if its tax rate is 35 percent?
4.39 percent
You expect to receive $7000 at graduation in two years you plan on investing it at 7% until you have $93,000 how long will you wait for
40.23 years
In 1895 the first sporting event was held the winners prize money was $200 in 2007 the winners check was $1,171,000 what was the percent increase per year in the winners check over this.? If the winners prize increases at the same rate what will be in 2040
8.05 & 15,088,002.81
You are scheduled to receive an annual payment of $10,300 for each of the next 22 years your discount rate is 10% what is the difference of the present value if you receive this payment at the beginning of each year rather than at the end of each year
9,035
Andy deposit $3000 this morning into account that pays 5% interest compounded annually. Barb also deposits $3000 this morning into an account that pays 5% interest compounded annually. And he will withdraw his interest earnings and spend it as soon as possible. Barb will reinvest her interest earnings into her account. Given this which one of the following statements is true?
Barrable earn more interest the second year than Andy
The internal rate of return is defined
Discount rate which causes the net present value to equal zero
An ordinary annuity is best defined by which one of the following?
Equal payments paid at the end of regular intervals over a stated time period.
Samuelson Electronics has a required payback period of three years for all of its projects. Currently, the firm is analyzing two independent projects. Project A has an expected payback period of 2.8 years and a net present value of $6,800. Project B has an expected payback period of 3.1 years with a net present value of $28,400. Which projects should be accepted based on the payback decision rule?
Project A only
The discount rate assigned to an individual project should be based on the
Risk associated with the use of the funds required by the project
Samantha opened a savings account this morning. Her money will earn 3.5 percent interest, compounded annually. After four years her savings account will be worth $5,000. Assume she will not make any withdrawals. Given this which one of the following statements is true?
Samantha could have deposited less money today and still had $5,000 in four years if she could have earned a higher rate of interest
Which one of the following statements related to the internal rate of return is correct
The IRR is equal to the required return when the net present value is equal to zero
Net working capital is defined as
current assets minus current liabilities
Which of the following premiums is compensated for the possibility that a bond insurance may not pay bonds interest or principal payment as expected
default risk
Rosita paid a total of $1189 to purchase a van that has seven of its initial 20 years left until maturity the price is referred to as the
dirty price
Steve just computed the present value of a $10,000 bonus he will receive in the future. The interest rate he used in this process is referred to as which of the following?
discount rate
which of the following is true according to generally accepted accounting principles
income is recorded based on the realization principle
if a firm uses WACC as a discount rate for all the projects that undertakes then the firm will defend to do all the following except
lower the average risk level of the phone overtime
the percentage of the next dollar you earn must be paid in taxes is referred to as the ____ tax rate.
marginal
The expected rate of return on a stock portfolio is a weighted average where the weights are based on the
market value of the investment in each stock