FIN 125 Exam 1

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

15.61 percent

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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value - ?

154563.4

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

16.07 percent

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?

17900

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.

19054

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

20 years

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?

2044.22

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

$1,033,545

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

$1,219,512

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

$2,170.39

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

$2,777,778

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

$266,498

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

$28,927.38

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

$36,121.08

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

$37,537.88

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

$394.89

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

$49.81

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

$51,695.15

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

$519,799.59

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

$67,485.97

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

$8,979.10

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? $1,894.99 $1,032.39 $929.15 $836.24 $1,161.44

$929.15

Solve for the unknown interest rate in each of the following (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): Present Value $48,000 Years 13 Future Value $185,382 Interest Rate - ?

10.95

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? 1.06 years 1.08 years 1.32 years 1.17 years 1.40 years

1.17 years

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?

1.1875

Solve for the unknown number of years in each of the following (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value $810 Interest Rate 8% Future Value $1,821 Years - ?

10.53

At 6.1 percent interest, how long does it take to double your money? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)​ Length of time - ?

11.71

Solve for the unknown interest rate in each of the following (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): Present Value $181 Years 5 Future Value $317 Interest Rate - ?

11.86

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?

12.51%

Solve for the unknown number of years in each of the following (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value $560 Interest Rate 7% Future Value $1,389 Years - ?

13.43

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

13.80 percent

For each of the following, compute the future value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value $7,513 Years 7 Interest Rate 9% Future Value - ?

13734.06

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?

215500

At 6.1 percent interest, how long does it take to quadruple it? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Length of time - ?

23.41

For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Years 29 Interest Rate 13% Future Value $886,073 Present Value - ?

25597.33

For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Years 40 Interest Rate 21% Future Value $550,164 Present Value - ?

268.58

Solve for the unknown number of years in each of the following (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): 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?

3.88125

Solve for the unknown number of years in each of the following (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): 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?

310500

For each of the following, compute the future value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value $74,381 Years 14 Interest Rate 12% Future Value - ?

363508.30

For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Years 4 Interest Rate 7% Future Value $48,318 Present Value - ?

36861.57

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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value - ?

400897.66

For each of the following, compute the future value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value $192,050 Years 16 Interest Rate 6% Future Value - ?

487874.54

For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Years 13 Interest Rate 9% Future Value $16,832 Present Value - ?

5490.24

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

6.33 percent

Solve for the unknown interest rate in each of the following (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): Present Value $335 Years 17 Future Value $1,080 Interest Rate - ?

7.13

Solve for the unknown interest rate in each of the following (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): 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

For each of the following, compute the future value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value $2,328 Years 11 Interest Rate 13% Future Value - ?

8929.88

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? Select one: a. $834 b. $210 c. $640 d. $1,070 e. $550

c. $640

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.

Option B: It has the largest value today.

The growth of both sole proprietorships and partnerships is frequently limited by the firm's: Select one: a. double taxation. b. bylaws. c. inability to raise cash. d. limited liability. e. agency problems.

c. inability to raise cash.

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. $1.08

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? Select one: a. $3,931 b. $7,707 c. $7,362 d. $4,875 e. $3,854

a. $3,931

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? Select one: a. $369 b. $500 c. $595 d. $800 e. $964

a. $369

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? Select one: a. $4,019 b. $894 c. $1,811 d. $5,807 e. $14,743

a. $4,019

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? Select one: a. $4,799 b. $3,014 c. $3,521 d. $7,263 e. $2,289

a. $4,799 CorrectEBIT = $22,561 − 16,530 − 1,390 = $4,641 EBT = $4,641 − 1,120 = $3,521 Taxes = $3,521(.35) = $1,232 OCF = $4,641 + 1,390 − 1,232 = $4,799

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? Select one: a. $6,933 b. $12,274 c. $7,922 d. $7,487 e. $10,087

a. $6,933

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. 12.22 percent

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. 15.21

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. 3.58

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. 8.29 percent

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. Equity multiplier, profit margin, and total asset turnover

Which one of the following best states the primary goal of financial management? Select one: 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. Maximize the current value per share

Which one of the following is a primary market transaction? Select one: 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 shareholder e. Gift of stock by a shareholder to a family member

b. Sale of a new share of stock to an individual investor

Which one of the following is a working capital management decision? Select one: a. What type(s) of equipment is (are) 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 debt is required to complete a project? d. How many shares of stock should the firm issue to fund an acquisition? e. Should a project should be accepted?

b. Should the firm pay cash for a purchase or use the credit offered by the supplier?

An example of a capital budgeting decision is deciding: Select one: 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. whether or not to purchase a new machine for the production line.

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. Acquisition of debt

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. Utilizing its total assets more efficiently than Sam's

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction: Select one: a. took place in 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. was facilitated in the secondary market.

Lani's generated net income of $911, depreciation expense was $47, and dividends paid were $25. Accounts payables increased by $15, accounts receivables increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity? Select one: a. $776 b. $865 c. $959 d. $922 e. $985

c. $959

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. 78.38 days

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. I, II, and III only

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? Select one: a. 36.97% b. 28.56% c. 39.00% d. 26.07% e. 20.00%

d. 26.07% Taxes paid = .15($50,000) + .25($75,000 - 50,000) + .34($100,000 - 75,000) + .39($129,513 - 100,000) Taxes paid = $33,760.07 Average tax rate = $33,760.07/$129,513 Average tax rate = .2607, or 26.07%

Capital structure decisions include determining: Select one: 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 a 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. how much debt should be assumed to fund a project.

Financial managers should primarily focus on the interests of: Select one: a. stakeholders b. the vice president of finance. c. their immediate supervisor. d. shareholders. e. the board of directors.

d. shareholders.

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. $1.20

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. .89

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. 1.85

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. Quick ratio

Which one of the following parties has ultimate control of a corporation? Select one: a. Chairman of the board b. Board of directors c. Chief executive officer d. Chief operating officer e. Shareholders

e. Shareholders

The decision to issue additional shares of stock is an example of: Select one: a. working capital management. b. a net working capital decision. c. capital budgeting. d. a controller's duties. e. a capital structure decision.

e. a capital structure decision.

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. use of $31,800 of cash as an operating activity.

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. $190

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. 15.26 percent

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. 170,702

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. An increase in the depreciation expense will not affect the cash coverage ratio.