FIN 125: Exam 1 MC Practice

Present Value $810 Interest Rate 8% Future Value $1,821 Years - ?

10.53

Present Value $48,000 Years 13 Future Value $185,382 Interest Rate - ?%

10.95

At 6.1 percent interest, how long does it take to double your money?

11.71

Present Value $181 Years 5 Future Value $317 Interest Rate - ? %

11.86

Present Value $7,513 Years 7 Interest Rate 9% Future Value - ?

13,734.06

Present Value $560 Interest Rate 7% Future Value $1,389 Years - ?

13.43

You have just made your first $5,500 contribution to your retirement account. Assume you earn a return of 10 percent per year and make no additional contributions. What if you wait 10 years before contributing?

154,563.4

Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current liabilities of $4,100, and long-term debt of $10,200. What is the value of the shareholders' equity account for this firm?

17,900

You are given the following information for Bowie Pizza Co.: Sales = $64,000; Costs = $30,700; Addition to retained earnings = $5,700; Dividends paid = $1,980; Interest expense = $4,400; Tax rate = 22 percent. Calculate the depreciation expense.

19,054

First City Bank pays 9 percent simple interest on its savings account balances, whereas Second City Bank pays 9 percent interest compounded annually. If you made a deposit of $7,500 in each bank, how much more money would you earn from your Second City Bank account at the end of eight years?

2,044.22

Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. What is the addition to retained earnings?

215,470

At 6.1 percent interest, how long does it take to quadruple it?

23.41

Years 29 Interest Rate 13% Future Value $886,073 Present Value - ?

25,597.33

Years 40 Interest Rate 21% Future Value $550,164 Present Value - ?

268.58

Present Value $21,500 Interest Rate 11% Future Value $430,258 Years - ?

28.71

Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. The common stock outstanding is 80,000 shares. What is the earnings per share figure?

3.88

Present Value $18,400 Interest Rate 9% Future Value $289,715 Years - ?

31.99

Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, and a tax rate of 21 percent. What is the net income for this firm?

310,470

Years 4 Interest Rate 7% Future Value $48,318 Present Value - ?

36,861.57

Present Value $74,381 Years 14 Interest Rate 12% Future Value - ?

363,508.3

You have just made your first $5,500 contribution to your retirement account. Assume you earn a return of 10 percent per year and make no additional contributions. What will your account be worth when you retire in 45 years?

400,897.66

Present Value $192,050 Years 16 Interest Rate 6% Future Value - ?

487,874.54

Years 13 Interest Rate 9% Future Value $16,832 Present Value - ?

5,490.24

Present Value $335 Years 17 Future Value $1,080 Interest Rate - ?%

7.13

Present Value $2,328 Years 11 Interest Rate 13% Future Value - ?

8,929.88

Present Value $40,353 Years 30 Future Value $531,618 Interest Rate - ?%

8.97

Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current liabilities of $4,100, and long-term debt of $10,200. How much is net working capital?

800

A company has $1,315 in inventory, $4,746 in net fixed assets, $610 in accounts receivable, $262 in cash, $554 in accounts payable, $926 in long-term debt, and $5,341 in equity. What are the company's total assets? a. $6,933 b. $12,274 c. $7,922 d. $7,487 e. $10,087

A

A company has net working capital of $1,888. If all its current assets were liquidated, the company would receive $5,819. What are the company's current liabilities? a. $3,931 b. $7,707 c. $7,362 d. $4,875 e. $3,854

A

Which one of the following accurately describes the three parts of the DuPont identity? Select one: a. Equity multiplier, profit margin, and total asset turnover b. Debt-equity ratio, capital intensity ratio, and profit margin c. Operating efficiency, equity multiplier, and profitability ratio d. Return on assets, profit margin, and equity multiplier e. Financial leverage, operating efficiency, and profitability ratio

A

You are examining a company's balance sheet and find that it has total assets of $20,572, a cash balance of $2,208, inventory of $4,913, current liabilities of $5,829 and accounts receivable of $2,727. What is the company's net working capital? A. $4,019 B. $894 C. $1,811 D. $5,807 E. $14,743

A

You are paying an EAR of 16.78 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on this account? Select one: 15.61 percent 13.97 percent 14.98 percent 15.75 percent 16.35 percent

A

You have just deposited $8,500 into an account that promises to pay you an annual interest rate of 6 percent each year for the next 6 years. You will leave the money invested in the account and 10 years from today, you need to have $19,320 in the account. What annual interest rate must you earn over the last 4 years to accomplish this goal? Select one: a. 12.51% b. 11.55% c. 11.37% d. 14.07% e. 10.01%

A

An example of a capital budgeting decision is deciding: A. How many shares of stock to issue B. Whether or not to purchase a new machine for the production line. C. How to refinance a debt issue that is maturing. D. How much inventory to keep on hand. E. How much money should be kept in the checking account.

B

RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be doing which one of the following? Select one: a. Utilizing its fixed assets more efficiently than Sam's b. Utilizing its total assets more efficiently than Sam's c. Generating $1 in sales for every $1.26 in net fixed assets d. Generating $1.26 in net income for every $1 in net fixed assets e. Maintaining the same level of current assets as Sam's

B

The Distribution Point plans to save $2,000 a month for the next 3 years for future emergencies. The interest rate is 4.5 percent compounded monthly. The first monthly deposit will be made today. What would today's deposit amount have to be if the firm opted for one lump sum deposit that would yield the same amount of savings as the monthly deposits after 3 years? Select one: $70,459.07 $67,485.97 $69,068.18 $69,333.33 $67,233.84

B

Which of the following is a primary market transaction? A. Sale of currently outstanding stock by a dealer to an individual investor B. Sale of a new share of stock to an individual investor C. Stock ownership transfer from one shareholder to another shareholder D. Gift of stock from one shareholder to another E. Gift of stock by a shareholder to a family member

B

Which one of the following best states the primary goal of financial management? A. Maximize current dividends per share B. Maximize the current value per share C. Increase cash flow and avoid financial distress D. Minimize operational costs while maximizing firm efficiency E. Maintain steady growth while increasing current profits

B

Which one of the following is a source of cash? Select one: a. Repurchase of common stock b. Acquisition of debt c. Purchase of inventory d. Payment to a supplier e. Granting credit to a customer

B

BL Industries has ending inventory of $302,800, annual sales of $2.33 million, and annual cost of goods sold of $1.41 million. On average, how long did a unit of inventory sit on the shelf before it was sold? Select one: a. 47.43 days b. 22.18 days c. 78.38 days d. 61.78 days e. 83.13 days

C

Both you and your older brother would like to have $23,000 in 15 in years. Because of your success in this class, you feel that you are a more savvy investor than your brother and will be able to earn an annual return of 11 percent compared to your brother's 9.7 percent. How much less than your brother will you have to deposit today? Select one: a. $1,894.99 b. $1,032.39 c. $929.15 d. $836.24 e. $1,161.44

C

The DuPont identity can be used to help managers answer which of the following questions related to a company's operations? I. How many sales dollars are being generated per each dollar of assets? II. How many dollars of assets have been acquired per each dollar in shareholders' equity? III. How much net profit is being generating per dollar of sales? IV. Does the company have the ability to meet its debt obligations in a timely manner? Select one: a. I and III only b. II and IV only c. I, II, and III only d. II, III and IV only e. I, II, III, and IV

C

The growth of both sole proprietorships is frequently limited by the firm's: A. Double Taxation B. Bylaws C. Inability to raise cash D. Limited Liability E. Agency Problems

C

Shareholder A sold 500 shares of ABC stock in the New York Stock Exchange. This transaction: A. Took place on the primary market B. Occurred in a dealer market C. Was facilitated in the secondary market D. Involved a proxy E. Was a private placement

C.

Green Yard Care has net income of $62,300, a tax rate of 21 percent, and a profit margin of 6.7 percent. Total assets are $1,100,500 and current assets are $328,200. How many dollars of sales are being generated from every dollar of net fixed assets? Select one: a. $2.83 b. $1.37 c. $.84 d. $1.20 e. $1.23

D

Sara wants to establish a trust fund to provide $75,000 in scholarships each year and earn a fixed 6.15 percent rate of return. How much money must she contribute to the fund assuming that only the interest income is distributed? Select one: $987,450 $1,478,023 $1,333,333 $1,219,512 $1,500,000

D

The tax rates for a particular year are shown below: Taxable Income Tax Rate $0 - 50,000 15 % 50,001 - 75,000 25 % 75,001 - 100,000 34 % 100,001 - 335,000 39 % What is the average tax rate for a firm with taxable income of $129,513? a. 36.97% b. 28.56% c. 39.00% d. 26.07% e. 20.00%

D

Which one of the following statements is correct? Select one: a. If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0. b. Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5. c. The debt-equity ratio can be computed as 1 plus the equity multiplier. d. An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity. e. An increase in the depreciation expense will not affect the cash coverage ratio.

E

Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. The common stock outstanding is 80,000 shares. What is the dividends per share figure?

1.19

Assume you work for an employer who will contribute $60 a week for the next 20 years into a retirement plan for your benefit. At a discount rate of 9 percent, what is this employee benefit worth to you today? Select one: $28,927.38 $27,618.46 $29,211.11 $25,306.16 $25,987.74

A

Bernice's has $823,000 in sales. The profit margin is 4.2 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $16.50. What is the price-earnings ratio? Select one: a. 3.58 b. 3.98 c. 4.32 d. 3.51 e. 4.27

A

Disturbed, Inc., had the following operating results for the past year: sales = $22,561; depreciation = $1,390; interest expense = $1,120; costs = $16,530. The tax rate for the year was 35 percent. What was the company's operating cash flow? a. $4,799 b. $3,014 c. $3,521 d. $7,263

A

Ivan's, Inc., paid $500 in dividends and $595 in interest this past year. Common stock increased by $205 and retained earnings decreased by $131. What is the net income for the year? a. $369 b. $500 c. $595 d. $800 e. $964

A

JK Motors has sales of $96,400, costs of $53,800, interest paid of $2,800, and depreciation of $7,100. The tax rate is 21 percent. What is the value of the cash coverage ratio? Select one: a. 15.21 b. 12.14 c. 17.27 d. 23.41 e. 12.68

A

Marcus is scheduled to receive annual payments of $3,600 for each of the next 12 years. The discount rate is 8 percent. What is the difference in the present value if these payments are paid at the beginning of each year rather than at the end of each year? Select one: $2,170.39 $2,511.07 $2,021.18 $2,027.94 $2,304.96

A

Oil Creek Auto has sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. What is the common-size statement value of inventory? Select one: a. 12.22 percent b. 44.16 percent c. 16.54 percent d. 13.36 percent e. 46.74 percent

A

Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218,000, $224,000, and $238,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 14.5 percent, what is the maximum Southern Tours should pay today to acquire Holiday Vacations? Select one: $519,799.59 $538,615.08 $545,920.61 $595,170.53 $538,407.71

A

TJ's has annual sales of $813,200, total debt of $171,000, total equity of $396,000, and a profit margin of 5.78 percent. What is the return on assets? Select one: a. 8.29 percent b. 6.48 percent c. 9.94 percent d. 7.78 percent e. 8.02 percent

A

The Harrisburg Store has net working capital of $2,715, net fixed assets of $22,407, sales of $31,350, and current liabilities of $3,908. How many dollars' worth of sales are generated from every $1 in total assets? Select one: a. $1.08 b. $1.14 c. $1.19 d. $84 e. $93

A

You want to borrow $27,500 and can afford monthly payments of $650 for 48 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford? Select one: 6.33 percent 6.67 percent 5.82 percent 7.01 percent 7.18 percent

A

You would like to provide $125,000 a year forever for your heirs. How much money must you deposit today to fund this goal if you can earn a guaranteed 4.5 percent rate of return? Select one: $2,777,778 $2,521,212 $2,666,667 $2,858,122 $2,850,000

A

Your broker is offering 1.2 percent compounded daily on its money market account. If you deposit $7,500 today, how much will you have in your account 15 years from now? Select one: $8,979.10 $9,714.06 $8,204.50 $9,336.81 $9,414.14

A

Your grandfather left you an inheritance that will provide an annual income for the next 20 years. You will receive the first payment one year from now in the amount of $2,500. Every year after that, the payment amount will increase by 5 percent. What is your inheritance worth to you today if you can earn 7.5 percent on your investments? Select one: $37,537.88 $28,667.40 $23,211.00 $35,612.20 $30,974.92

A

Which one of the following is a working capital management decision? A. What type of equipment is needed to complete a current project? B. Should the firm pay cash for a purchase or use the credit offered by the supplier? C. What amount of long-term dent is required to complete a project? D. How many shares of stock should the firm issue to fund an acquisition? E. Should a project be accepted?

B

You are considering a project with cash flows of $16,500, $25,700, and $18,000 at the end of each year for the next three years, respectively. What is the present value of these cash flows, given a discount rate of 7.9 percent? Select one: $54,877.02 $51,695.15 $55,429.08 $46,388.78 $53,566.67

B

Your credit card company charges you 1.15 percent interest per month. What is the APR? Select one: 18.92 percent 13.80 percent 15.95 percent 17.25 percent 14.71 percent

B

A firm has common stock of $94, paid-in surplus of $310, total liabilities of $430, current assets of $430, and net fixed assets of $640. What is the amount of the shareholders' equity? a. $834 b. $210 c. $640 d. $1,070 e. $550

C

A preferred stock pays an annual dividend of $5.20. What is one share of this stock worth today if the rate of return is 10.44 percent? Select one: $51.48 $41.18 $49.81 $39.87 $42.90

C

Troy will receive $7,500 at the end of Year 2. At the end of the following two years, he will receive $9,000 and $12,500, respectively. What is the future value of these cash flows at the end of Year 6 if the interest rate is 8 percent? Select one: $38,418.80 $32,907.67 $36,121.08 $39,010.77 $33,445.44

C

An annuity that pays $12,500 a year at an annual interest rate of 5.45 percent costs $150,000 today. What is the length of the annuity time period? Select one: 25 years 18 years 15 years 20 years 22 years

D

Coulter Supply has a total debt ratio of .46. What is the equity multiplier? Select one: a. .89 b. 1.17 c. 1.47 d. 1.85 e. 2.17

D

Duke's Garage has cash of $68, accounts receivable of $142, accounts payable of $235, and inventory of $318. What is the value of the quick ratio? Select one: a. 2.25 b. .53 c. .71 d. .89 e. 1.35

D

Financial managers should primarily focus on the interests of: A. Stakeholders B. The vice president of finance C. Their immediate supervisor D. Shareholders E. The board of directors

D

Which one of the following ratios is a measure of a firm's liquidity? Select one: a. Cash coverage ratio b. Profit margin c. Debt-equity ratio d. Quick ratio e. NWC turnover

D

You currently have $5,400. First United Bank will pay you an annual interest rate of 8.9, while Second National Bank will pay you an annual interest rate of 10. How many fewer years must you wait for your account value to grow to $13,900 at Second National Bank? Select one: a. 1.06 years b. 1.08 years c. 1.32 years d. 1.17 years e. 1.40 years

D

Capital structure decisions include determining: A. Which one of two projects to accept B. How to allocate investment funds to multiple projects C. The amount of funds needed to finance customer purchases of new product. D. How much debt should be assumed to fund a project. E. How much inventory will be needed to support a project.

D.

Canine Supply has sales of $2,800, total assets of $1,900, and a debt-equity ratio of .5. Its return on equity is 15 percent. What is the net income? Select one: a. $210 b. $130 c. $240 d. $350 e. $190

E

Chris has three options for settling an insurance claim. Option A will provide $1,500 a month for 6 years. Option B will pay $1,025 a month for 10 years. Option C offers $85,000 as a lump sum payment today. The applicable discount rate is 6.8 percent, compounded monthly. Which option should Chris select, and why, if he is only concerned with the financial aspects of the offers? Select one: Option A: It provides the largest monthly payment. Option B: It pays the largest total amount. Option C: It is all paid today. Option B: It pays the greatest number of payments. Option B: It has the largest value today.

E

Frank's Used Cars has sales of $807,200, total assets of $768,100, and a profit margin of 6.68 percent. The firm has a total debt ratio of 54 percent. What is the return on equity? Select one: a. 13.09 percent b. 12.04 percent c. 11.03 percent d. 8.56 percent e. 15.26 percent

E

Hungry Lunch has net income of $73,402, a price-earnings ratio of 13.7, and earnings per share of $.43. How many shares of stock are outstanding? Select one: a. 13,520 b. 12,460 c. 165,745 d. 171,308 e. 170,702

E

Sue just purchased an annuity that will pay $24,000 a year for 25 years, starting today. What was the purchase price if the discount rate is 8.5 percent? Select one: $241,309 $245,621 $251,409 $258,319 $266,498

E

The accounts payable of a company changed from $136,100 to $104,300 over the course of a year. This change represents a: Select one: a. use of $31,800 of cash as investment activity. b. source of $31,800 of cash as an operating activity. c. source of $31,800 of cash as a financing activity. d. source of $31,800 of cash as an investment activity. e. use of $31,800 of cash as an operating activity.

E

Waldo expects to save the following amounts: Year 1 = $50,000; Year 2 = $28,000; Year 3 = $12,000. If he can earn an average annual return of 10.5 percent, how much will he have saved in this account exactly 25 years from the time of the first deposit? Select one: $1,172,373 $935,334 $806,311 $947,509 $1,033,545

E

What is the EAR of 14.9 percent compounded continuously? Select one: 15.59 percent 15.62 percent 15.69 percent 15.84 percent 16.07 percent

E

Which one of the following parties has ultimate control of a corporation? A. Chairman of the board B. Board of directors C. Chief executive officer D. Chief operating officer E. Shareholders

E

You just obtained a loan of $16,700 with monthly payments for four years at 6.35 percent interest, compounded monthly. What is the amount of each payment? Select one: $387.71 $391.40 $401.12 $419.76 $394.89

E

The decision to issue additional shares of stock is an example of: A. Working capital management B. A net working capital decision C. Capital budgeting D. A controller's duties E. A capital structure decision

E.