Ag finance

A 60,000 outlay for a new machine with a useable life of 15 years is called: A) capital expenditure B) operating expenditure C) replacement expenditure D) none of the above

A

A college received a contribution to its endowment fun of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?: A) $190,000 B) $18,000 C) $19,000 D) $95,000

A

If a young, beginning farmer is willing to accept supervision and guidance in his activities, he/she is most likely to be able to get credit from ___________________: A) the farm service agency B) a commercial bank C) Farmer Mac D) a life insurance company

A

Key differences between common stock and bonds include all of the following EXCEPT: A) common stockholders have a senior claim on assets and income relative to bondholders B) common stock holders have a voice in management; bondholders do not C) interest paid to bondholders is tax-deductible but dividends paid to stockholders are not D) Bonds have a stated maturity but stock does not

A

The _________ rate of interest created equilibrium between the supply of savings and the demand for investment funds. A) real B) inflationary C) nominal D) risk free

A

The future value of $100 received today and deposited at 6 percent for four years is: A)$126 B) $79 C) $116 D) $124

A

XYZ industries has issued a bond which has a 1,000 par value and a 15 percent annual coupon interest rate. The bond will mature in ten years and currently sells for 1,250. Using this information, the yield to maturity on the XYZ industries bond is _____________. A) 10.79 percent B) 11.39 percent C)12.19 percent D)13.29 percent

A

A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm's common stock is _________________. A) $10 B) $12 C)$120 D) $100

B

A firm is evaluating a proposal has an initial investment of 35,000 and has cash flows of 10,000 in year 1, 20,000 in year 2, and 10,000 in year 3. The payback period of the project is A) 1 year B) between 2 and 3 years C) 2 years D) between 1 and 2 years

B

Cash outlays that had been previously made and have no effect on the cash flows relevant to a current decision are called: A)opportunity costs foregone B)sunk costs C) incremental historical costs D) incremental pas expenses

B

Combining two negatively correlated assets to reduce risk is known as: A) liquidation B) diversification C) valuation D) risk aversion

B

Nico Corporation's common stock is expected to pay a dividend of $3.00 forever and currently sells for $21.42. What is the required rate of return? A) 13% B) 14% C) 12% D) 10%

B

The __________ rate of interest is typically the required rate of return on a three-month U.S. Treasury bill: A)real B) risk-free C)discount rate D) cash flows

B

The _______________ is the annual rate of interest earned on a security purchased on a given date and held to maturity: A) yield curve B) yield to maturity C) risk free rate D) term structure

B

The cash flow pattern depicted is associated with a capital investment and may be characterized as: A) a mixed stream and conventional cash flow B) an annuity and conventional cash flow C) an annuity and non conventional cash flow D) a mixed stream and non conventional cash flow

B

ABC Enterprises wants to issue sixty 20-year $1,000 par value zero-coupon bonds. If each bond is priced to yield 7 percent, how much will ABC receive (ignoring insurance costs) when the bonds are first sold? A) $20,000 B) 11,212 C)15,505 D) 12,393 E) 18,880

C

All of the following are sources of funds for the Farm Credit Banks EXCEPT: A) federal assistance B) sales of systemwide securities C) trade credit D) sales of required equity to borrowers E) retained earnings

C

In the present value model, risk is generally incorporated into the: A) total value B) timing C) discount rate D) cash flows

C

Nico Nelson, a management trainee at a large New York based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent. A) 5% B) 2% C) 1% D) 3%

C

The amount by which the required discount rate exceeds the risk-free rate is called: A) the risk equivalent B) the opportunity cost C) the risk premium D) the excess risk

C

________________ is the risk to the firm of being unable to cover financial obligations. A) diversifiable risk B) business risk C) Financial risk D) total risk

C

A corporation is selling an existing asset for 21,000. The asset when purchased cost 10,000, was being depreciated under MACRS using a five year recovery period, and has been depreciated for four full years. If the assumed tax rate is 40 percent on ordinary income and capital gains the tax effect of this transaction is: A)$0 tax liability B) 4,400 tax liability C) 7,560 tax liability D) 7,720 tax liability

D

A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for ___________ today. A) $805.20 B) $1,000 C) 851.50 D) $1,268.20

D

A firm is evaluating three capital projects. The net present values for the projects are as follows: 1:$100 2: $0 3:$-100; the firm should A)reject project 1 and accept projects 2 and 3 B) accept projects 1 and 3 C reject all projects D) accept projects 1 and 2 and reject project 3

D

A firm with limited dollars available for capital expenditures is subject to: A) mutually exclusive projects B) capital dependency C) working capital constraints D) capital rationing

D

A non conventional cash flow pattern associated with capital investment projects consists of an initial: A) inflow followed by a series of both cash inflows and outflows B) outflows followed by a series inflows C) inflow followed by a series of outflows D) outflow followed by a series of both cash inflows and outflows

D

Finance can be defined as: A) the science of the production, distribution, and consumption of wealth B) the art of merchandising products and services C) the system of debits and credits D) the art and science of managing money

D

If expected return is less than required return on an asset, rational investors will A) sell the asset, which will drive the price up and cause the expected return to reach the level of the required return B) buy the asset which will drive the price up and cause expected return to reach the level of the required return C) buy the asset since price is expected to increase D) sell the asset, which will drive the price down and cause the expected return to reach the level of required return

D

The key role of the financial manager is: A) the preparation of data for future evaluation B) the collection of financial data C) the presentation of financial statements D) Decision making

D

Which pattern of cash flow stream is the most difficult to use when evaluating projects? A)mixed stream B) conventional flow C) annuity D) non conventional flow

D

preferred stock is valued as if it were a A)bond B) common stock C) fixed-income obligation D) perpetuity

D

the agency problem may result from a manager's concerns about any of the following EXCEPT: A) personal wealth B) company-provided perquisites C) job security D) corporate goals

D