Managerial Finance Final Review

What is the future value of $7,189 invested for 23 years at 9.25 percent compounded annually? A) $22,483.60 B) $51,009.13 C) $38,991.07 D) $27,890.87 E) $54,999.88

Answer: E) 54,999.88

Bonus: Crystal Lake, Inc., has a total debt ratio of 0.27. Its debt-equity ratio is therefore _______. A) 0.54 B) 0.37 C) 0.43 D) 0.3 E) 0.67

Answer: B) 0.37

Some time ago, Julie purchased eleven acres of land costing $14,990. Today, that land is valued at $43,850. How long has she owned this land if the price of the land has been increasing at 5 percent per year? A) 21.51 years B) 22.13 years C) 21.67 years D) 21.72 years E) 22.00 years

Answer: E) 22.00 years

What is the IRR for the following Cash Flows? Year 0: -31,729; Year 1: 24,000; Year 2: 14,000; Year 3: 6,000 A) 20.67% B) 24.88% C) 21.42% D) 25.71% E) 23.68%

Answer: E) 23.68%

What is the payback period for the following set of cash flows? Year 0: -1,900; Year 1: 1,800; Year 2: 1,600; Year 3: 2,800; Year 4: 2,800 A) 1.01 years B) 1.08 years C) 1.06 years D) 1.36 years E) 1.12 years

Answer: C)1.06 years

The appropriate discount rate for the following cash flows is 16 percent compounded quarterly. What is the present value of the cash flows? Year 1 CF=700, Year 2 CF=600, Year 3 CF=0, Year 4 CF=1000 A) $1,570.56 B) $1,601.64 C) $232.06 D) $1,539.15 E) $1,601.97

Answer: A) $1,570.56

Four months ago, you purchased 1,200 shares of Lakeside Bank stock for $19.08 a share. You have received dividend payments equal to $.58 a share. Today, you sold all of your shares for $20.08 a share. What is your total dollar return on this investment? A) $1,896 B) $696 C) $1,200 D) $3,792 E) $1,392

Answer: A) $1,896

What is the present value of $2,000 per year, at a discount rate of 9 percent, if the first payment is received 7 years from now and the last payment is received 25 years from now? A) $10,673.32 B) $10,459.86 C) $17,900.23 D) $4,502.66 E) $10,441.39

Answer: A) $10,673.32

Langley Enterprises pays a constant dividend of $1.30 a share. The company announced today that it will continue to do this for another 2 years after which time it will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 8 percent? A) $2.32 B) $3.71 C) $2.60 D) $3.45 E) $2.06

Answer: A) $2.32

Atlas Insurance wants to sell you an annuity which will pay you $600 per quarter for 25 years. You want to earn a minimum rate of return of 5.0 percent. What is the most you are willing to pay as a lump sum today to buy this annuity? A) $34,140.80 B) $28,778.49 C) $30,319.28 D) $33,825.47 E) $29,735.24

Answer: A) $34,140.80

You are scheduled to receive $30,000 in two years. When you receive it, you will invest it for 5 more years, at 8 percent per year. How much money will you have 7 years from now? A) $44,079.84 B) $51,414.73 C) $39,909.19 D) $47,209.19 E) $41,381.16

Answer: A) $44,079.84

Marcel Co. is growing quickly. Dividends are expected to grow at a 22 percent rate for the next 3 years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 8 percent and the company just paid a $1.40 dividend. what is the current share price? (Do not round your intermediate calculations.) B) $56.70 C) $55.84 D) $53.97 E) $59.01

Answer: A) $57.86

E-Eyes.com Bank just issued some new preferred stock. The issue will pay a $10 annual dividend in perpetuity, beginning 4 years from now. If the market requires a 12 percent return on this investment, how much does a share of preferred stock cost today? A) $59.32 B) $83.33 C) $62.28 D) $56.35 E) $52.96

Answer: A) $59.32

The common stock of Jensen Shipping has an expected return of 17.10 percent. The return on the market is 12 percent and the risk-free rate of return is 4.5. What is the beta of this stock? A) 1.68 B) 0.75 C) 2.68 D) 1.32 E) 1.26

Answer: A) 1.68

Holdup Bank has an issue of preferred stock with a $9 stated dividend that just sold for $87 per share. The bank's cost of preferred stock is A) 10.34% B) 9.50% C) 10.82% D) 11.24% E) 9.00%

Answer: A) 10.34%

Suppose a stock had an initial price of $67 per share, paid a dividend of $1.2 per share during the year, and had an ending share price of $75. The percentage total return was _____. A) 13.73% B) 12.98% C) 13.88% D) 12.97% E) 2.13%

Answer: A) 13.73%

A stock has had returns of 19 percent, 20 percent, 14 percent, 13 percent, 17 percent, and 3 percent over the last six years. The arithmetic and geometric returns for the stock are ______ and _______, respectively A) 14.33%; 14.19% B) 14.33%; 13.78% C) 14.33%; 13.96% D) 14.60%; 14.14% E) 14.60%, 18.94%

Answer: A) 14.33%; 14.19%

You have just made a $1,500 contribution to your individual retirement account. Assume you earn a 12 percent rate of return and make no additional contributions. How much more will your account be worth when you retire in 25 years than it would be if you waited another 10 years before making this contribution? A) $17,289.75 B) $16,311.18 C) $8,306.16 D) $9,658.77 E) $16,907.17

Answer: A) 17,289.75

A stock has a beta of 1.55, the expected return on the market is 17 percent, and the risk-free rate is 8.5 percent. The expected return on this stock must be A) 21.68% B) 19.61% C) 28.62% D) 34.85% E) 24.59%

Answer: A) 21.68%

You invested $1,430 in an account that pays 5 percent simple interest. How much more could you have earned over a 5-year period if the interest had compounded annually? A) $37.58 B) $39.51 C) $36.05 D) $39.46 E) $35.70

Answer: A) 37.58

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4. The bonds have a 5 percent coupon rate. What is the current yield on these bonds? A) 5.08 percent B) 5.54 percent C) 4.78 percent D) 4.67 percent E) 5.33 percent

Answer: A) 5.08 percent

What is the NPV of the following cash flows at a discount rate of 14 percent? Year 0: �$6,200; Year 1: 6,400; Year 2: 5,900; Year 3: 3,500 A) 6,316.29 B) 6,277.23 C) 5,954.89 D) 4,878.12 E) 5,714.68

Answer: A) 6,316.29

Greenbrier Industrial Products' bonds have a 7.60 percent coupon and pay interest annually. The face value is $1,000 and the current market price is $1,062.50 per bond. The bonds mature in 16 years. What is the yield to maturity? A) 6.94 percent B) 7.22 percent C) 7.71 percent D) 7.46 percent E) 7.80 percent

Answer: A) 6.94 percent

Teder Corporation stock currently sells for $100 per share. The market requires a 12 percent return on the firm's stock. If the company maintains a constant 6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock? A) $5.43 B) $18.06 C) $7.89 D) $5.66 E) $6.00

Answer: D) $5.66

Given the following information for Evenflow Power Co., the WACC is __________. Debt: 2,500 7 percent coupon bonds outstanding, $1,000 par value, 18 years to maturity, selling for 103 percent of par; the bonds make semiannual payments. Common stock: 60,000 shares outstanding, selling for $64 per share; the beta is 1.13. Preferred stock: 7,500 shares of 5.5 percent preferred stock outstanding, currently selling for $105 per share. Market: 8.5 percent market risk premium and 5 percent risk-free rate. Marginal Tax Rate: 34%. A) 9.94% B) 11.14% C) 8.15% D) 8.62% E) 10.78%

Answer: A) 9.94%

Metroplex Corporation will pay a $4.80 per share dividend next year. The company pledges to increase its dividend by 5.00 percent per year indefinitely. If you require an 8.00 percent return on your investment, how much will you pay for the company's stock today? A) $160.00 B) $152.38 C) $166.40 D) $35.16 E) $153.60

Answer: A)$160.00

One year ago, you invested $2,660. Today it is worth $3,600.50. What rate of interest did you earn? A) 35.36 B) 26.64 C) 35.31 D) 35 E) 26.12

Answer: A)35.36

Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments. The yield to maturity is 11.2 percent and the maturity date is 11 years from today. What is the market price of this bond if the face value is $1,000? A) $946.18 B) $895.43 C) $896.67 D) $941.20 E) $953.30

Answer: B) $895.43

A project that provides annual cash flows of $15,500 for 9 years costs $85,824 today. Assuming a required return of 13%, What is the NPV of this project? A) 2,856.33 B) (6,283.58) C) 3,825.92 D) (4,863.23) E) 4,872.49

Answer: B) (6,283.58)

An investment project has annual cash inflows of $5,400, $6,500, $7,300, and $8,600, and a discount rate of 10 percent. What is the discounted payback period for these cash flows if the initial cost is $9,000? A) 1.26 years B) 1.76 years C) 3.52 years D) 0.76 years E) 2.51 years

Answer: B) 1.76 years

The stock of United Industries has a beta a 1.26 and an expected return of 12.0. The risk-free rate of return is 4 percent. What is the expected return on the market? A) 8.00% B) 10.35% C) 12.66% D) 8.83% E) 8.89%

Answer: B) 10.35%

A stock has an expected return of 8 percent, its beta is 0.35, and the risk-free rate is 3.6 percent. The expected return on the market must be: A) 15.45% B) 16.17% C) 14.12% D) 10.19% E) 12.57

Answer: B) 16.17%

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.32 per share on its stock. The dividends are expected to grow at a constant rate of 7 percent per year indefinitely. If investors require a 14 percent return on The Jackson-Timberlake Wardrobe Co. stock, what is the current price? A) 21.1 B) 20.18 C) 22.96 D) 19.54 E) 23.45

Answer: B) 20.18

If Roten Rooters, Inc., has an equity multiplier of 1.85, total asset turnover of 1.35, and a profit margin of 8.5 percent, then its ROE is A) 17.81% B) 21.23% C) 19.36% D) 14.73% E) 11.48%

Answer: B) 21.23%

Titan Mining Corporation has 14 million shares of common stock outstanding, 738,000 shares of 6.5 percent preferred stock outstanding, and 180,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $33 per share and has a beta of 1.1, the preferred stock currently sells for $80 per share, and the bonds have 13 years to maturity and sell for 95 percent of par. The market risk premium is 9 percent, T-bills are yielding 4.5 percent, and Titan Mining's tax rate is 33 percent. The Market Value Weightd of Debt and Equity are________ and ________, respectively. The WACC is 11.65% A) 32.45%; 66.76% B) 24.71%; 66.76% C) 24.71%; 54.87% D) 32.45%; 54.87% E) 24.71%; 70.32%

Answer: B) 24.71%; 66.76%

Organic Chicken Company has a debt-equity ratio of 2.4. Return on assets is 9.1 percent, and total equity is $440,000. What is its equity multiplier? A) 2.25 B) 3.4 C) 1.4 D) 2.5 E) 2

Answer: B) 3.4

The expected return on JK stock is 14.15 percent while the expected return on the market is 10.9 percent. The beta of JK stock is 1.5. What is the risk-free rate of return? A) 2.90 percent B) 4.40 percent C) 4.90 percent D) 3.31 percent E) 3.90 percent

Answer: B) 4.40 percent

A project has the following cash flows: Year 0: �$25,000; Year 1: 20,000; Year 2: 16,000; Year 3 11,000. At a required return of 25 percent, what is the NPV for this project? A) 7,340 B) 6,872 C) 8,719 D) 9,184 E) 7,045

Answer: B) 6,872

Ortiz Lumber Yard has a current accounts receivable balance of $350,000. Credit sales for the year just ended were $2,940,000. Accounts Receivable Turnover is ____. A) 7.6 Times B) 8.4 Times C) 5.4 Times D) 4.2 Times E) 6.8 Times

Answer: B) 8.4 Times

The average return on mid-cap equities was 11.9% over the past 50 years. If the average return on Treasury bills was 3.1% over that period, what was the risk premium for mid-cap stocks? A) 11.9% B) 8.8% C) 3.8% D) Cannot be determined E) 15%

Answer: B) 8.8%

Collingwood Homes has a bond issue outstanding that pays an 8.5 percent coupon and matures in 18.5 years. The bonds have a par value of $1,000 and a market price of $964.20. Interest is paid semiannually. What is the yield to maturity? A) 8.61 percent B) 8.90 percent C) 8.36 percent D) 8.42 percent E) 8.74 percent

Answer: B) 8.90 percent

Cash flow to stockholders is defined as: A) cash flow from assets plus the cash flow to creditors. B) dividend payments less net new equity raised. C) operating cash flow minus the cash flow to creditors. D) the total amount of interest and dividends paid during the past year. E) the change in total equity over the past year.

Answer: B) Dividend payments less net new equity raised.

Which one of the following is a means by which shareholders can replace company management? A) promotion B) proxy fight C) agency play D) stock options E) Sarbanes-Oxley Act

Answer: B) Proxy Fight

Which one of the following is a capital structure decision? A) determining how to allocate investment funds to multiple projects B) determining how much debt should be assumed to fund a project C) determining how much inventory will be needed to support a project D) determining the amount of funds needed to finance customer purchases of a new product E) determining which one of two projects to accept

Answer: B) determining how much debt should be assumed to fund a project

Which one of the following is a working capital management decision? A) determining whether or not a project should be accepted B) determining whether to pay cash for a purchase or use the credit offered by the supplier C) determining the amount of long-term debt required to complete a project D) determining the amount of equipment needed to complete a job E) determining the number of shares of stock to issue to fund an acquisition

Answer: B) determining whether to pay cash for a purchase or use the credit offered by the supplier

You are planning to make monthly deposits of $100 into a retirement account that pays 8 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 28 years? A) $131,099.27 B) $124,856.45 C) $1,498,277.43 D) $114,406.60 E) $118,613.63

Answer: B)$124,856.45

You are purchasing a 25-year, zero-coupon bond. The yield to maturity is 8.68 percent and the face value is $1,000. What is the current market price? A) $108.18 B) $106.67 C) $119.52 D) $128.47 E) $121.50

Answer: C) $119.52

Determine the common stock for Bertinelli Corp. based on the following information: cash = $320,000; patents and copyrights = $790,000; accounts payable = $400,000; accounts receivable = $159,000; tangible net fixed assets = $4,600,000; inventory = $195,000; notes payable = $180,000; accumulated retained earnings = $1,285,000; long-term debt = $1,530,000. A) $3,029,000 B) $3,151,000 C) $2,669,000 D) $2,458,000 E) $2,880,000

Answer: C) $2,669,000

The 2008 balance sheet of Saddle Creek, Inc., showed current assets of $1,480 and current liabilities of $780. The 2009 balance sheet showed current assets of $1,610 and current liabilities of $890. What was the company's 2009 change in net working capital, or NWC? A) $130 B) ($130) C) $20 D) $240 E) ($240)

Answer: C) $20

Miller Brothers Hardware paid an annual dividend of $1.55 per share last month. Today, the company announced that future dividends will be increasing by 3.40 percent annually. If you require a 8.7 percent rate of return, how much are you willing to pay to purchase one share of this stock today? A) $31.79 B) $45.59 C) $30.24 D) $47.14 E) $28.69

Answer: C) $30.24

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 8 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $7 per share dividend in 9 years and will increase the dividend by 7 percent per year thereafter. If the required return on this stock is 13 percent, what is the current share price? (Do not round your intermediate calculations.) A) $46.08 B) $45.20 C) $43.89 D) $38.84 E) $41.69

Answer: C) $43.89

Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000? A) $1,013.48 B) $1,002.60 C) $991.47 D) $989.70 E) $996.48

Answer: C) $991.47

SDJ, Inc., has net working capital of $1,220, current liabilities of $4,130, and inventory of $1,650. What is the quick ratio? A) 0.8 B) 1.1 C) 0.9 D) 1.3 E) 1.4

Answer: C) 0.9

A stock has an expected return of 11 percent, the risk-free rate is 4.4 percent, and the market risk premium is 5 percent. The beta of this stock must be A) 1.48 B) 2.78 C) 1.32 D) 11.00 E) 3.44

Answer: C) 1.32

What is the profitability index for the following cashflows if the relevant discount rate is 18 percent? Year 0: ?$7,500; Year 1: 3,800; Year 2: 5,000; Year 3: 5,700 A) 1.45 B) 1.16 C) 1.37 D) 1.22 E) 0.98

Answer: C) 1.37

The Down and Out Co. just issued a dividend of $2.56 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, the company's cost of equity is A) 12.97% B) 9.14% C) 10.38% D) 11.28% E) 14.62%

Answer: C) 10.38%

Christy bought an 8% bond price at 95% of par that has 10 years until it matures. 1 year later the yield to maturity on this bond is 8.2%. What return did Christy earn on this bond? A) 8.2% B) 8.4% C) 12.4% D) .2% E) 11.7%

Answer: C) 12.4%

The risk-free rate of return is 3 percent and the market risk premium is 9 percent. What is the expected rate of return on a stock with a beta of 1.16? A) 10.44 B) 9.48 C) 13.44 D) 6.48 E) 13.92

Answer: C) 13.44

You just paid $365,000 for an annuity that will pay you and your heirs $12,400 a year forever. What rate of return are you earning on this policy? A) 3.97 percent B) 4.40 percent C) 3.40 percent D) 5.60 percent E) 2.70 percent

Answer: C) 3.40 percent

Bonus: Bach Corp. had additions to retained earnings for the year just ended of $340,000. The firm paid out $130,000 in cash dividends, and it has ending total equity of $6.7 million. The company currently has 190,000 shares of common stock outstanding and the stock currently sells for $85 per share. What is the PE ratio? A) 38.92 B) 15.88 C) 34.36 D) 28.74 E) 21.91

Answer: C) 34.36

Noncash items refer to: A) the ownership of intangible assets such as patents. B) inventory items purchased using credit. C) expenses which do not directly affect cash flows. D) sales which are made using store credit. E) accrued expenses.

Answer: C) Expenses which do not directly affect cash flows

Which of the following are expenses for accounting purposes but are not operating cash flows for financial purposes? I. interest expense; II. Taxes; III. costs of goods sold; IV. Depreciation A) I and III only B) IV only C) I and IV only D) II and IV only E) I, II, and IV only

Answer: C) I and IV Only

Why should financial managers strive to maximize the current value per share of the existing stock? A) because managers often receive shares of stock as part of their compensation B) because this will increase the current dividends per share C) because they have been hired to represent the interests of the current shareholders D) doing so guarantees the company will grow in size at the maximum possible rate E) doing so increases employee salaries

Answer: C) because they have been hired to represent the interests of the current shareholders

The primary goal of a publicly-owned firm interested in serving its stockholders should be to: A) maximize expected total corporate profit. B) minimize expected EPS. C) maximize share price. D) minimize shareholder wealth. E) minimize the chances of losses.

Answer: C) maximize share price

Far Side Corporation is expected to pay the following dividends over the next four years: $14, $11, $8, and $5. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 13 percent, what is the current share price? (Do not round your intermediate calculations.) A) $71.96 B) $67.30 C) $66.37 D) $69.86 E) $75.23

Answer: D) $69.86

You want to buy a new sports car from Muscle Motors for $45,000. The contract is in the form of a 60-month annuity due at a 7.20 percent APR. What will your monthly payment be? A) $845.47 B) $907.77 C) $895.31 D) $889.97 E) $872.17

Answer: D) $889.97

The Up and Coming Corporation's common stock has a beta of 1.10. If the risk-free rate is 6.0 percent and the expected return on the market is 12 percent, Up and Coming's cost of equity is A) 13.14% B) 11.48% C) 12.96% D) 12.60% E) 10.89%

Answer: D) 12.60%

A stock has an expected return of 12 percent, its beta is 0.45, and the risk-free rate is 7.2 percent. The expected return on the market must be A) 12.82% B) 10.67% C)14.41% D) 17.87% E) 16.33%

Answer: D) 17.87%

Suppose a stock had an initial price of $80 per share, paid a dividend of $1.75 per share during the year, and had an ending share price of $98. Compute the percentage total return. A) 31.50 B) 27.31 C) 20.15 D) 24.69 E) 25.92

Answer: D) 24.69

What is the IRR of the following set of cash flows? Year 0: �$10,341 ; Year 1: 6,300 ; Year 2: 5,900 ; Year 3: 3,500 A) 26.36% B) 27.44% C) 25.55% D) 26.90% E) 28.24%

Answer: D) 26.90%

You are considering an annuity which costs $91,288 today. The annuity pays $6,200 a year at an annual interest rate of 5.5 percent. What is the length of the annuity time period? A) 42.88 years B) 19.02 years C) 29.90 years D) 31.00 years E) 32.00 years

Answer: D) 31.00 years

Your older sister deposited $5,000 today at 8.5 percent interest for 5 years. You would like to have just as much money at the end of the next 5 years as your sister will have. However, you can only earn 7 percent interest. How much more money must you deposit today than your sister did if you are to have the same amount at the end of the 5 years? A) $321.19 B) $413.39 C) $401.21 D) $360.43 E) $387.78

Answer: D) 360.43

The Blue Moon Corporation has ending inventory of $500,000, and cost of goods sold for the year just ended was $2,400,000. Days Sales in Inventory is _______. A) 96.42 Days B) 84.87 Days C) 14.18 Days D) 76.04 Days E) 29.60 Days

Answer: D) 76.04 Days

Penguin Pucks, Inc., has current assets of $5,700, net fixed assets of $20,300, current liabilities of $4,800, and long-term debt of $11,500. The value of the shareholders' equity account for this firm is A) 10,400 B) 11,600 C) 8,400 D) 9,700 E) 7,100

Answer: D) 9,700

Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 102 percent of face value. The issue makes semiannual payments and has an embedded cost of 10 percent annually. The company's pretax cost of debt is _____. A) 6.18% B) 7.94% C) 8.22% D) 9.66% E) 7.44%

Answer: D) 9.66%

Agency costs refer to: A)the total dividends paid to shareholders over the life of the firm. B)the total interest paid to bondholders over the life of the firm. C)corporate income that is subject to double taxation. D)the cost of the conflict between stockholders and management. E)the costs that result from default and bankruptcy of the firm.

Answer: D) the cost of the conflict between stockholders and management

What is the present value of $12,850 to be received 4 years from today if the discount rate is 5.25 percent? A) $11,021.40 B) $9,790.48 C) $10,366.92 D) $10,356.67 E) $10,471.64

Answer: E) $10,471.64

Earnhardt Driving School's 2008 balance sheet showed net fixed assets of $4.4 million, and the 2009 balance sheet showed net fixed assets of $6.6 million. The company's 2009 income statement showed a depreciation expense of $915,000. What was net capital spending for 2009? A) ($2,200,000) B) $1,285,000 C) $2,200,000 D) ($1,285,000) E) $3,115,000

Answer: E) $3,115,000

Miller Brothers Hardware paid an annual dividend of $1.75 per share last month. Today, the company announced that future dividends will be increasing by 3.00 percent annually. If you require a 8.7 percent rate of return, how much are you willing to pay to purchase one share of this stock today? A) $29.87 B) $60.08 C) $58.33 D) $33.37 E) $31.62

Answer: E) $31.62

Apocalyptica Corp. pays a constant $18 dividend on its stock. The company will maintain this dividend for the next 4 years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price? A) $55.92 B) $72.00 C) $62.76 D) $59.91 E) $57.06

Answer: E) $57.06

You want to have $58,000 in your savings account 7 years from now, and you're prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.5 percent interest, what amount must you deposit each year? A) $3,769.98 B) $8,285.71 C) $3,770.02 D) $10,595.17 E) $6,805.22

Answer: E) $6,805.22

Juan bought 350 shares of Dynatronics stock at $40/share 1 year ago. During the year, the stock paid a $3/share dividends, and it currently sells for $36/share. What return did Juan earn on Dynatronics' stock? A) 10% B) -7.5% C) 17.5% D) -10% E) -2.5%

Answer: E) -2.5%

Mullineaux Corporation has a target capital structure of 70 percent common stock, 10 percent preferred stock, and 20 percent debt. Its cost of equity is 13 percent, the cost of preferred stock is 4 percent, and the cost of debt is 6 percent. The relevant tax rate is 35 percent. Mullineaux's WACC is A) 12.82% B) 14.41% C) 11.45% D) 11.67% E) 10.28%

Answer: E) 10.28%

Allison purchased a 15 year 7% bond at par 1 year ago. Today, she sold the bond at 108.50% of par. What was Allison's holding period return? A) 7.0% B) 8.5% C) 14.3% D) 11.8% E) 15.5%

Answer: E) 15.5%

A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent? A) 1.97 percent increase B) 1.97 percent decrease C) 0.21 percent increase D) 2.14 percent increase E) 2.14 percent decrease

Answer: E) 2.14 percent decrease

The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989. What is the yield to maturity? A) 5.87 percent B) 5.92 percent C) 6.08 percent D) 6.20 percent E) 6.14 percent

Answer: E) 6.14 percent

Wakers, Inc., has sales of $31 million, total assets of $43 million, and total debt of $11 million. If the profit margin is 10 percent, what is the ROA? A) 6.32% B) 7.64% C) 8.81% D) 6.92% E) 7.21%

Answer: E) 7.21%

Jiminy's Cricket Farm issued a 30-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 115 percent of its face value. The company's tax rate is 34 percent. The company's cost of debt is _____. A) 9.66% B) 8.12% C) 9.43% D) 7.65% E) 8.55%

Answer: E) 8.55%

Which one of the following terms is defined as the management of a firm's long-term investments? A) capital structure B) financial allocation C) agency cost analysis D) working capital management E) capital budgeting

Answer: E) Capital Budgeting

The higher the degree of financial leverage employed by a firm, the: A) lower the amount of debt incurred. B) lower the balance in accounts payable. C) less debt a firm has per dollar of total assets. D) higher the number of outstanding shares of stock. E) higher the probability that the firm will encounter financial distress.

Answer: E) higher the probability that the firm will encounter financial distress.

A(n) ________ transaction occurs when a firm first sells its shares to the investing A) public. B) money market C) unregistered D) secondary market E) bond market F) primary market

Answer: F) Primary market