AGB 374 Exam

$1,105,000

The beginning inventory for AgBiz for the year 2012 was $151,000, the ending inventory was $127,000 and the cost of goods sold was $1,129,000. What was the inventory purchase in this period?

Municipal Bonds

The following are the sources of equity finance for agriculture cooperatives, except

Financial leverage helps increase the return on equity at the time of expansion

Based on the analysis, you can reach the following conclusion:

9.78 percent

Ten years ago, Jackson Supply set aside $130,000 in case of a financial emergency. Today, that account has increased in value to $330,592. What rate of interest is the firm earning on this money?

Current assets minus current liabilities

Net working capital is defined as:

a and b only

Ratios are valuable to managers because they:

1.10

Russell's Deli has cash of $136, accounts receivables of $95, accounts payable of $210, and inventory of $409. What is the value of the quick ratio?

Annuities

___________ are a stream of incomes and/ or costs that are equal in amounts for each of the number of periods evaluated.

the number of employees in the firm

factors affecting the net cost of borrowed capital are the following except

$164 million

AgBiz Inc. reported $205 million as current assets in its Balance Sheet as of December 2012. In the same period the current liabilities were $41 million. The net working capital of AgBiz Inc. was

122 days

. Al's Sport Store has sales of $897,400, cost of goods sold of $628,300, inventory of $208,400, and accounts receivables of $74,100. What is average holding period in days (rounded number)? Assume 365 days as working days.

Compounding

. Tracy invested $1,000 five years ago and earns 4 percent interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as which one of the following?

122 days

Al's Sport Store has sales of $897,400, cost of goods sold of $628,300, inventory of $208,400, and accounts receivables of $74,100. What is average holding period in days (rounded number)? Assume 365 days as working days.

1. F 2. F 3. V 4. M 5. F 6. F 7. V 8. V 9. V 10. F

1. Administrative Salaries and Wages 2. Sales Salaries 3. Sales Commissions 4. Office Supplies 5. Rent for Administrative, Manufacturing, and Warehouse Facilities 6. Manufacturing Equipment Lease 7. Raw Materials 8. Utilities Related to Production only 9. Direct Labor 10. Manager's Salary

It is collecting credit sales more slowly than before

A decrease in the firm's receivable turnover ratio means that_____________.

$780

A firm has $520 in inventory, $1860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. What is amount of current assets?

$5,860

A firm has net working capital of $640. Long-term debt of $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?

In a normal economy, the earnings per share (EPS) of Big Ben's Buffet:

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In a recession, the earnings per share (EPS) of Big Ben's Buffet: (2 points)

1000

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% By issuing debt, Big Ben's Buffet can buy back how many shares?

7.80

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In a normal economy, the earnings per share (EPS) of Big Ben's Buffet is:

Increases to $11.70 per share after the proposed change in capital structure

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In a normal economy, the earnings per share (EPS) of Big Ben's Buffet:

39,000

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In expansion, the EBIT of Big Ben's Buffet will increase to:

10.14

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In expansion, the earnings per share (EPS) of Big Ben's Buffet would be:

12,000

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In recession, the EBIT of Big Ben's Buffet will decrease to:

0

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In recession, the earnings per share (EPS) of Big Ben's Buffet would be:

3.12

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% In recession, the earnings per share (EPS) of Big Ben's Buffet would be:

60

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% The market price of the outstanding shares of Big Ben's Buffet, based on the current market value of the company, is:

.67

Big Ben's Buffet, Inc. has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. Big Ben's Buffet is considering a $60,000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,500 shares outstanding. The tax rate is 35% What is the Debt-to-Equity Ratio of Big Ben's Buffet after the proposed change in the capital structure

The level of business operations at which revenues and total costs are equal

Break-even point is defined as

compounding

Christina invested $3,000 five years ago and earns 2 percent interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as which one of the following?

fixed costs and profits

Contribution margin represent contribution to

14,815

Highland feed is considering one of two locations to construct a new processing plant. Location A would result in annual fixed costs of $300,000, variable costs of $63/unit, and price of $68/unit. Annual fixed costs at Location B are $800,000, variable costs are $32/unit, and price per unit of $86/unit. Sales volume is estimated to be 25,000units/year. What are the break-even units for Location B?

Location

Highland feed is considering one of two locations to construct a new processing plant. Location A would result in annual fixed costs of $300,000, variable costs of $63/unit, and price of $68/unit. Annual fixed costs at Location B are $800,000, variable costs are $32/unit, and price per unit of $86/unit. Sales volume is estimated to be 25,000units/year. 10. Which location would you choose?

175,000 loss

Highland feed is considering one of two locations to construct a new processing plant. Location A would result in annual fixed costs of $300,000, variable costs of $63/unit, and price of $68/unit. Annual fixed costs at Location B are $800,000, variable costs are $32/unit, and price per unit of $86/unit. Sales volume is estimated to be 25,000units/year. Total estimated profits (loss) at Location A are

$549,990

Highland feed is considering one of two locations to construct a new processing plant. Location A would result in annual fixed costs of $300,000, variable costs of $63/unit, and price of $68/unit. Annual fixed costs at Location B are $800,000, variable costs are $32/unit, and price per unit of $86/unit. Sales volume is estimated to be 25,000units/year. Total estimated profits (loss) at Location B are: (2 points)

60,000

Highland feed is considering one of two locations to construct a new processing plant. Location A would result in annual fixed costs of $300,000, variable costs of $63/unit, and price of $68/unit. Annual fixed costs at Location B are $800,000, variable costs are $32/unit, and price per unit of $86/unit. Sales volume is estimated to be 25,000units/year. What are the break-even units for Location A?

no change in net working capital

In inventory is purchased of $1 million and paid for in cash for the same amount. Therefore, the net working capital

1.69 times

Jupiter Company has provided the following information: Number of time interest earned by the company for 2003 is

7.4%

Jupiter Company has provided the following information: Return on Assets ratio of the company for 2003 is

meet its day-to-day cash needs

Liquidity ratios measure a firm's ability to:

2000 bottles

Oovda Winery in Springfield is contemplating adding a new red wine line for low price market in Springfield area. It will require leasing a new equipment for a monthly payment of $6,000. Variable cost of the wine per bottle would be $2, and wine can be sold in the market at $7 per bottle. How many bottles must be sold to realize a profit of 4,000 per month

$7.50

Oovda Winery in Springfield is contemplating adding a new red wine line for low price market in Springfield area. It will require leasing a new equipment for a monthly payment of $6,000. Variable cost of the wine per bottle would be $2, and wine can be sold in the market at $7 per bottle. If 2,000 bottles can be sold, and profit target is $5000, what price should be charged per bottle of new red wine

will lose 1,000

Oovda Winery in Springfield is contemplating adding a new red wine line for low price market in Springfield area. It will require leasing a new equipment for a monthly payment of $6,000. Variable cost of the wine per bottle would be $2, and wine can be sold in the market at $7 per bottle. What would be the profit or loss if 1,000 bottles are made and sold in a month?

1.34

The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, The profitability index of the project is:

1 year and 7.5 months

The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, What is the payback period of the project (select the closest answer):

30 %

The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, What is the IRR of the project? (approximately)

$2729

The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, What is the net present value of the project with a market interest rate of 6% and a risk premium of 3%?

0

The Debt-to-Equity Ratio of XYZ Chemical, Inc. before changing the capital structure is:

municipal bonds

The following are the sources of equity finance for an agriculture company, except

65 days

The following data were extracted from the income statement of Sierra Instruments Inc. The number of days the inventory is held. Assume 360 days

buy the salads

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetable, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part time employee hired. They manager estimates fixed costs at 12,000 and variable costs totaling 1.50 per salad. the buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at 2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration with an annual fixed cost of 24000. the manger expects to sell 25,000 salads per year. If the projects sales is only 15,000 salads, she should decide to

make the salads

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetable, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part time employee hired. They manager estimates fixed costs at 12,000 and variable costs totaling 1.50 per salad. the buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at 2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration with an annual fixed cost of 24000. the manger expects to sell 25,000 salads per year. Given that the manager expects to sell 25,000 salads, she should decide to

19200

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetable, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part time employee hired. They manager estimates fixed costs at 12,000 and variable costs totaling 1.50 per salad. the buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at 2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration with an annual fixed cost of 24000. the manger expects to sell 25,000 salads per year. What is the break even quantity?

19,200

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetables, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part-time employee hired. The manager estimates fixed costs at $12,000 and variable costs totaling $1.50 per salad. The buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at $2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration, with an annual fixed cost of $2,400. The manager expects to sell 25,000 salads per year. 11. What is the break-even quantity?

Make the salads (54,000)

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetables, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part-time employee hired. The manager estimates fixed costs at $12,000 and variable costs totaling $1.50 per salad. The buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at $2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration, with an annual fixed cost of $2,400. The manager expects to sell 25,000 salads per year. 12. Given that the manager expects to sell 25,000 salads, s/he should decide to:

Buy the Salads (34,500)

The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetables, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part-time employee hired. The manager estimates fixed costs at $12,000 and variable costs totaling $1.50 per salad. The buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at $2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration, with an annual fixed cost of $2,400. The manager expects to sell 25,000 salads per year. 13. If the projected sales is only 15,000 salads, s/he should decide to:

100

The market price of the outstanding shares of XYZ Chemical, Inc., based on the current market value of the company, is:

$296.44

Travis invested $8,250 in an account that pays 4 percent simple interest. How much more could he have earned over a 7-year period if the interest had compounded annually?

$11,000

Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. Based on experience at other airports, Vivian projects that she will sell about 700 books per month. What will her profit be (if any) in the first year?

$11,600

Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. What is Vivian's Break-even Revenue?

2,900 books

Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. What is Vivian's break-even quantity (BEQ) of books after a year of operation?

$2.00 per book

Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. 2. What is the contribution margin per unit (per book)? That is, for each book sold, what contribution is made to cover the fixed costs of Vivian's business?

Costs that vary in total in direct proportion to changes in the level of activity

Which of the following statements describes variable costs?

16.90

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35% . In expansion, the earnings per share (EPS) of XYZ Chemical, Inc. would be:

1,000

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. By issuing debt, XYZ Chemical, Inc. can buy back how many shares?

13.00

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In a normal economy, the earnings per share (EPS) of XYZ Chemical, Inc. is:

$78,000

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In expansion, the EBIT of XYZ Chemical, Inc. will increase to:

$24,000

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In recession, the EBIT of XYZ Chemical, Inc. will decrease to:

5.20

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In recession, the earnings per share (EPS) of XYZ Chemical, Inc. would be:

.50

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. What is the Debt-to-Equity Ratio of XYZ Chemical, Inc. after the proposed change in the capital structure?

Increases to $16.25 per share after the proposed change in capital structure.

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In a normal economy, what is the the earnings per share (EPS) of XYZ Chemical, Inc., after the proposed change in the capital structure?

Decreases to $4.55 per share after the proposed change in capital structure.

XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In a recession, what is the earnings per share (EPS) of XYZ Chemical, Inc., after the proposed change in the capital structure?

Option B has a higher present value at time zero than does option A

You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?

Option B has a higher present value at time zero than does option A.

You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?

$283,822

You have decided to make $4000 contribution to 401K. The rate of return (r) on the account is 11%. Assume that no additional contribution will be made to your account, what will be the difference in amount if you start contribution to your account now and retire in 45 years compared to if you wait another 10 years before contributing the same amount to your account?

$3,460

You have just received notification that you have won the $1.4 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 78 years from now. The appropriate discount rate is 8 percent. What is the present value of your winnings?

$1,256.43

You want to have $30,000 saved 5 years from now to buy a farm equipment. How much less do you have to deposit today to reach this goal if you can earn 3.5 percent rather than 2.5 percent on your savings? Today's deposit is the only deposit you will make to this savings account.

Decreases

Your grandmother has promised to give you $5,000 when you graduate from college. She is expecting you to graduate two years from now. What happens to the pre