Description of this paper

Which of the following mechanisms helps to align management interests with those...

Description

solution


Question

Identify the letter of the choice that best completes the statement or answers the question.;1. Which of the following mechanisms helps to align management interests with those of shareholders?;a.;b.;c.;d.;A well designed compensation package.;An efficient managerial labor market.;The Sarbanes-Oxley Act of 2002.;All of the above.;2. Assume the pre-tax profit of $50,000 has been earned by a business, and the owner/proprietor wants;to withdraw all of the after-tax profit for personal use. Assume the tax rate for a C corporation is;33%, while the rate for a person is 25%. The after-tax earnings available under the corporate and;proprietorship forms of business are;a. for a corporation, $25,125, for a proprietorship, $37,500.;b. for a corporation, $24,090, for a proprietorship, $36,500.;c. for either a corporation or a proprietorship, $36,500.;d. for either a corporation or a proprietorship, $24,090.;3. Galan Associates prepared its financial statements for 2013 based on the information below.;The company had cash of $1,350, inventory of $12,480, and accounts receivables;of $6,589. The companys net fixed assets are $40,331, and other assets are $1,822.;It has accounts payable of $10,604, notes payable of $2,886, common stock of $22,400;and retained earnings of $14,368. How much long-term debt does the firm have?;a. $16,342;b. $18,334;c. $12,314;d. $22,342;4. Mikes Boutique announced that for the period ending December 31, 2013, it had revenues of;$640,000. The companys costs (excluding depreciation and amortization) amounted to 75% of;revenues, and Arts boutique had interest expenses of $40,000 and depreciation of 60,000. What is;the firms net income if the tax rate was 34 percent?;a.;b.;c.;d.;The information below should be used;for question 5;2012 and 2013 Balance Sheets for Nabors, Inc;($ millions);1;2012;310;2640;3275;10,960;Cash;Accounts Rec.;Inventory;Net Fixed Assets;$;Total Assets;$ 17,185;$;2013;405;3,055;3,850;10,670;Accounts Payable;Notes Payable;Long-Term Debt;Common Stock;Retained Earnings;$ 17,980 Total Liab.;Equity;5. What is the change in net working capital from 2012 to 2013?;a. $4,015;b. -$1,200;c. $1,335;d. -$3,405;6. Ship-to-Shore had earnings after tax (EAT) of $320,000 last year. Its expenses included;depreciation of $55,000, interest of $40,000. It purchased new equipment for $20,000.;The company also sold stock for $40,000. What is Ship-to-Shores net cash flow for last year?;a. $395,000;c. $380,000;b. $315,000;d. $475,000;7. Given the following information for Tandoori Grill Restaurant, calculate the total asset turnover and;return on equity ratios;Net Profit Margin = 8%;Return on Assets = 15%;Debt Ratio = 30%;a. 1.875, 15.34%;c. 2.000, 26.67%;b. 1.875, 21.43%;d. 3.750, 26.67%;8. The Felix Corporation has just decided to save $10,000 each quarter for the next five years to serve;as a safety net for economic downturns. The money will be set aside in a separate savings account;that pays 5.25 percent annual rate, with interest compounded quarterly. The first deposit will be;made today. If the company wanted to deposit an equivalent lump sum today, how much would it;have to deposit?;a. $190,454.86;c. $189,468.05;b. $174,902.14;d. $177,197.73;9. You are comparing two investment options. The cost to invest in either option is the same today.;Both options provide you with $20,000 of income. Option A pays five annual payments starting;with $8,000 the first year followed by four annual payments of $3,000 each. Option B pays five;annual payments of $4,000 each. Which one of the following statements is correct given these two;investment options?;a. Both options are of equal value given that they both provide $20,000 of income.;b. Option A has a higher present value than option B given any positive rate of return.;c. Option B has a higher present value than option A given any positive rate of return.;d. Option B has a lower future value at year 5 than option A given a zero rate of return.;2;10. You want to buy a car for $25,650. The finance company will charge you 6.6% annual rate;compounded monthly on a 4-year loan. If you can afford $485 monthly payments, how much do;you need to borrow? How much do you need for a down payment?;a. $18,441, $7,209;c. $22,590, $3,060;b. $25,650, $0;d. $20,412, $5,238;11. You are the manager of an annuity settlement company. Jim Patton just won the state lottery which;promises to pay him $1,000 per year for 20 years, starting from today, and $2,000 per year for years;21-45, given a 9% discount rate. Your company wants to purchase the proceeds from the lottery;from Jim. What is the most that your company can offer?;a. $12,633.85;b. $13,770.90;c. $16,940.38;d. $18,680.95;12. Jean Cleveland currently has $7,750 in a money market account paying 7.25 percent compounded;semi-annually. She plans to use this amount and her savings over the next 5 years to make a down;payment on a townhouse. She estimates that he will need $20,000 in 5 years. How much should she;invest in the money market account semi-annually over the next 5 years to achieve this target?;a. $ 886.28;b. $ 757.25;c. $ 650.97;d. $ 610.79;13. Fabian has a 6-year, 8% annual coupon bond with a $1,000 par value. Feaster Enterprises has a 12year, 8% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity;of 6%. Which of the following statements are correct if the market yield increases to 7%?;a. Both bonds will decrease in value by 4.61%.;b. The Feaster bond will increase in value by $88.25.;c. The Fabian bond will increase in value by 4.61%.;d. The Feaster bond will decrease in value by 7.56%.;14. BioMax Inc. offers an 8 percent coupon bond that has a $1,000 par value, semiannual coupon;payments and 20 years of its original 25 years left to maturity. Which of the following;statements is true if the market return on similar bonds is 10%?;a. The bond will sell at a premium of $1,198 because the coupon rate is less than the;market interest rate.;b. The bond will sell at a discount of $828 because the coupon rate is greater than the;market interest rate.;c. The bond will sell at a discount of $817 because the coupon rate is less than market;interest rate.;3;d. The bond will sell at a discount of $828 because the coupon rate is less than the;market interest rate.;15. If a stock portfolio is well diversified, then the portfolio variance;a. will equal the variance of the most volatile stock in the portfolio.;b. may be less than the variance of the least risky stock in the portfolio.;c. must be equal to or greater than the variance of the least risky stock in the portfolio.;d. will be a weighted average of the variances of the individual securities in the;portfolio.;16. Aquaman stock has exhibited a standard deviation in returns of 0.7, whereas Green Lantern;stock has exhibited a standard deviation of 0.8. The correlation coefficient between the;stock returns is 0.1. What is the standard deviation of a portfolio composed of 70%;Aquaman and 30% Green Lantern?;a. 0.56676;b. 0.32122;c. 0.61743;d. 0.75000;17. The stocks of Microsoft and Apple have a correlation coefficient of 0.6. The variance of;Microsoft stock is 0.4 and the variance of Apple stock is 0.3. What is the covariance;between the two stocks?;a. 0.72;b. 0.07;c. 0.21;d. 0.36;18. Star Solutions, Inc. paid a dividend last year of $3.55, which is expected to grow at a constant rate of;3%. Star Solutions has a beta of 1.8 and their stock is currently selling for $31.47. If the market rate;of return is 9% and the risk-free rate is 4%, would you purchase Star Solutions stock?;a. No, because it is overvalued $5.10;c. No, because it is overvalued $9.85;b. Yes, because it is undervalued $5.10;d. Yes, because it is undervalued $9.85;19. You are comparing stock A to stock B. Given the following information, which one of these two;Stocks should you prefer and why?;Rate of Return if State Occurs;State of the;Economy;Boom;Recession;Probability;of State of;the Economy;60%;40%;Stock A;9%;4%;Stock B;15%;-6%;a. Stock A, because it has a higher expected return and appears to be less risky than stock B.;b. Stock A, because it has a lower expected return but appears to be less risky than stock B.;4;c. Stock B, because it has a higher expected return and appears to be more risky than stock A.;d. Stock B, because it has a higher expected return and appears to be less risky than stock A.;20. Carmen Electronics bought a new machine for $2,538,966. The company expects additional cash;flows from the machine of $950,225, $1,058,436, and $1,491,497 over the next three years. What is;the payback period? If their acceptance period is 2.5 years, will this project be accepted?;a. 4.17 years, yes;c. 2.36 years, yes;b. 4.17 years, no;d. 3.83 years, no;21. Jekyll and Hyde, Inc. has just purchased the rights to a movie. The company has the option of;producing the movie on either a large budget of $25 million or a small budget of $10 million. The;cash flow in year 1 for the large budget movie is $65 million, while the cash flow in year 1 for the;small-budget movie is $40 million. The cost of capital is 25%. Which project should be accepted?;a. The large-budget movie because the IRR is higher.;b. The small-budget movie because the NPV is lower.;c. The large-budget movie because the NPV is higher.;d. The small-budget movie because the IRR is lower.;22. Which of the following statements is correct?;a. If Project A has a higher IRR than project B, then project A must also have a higher;NPV.;b. If a projects IRR exceeds the cost of capital, then the projects NPV must be;positive.;c. The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of;return equal to the firms cost of capital.;d. Statements (a) and (c) are correct.;23. The projected cash flows for two mutually exclusive projects are as follows;Year;Project A;Project B;0;($150,000);($150,000);1;0;50,000;2;0;50,000;3;0;50,000;4;0;50,000;5;250,000;50,000;If the cost of capital is 10%, the decidedly more favorable project is;a. project A with an NPV of $39,539 and an IRR of 10.8%.;b. project A with an NPV of $5,230 and an IRR of 10.8%.;c. project B with an NPV of $39,539 and an IRR of 19.9%.;d. project B with an NPV of $5,230 and an IRR of 19.9%.;5;24. You are considering two mutually exclusive projects with the following cash flows. Will your choice;between the two projects differ if the required rate of return is 8% rather than 11%? If so, what;should you do?;Year;Project A;Project B;0;($240,000);($198,000);1;0;110,800;2;0;82,500;3;325,000;45,000;a.;b.;c.;Yes, select A at 8% and B at 11%.;Yes, select B at 8% and A at 11%.;No, regardless of the required rate, project A always has;the higher NPV.;No, regardless of the required rate, project B always has;the higher NPV.;d.;25. Capital budgeting analysis of mutually exclusive projects A and B yields the following;IRR;NPV;Payback Period;Project A;18%;$270,000;2.5 yrs;Project B;22%;$255,000;2.0 yrs;Management should choose;a. project A because NPV is the best of the three methods.;b. project B because two out of three methods choose it.;c. project B because most executives prefer the IRR method.;d. either project because the results arent consistent.;6;View Full Attachment;Additional Requirements;Min Pages: 1;Max Pages: 5;Level of Detail: Show all work;Other Requirements: Please answer in excel format.;View full expert interaction;Solver answered the question Oct 24, 2014 at 6:59am;Rating: 1 2 3 4 5 Questions Answered: 323;Pl see answers in attached excel.;Pl rate me 5 stars. Assign me for your future quiz directly... Download Attachment;Misc Qs 620 Oct 24.xlsx;Misc Qs 620 Oct 24.xlsx;Download Preview;Identify the letter of the choice that best completes the statement or answers the question.;a.;b.;c.;d.;1 Which of the following mechanisms helps to align management interests with those...;Answer Rated

 

Paper#28656 | Written in 18-Jul-2015

Price : $27
SiteLock