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##### 36 Financial Accounting Multiple Choices - great quiz

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Question;What's the value of a preferred stock if we;assume it has an annual dividend $5;per share and the required rate of return is 20%?;$ 5;$ 10;$ 25;$ 100;How to;compute the real risk-free rate?;Equal;to nominal risk-free rate;Equal;to nominal risk-free rate plus the expected inflation rate;Equal;to nominal risk-free rate minus the expected inflation rate;By maximizing the net income of a firm we;will ensure that the price per share of;common stock is maximized, hence shareholders' wealth will also be maxi-;mized.;True;False;A firm;has $900 millions of current assets, including $300 millions of inventory. It;has $500 millions of current liabilities. What's the firm's quick ratio?;0.60;1.80;For a;discount bond, the coupon interest rate should be greater than its yield to;maturity.;True;False;1.40;1.20;A firm has a times interest earned;ratio of 2. This means that the firm has twice;as much;net;income as it owes in interest.;interest;expense as it does net income.;earnings;before interest and taxes as it does interest expense.;earnings;before interest and taxes plus depreciation as it does interest;expense.;If we assume a perpetuity pays $100;per year forever. What would the;perpetuity be worth if the required rate of return is 10%?;$100;$500;$1,000;$2,000;Under straight voting, each share of stock allows the;shareholder one vote, and;each position on the board of directors is voted on separately. But with;cumulative voting, each share of stock allows the stockholder a number of votes;equal to the number of directors being selected. So cumulative voting procedure;helps protect minority shareholders. _____True;False;You just inherited $10,000. You are;investing this money for two years at 10%;simple interest. In whole dollars, how much money will you have at the end of;the two years?;$10,500;$11,000;$12,025;F12,000;John purchased 1000 shares of;Facebook common stock at IPO. This transaction;occurs in the;Primary;market.;Secondary;market.;Credit;market.;Money;market.;At maturity, the value of either;premium bond or discount bond is always equal;to its par value.;True.;False.;The percentage of a firm's net;income which is transferred into retained earnings;is known as the _______.;Profit;margin;Dividend;payout ratio;Retention;ratio;Return;on equity;Theresa borrows $800 today in;exchange for one payment of $1,000 five years;from now. This is an example of a(n);interest-only;loan;amortized;loan;pure;discount loan;quoted;rate loan;Project;selection ambiguity can arise if you rely on the internal rate of return;(IRR);instead of the net present value (NPV) when;A;project's cash flows are non-conventional.;There;are multiple IRRs.;Projects;are mutually exclusive.;All;of the above.;Which of;the following statements is most correct?;Preferred;stockholders have claim priority over common stockholders.;A;big advantage of preferred stock is that preferred stock dividends are tax;deductible for the issuing corporation.;Preferred;stockholders have claim priority over bondholders.;None;of the above statements is correct.;Other;things held constant, for a given change in the market interest rate, the;the time to maturity of bond, the the change in the bond price.;longer;smaller.;shorter;larger.;longer;greater.;When evaluating two;mutually-exclusive project, the best method to use is the;internal;rate of return;net;present value;payback;rule;average;accounting return;What's;the future value of the initial $1,000 investment after 20 years? We;assume the expected annual return is 8%;$4,078.23;$4,660.96;$4,810.15;$5,020.78.;What's;the present value of the $1,000 due in 20 years (FV=$1,000)? We assume;current interest rate is 8%, compounded annually;$190.39;$205.14;$214.55;$365.67.;EA store;is offering a diamond ring for sale for 36 months at $135 per month.;The retail price of the ring is $3,900. What is the interest rate on this;offer?;13.8%;14.9%;15.5%;16.6%;What's;the value of a 15-year, $1,000 par value, 9% coupon rate bond if the yield;to maturity (YTM) is 9%?;$800;$950;$1,000;$1,100;What's;the value of a 15-year, $1,000 par value, 9% coupon rate bond if the yield to;maturity (YTM) increases to 12%?;$795.67;$813.26;$1,000;$1,123.15;Based on the information in Question;35, the bond is a;Par;value bond;Discount;bond;Premium;bond;What's the value of a 15-year;$1,000 par value, 9% coupon rate bond if the yield;to maturity (YTM) decreases to 6%?;$916.23;$1000;$1,176.30;$1,291.37;Based on;the information in Question 37, the bond is a;Par;value bond;Discount;bond;Premium;bond;A;stock has the required rate of return at 16%. The most recent dividend paid;D0 = $2.00 and the expected dividend;growth rate g = 5%. What's the first dividend expected to pay at the end of;this year?;$2.00;$2.10;$2.20;$2.50;Based;on the information from Question 39, What's the estimated value of the;stock?;$17.2;$19.1;$21.5;$30.8;Based;on the information from Question 39~40, if the current trading price of the;stock on the stock market is $22.28 per share, we should give a _____ recommendation;to the stock.;Buy;Hold;Sell;A;company has a net working capital of $4,800, total liabilities of $15,900;and;long-term debt of $9,500. What is the value of the current assets?;$4,800;$11,200;$20,700;$30,200;A;firm is considering a new inventory system that will cost $120,000. The;system is expected to generate positive cash flows over the next four years;in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000 in year 3;and $40,000 in year 4. The firm's required rate of return is 9%.;What;is the payback period of;this project?;1.95;years;2.46;years;2.99;years;3.10;years;Based;on the information from Question 43. What is the net present value (NPV);of the project?;$28,830.29;$30,929.26;$36,931.43;$39,905.28;Based;on the information from Question 43, what is the internal rate of return;(IRR) of this project?;14.03%;17.56%;19.26%;21.78%;Based on the information from;Question 43, what is the profitability index (PI) of;this project?;0.87;1.11;1.31;1.83.;A firm has total assets of $13,200;fixed assets of $8,500, current liabilities of;$2,700, and long-term liabilities of $5,200. What is the total debt ratio?;0.47;0.60;0.72;0.83;You want to receive $5,000 per month;in retirement. If you can earn 0.75% per;month and you expect to need the income for 25 years, how much do you need;to have in your account at retirement?;$623,798;$686,453;$798,204;What is the value of a stock that is;expected to pay a constant dividend of $5 per;year if the required return is 10%?;$15;$50;$100;$105;Based on the information from;Question 49, what the value of the stock if the;company starts increasing dividends by 5% per year, beginning with the next;dividend?;$15;$50;$100;$105;="msonormal">

Paper#38642 | Written in 18-Jul-2015

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