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Post University FIN 201 Final Exam

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Question;1) At 11 percent interest, how long;would it take to quadruple your money?;6.55;6.64;13.09;13.28;13.56;2) Which one of the following will;decrease if a firm can decrease its operating costs, all else constant?;Return on equity;Return on assets;Profit margin;Equity multiplier;Price-earnings ratio;3) Chelsea Fashions is expected to;pay an annual dividend of $0.80 a share next year. The market price of the;stock is $22.40 and the growth rate is 5 percent. What is the firm's cost of;equity?;7.58 percent;7.91 percent;8.24 percent;8.57 percent;9.00 percent;4) According to the Rule of 72, you;can do which one of the following?;Double your money in five years at;7.2 percent interest;Double your money in 7.2 years at 8;percent interest;Double your money in 8 years at 9;percent interest;Triple your money in 7.2 years at 5;percent interest;Triple your money at 10 percent;interest in 7.2 years;5) If a firm has a debt-equity ratio;of 1.0, then its total debt ratio must be which one of the following?;0.0;0.5;1.0;1.5;2.0;6) Shareholders' equity;Increases in value anytime total;assets increases.;Is equal to total assets plus total;liabilities.;Decreases whenever new shares of;stock are issued.;Includes long-term debt, preferred;stock, and common stock.;Represents the residual value of a;firm.;7) Which one of the following;statements correctly states a relationship?;Time and future values are inversely;related, all else held constant.;Interest rates and time are;positively related, all else held constant;An increase in the discount rate;increases the present value, given positive rates.;An increase in time increases the;future value given a zero rate of interest.;Time and present value are inversely;related, all else held constant.;8) A loan where the borrower;receives money today and repays a single lump sum on a future date is called;a(n) _____ loan;amortized;continuous;balloon;pure discount;interest-only;9) Which one of following is the;rate at which a stock's price is expected to appreciate?;current yield;total return;dividend yield;capital gains yield;coupon rate;10) What is the net present value;of a project that has an initial cash outflow of $34,900 and the following;cash inflows? The required return is 15.35 percent.;-$3,383.25;-$2,784.62;-$2,481.53;$52,311.08;$66,416.75;11) You are investing $100 today;in a savings account at your local bank. Which one of the following terms;refers to the value of this investment one year from now?;future value;present value;principal amounts;discounted value;invested principal;12) A business created as a;distinct legal entity and treated as a legal "person" is called a;Corporation.;Sole proprietorship.;General partnership.;Limited partnership.;Unlimited liability company.;13) When the present value of the;cash inflows exceeds the initial cost of a project, then the project should;be;Accepted because the internal rate;of return is positive.;Accepted because the profitability;index is greater than 1.;Accepted because the profitability;index is negative.;Rejected because the internal rate;of return is negative.;rejected because the net present;value is negative;14) An amortized loan;requires the principal amount to;be repaid in even increments over the life of the loan;May have equal or increasing;amounts applied to the principal from each loan payment.;Requires that all interest be;repaid on a monthly basis while the principal is repaid at the end of the;loan term.;Requires that all payments be;equal in amount and include both principal and interest.;Repays both the principal and the;interest in one lump sum at the end of the loan term.;15) The difference between the price;that a dealer is willing to pay and the price at which he or she will sell is;called the;Equilibrium.;Premium.;Discount.;Call price.;Spread.;16) Which one of the following;methods of project analysis is defined as computing the value of a project;based upon the present value of the project's anticipated cash flows?;Constant dividend growth model;Discounted cash flow valuation;Average accounting return;Expected earnings model;Internal rate of return;17) Mary just purchased a bond which;pays $60 a year in interest. What is this $60 called?;Coupon;Face value;Discount;Call premium;Yield;18) What are the distributions to;shareholders by a corporation called?;Retained earnings;Net income;Dividends;Capital payments;Diluted profits;19) Which one of the following is;defined as a firm's short-term assets and its short-term liabilities?;Working capital;Debt;Investment capital;Net capital;Capital structure;20) An ordinary annuity is best;defined by which one of the following?;Increasing payments paid for a;definitive period of time;Increasing payments paid forever;Equal payments paid at regular;intervals over a stated time period;Equal payments paid at regular;intervals of time on an ongoing basis;Unequal payments that occur at set;intervals for a limited period of time;21) Which one of the following terms;is used to describe a loan that calls for periodic interest payments and a lump;sum principal payment?;Amortized loan;Modified loan;Balloon loan;Pure discount loan;Interest-only loan;22) Which of the following questions;are addressed by financial managers?;I. How should a product be marketed?;II. Should customers be given 30 or;45 days to pay for their credit purchases?;III. Should the firm borrow more;money?;IV. Should the firm acquire new;equipment?;I and IV only;II and III only;I, II, and III only;II, III, and IV only;I, II, III, and IV;23) You want to be on the board of;directors of Wisely Foods. Since you are the only shareholder that will vote;for you, you will need to own more than half of the outstanding shares of stock;if you are to be elected to the board. What is the type of voting called that;requires this level of stock ownership to be successfully elected under these;conditions?;Democratic;Cumulative;Straight;Deferred;Proxy;24) 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?;Simplifying;Compounding;Aggregation;Accumulation;Discounting;25) A monthly interest rate;expressed as an annual rate would be an example of which one of the following;rates?;Stated rate;Discounted annual rate;Effective annual rate;Periodic monthly rate;Consolidated monthly rate;26) The decision to issue additional;shares of stock is an example of which one of the following?;Working capital management;Net working capital decision;Capital budgeting;Controller?s duties;Capital structure decision;27) The average of a firm's cost of;equity and after-tax cost of debt that is weighted based on the firm's capital;structure is called the;Reward to risk ratio.;Weighted capital gains rate.;Structured cost of capital.;Subjective cost of capital.;Weighted average cost of capital.;28) Wayco Industrial Supply has a;pre-tax cost of debt of 7.6 percent, a cost of equity of 14.3 percent, and a;cost of preferred stock of 8.5 percent. The firm has 220,000 shares of common;stock outstanding at a market price of $27 a share. There are 25,000 shares of;preferred stock outstanding at a market price of $41 a share. The bond issue;has a face value of $550,000 and a market quote of 101.2. The company's tax;rate is 37 percent. What is the firm's weighted average cost of capital?;10.18 percent;10.84 percent;11.32 percent;12.60 percent;12.81 percent;29) A project has an initial cost of;$27,400 and a market value of $32,600. What is the difference between these two;values called?;Net present value;Internal return;Payback value;Profitability index;Discounted payback;30) Which one of the following terms;is defined as the management of a firm's long-term investments?;Working capital management;Financial allocation;Agency cost analysis;Capital budgeting;Capital structure;31) Which one of the following is;computed by dividing next year's annual dividend by the current stock price?;Yield to maturity;Total yield;Dividend yield;Capital gains yield;Growth rate;32) Alex invested $10,500 in an;account that pays 6 percent simple interest. How much money will he have at the;end of four years?;$12,650;$12,967;$13,020;$13,256;$13,500;33) The length of time between the;sale of inventory and the collection of the payment for that sale is called;the;Operating cycle.;Inventory period.;Accounts receivable period.;Accounts payable period.;Cash cycle.;34) 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 present value of this gift if;you delay your graduation by one year and graduate three years from now?;Remains constant;Increases;Decreases;Becomes negative;Cannot be determined from the;information provided;35) Wind Power Systems has 20-year;semi-annual bonds outstanding with a 5 percent coupon. The face amount of each;bond is $1,000. These bonds are currently selling for 114 percent of face;value. What is the company's pre-tax cost of debt?;3.98 percent;4.42 percent;4.71 percent;5.36 percent;5.55 percent;36) Rachel's has a $50,000 line of;credit with Uptown Bank. The line of credit calls for an interest rate of 8;percent and a compensating balance of 4 percent. The compensating balance is;based on the total amount borrowed and will be held in an interest-free;account. What is the effective annual interest rate if the firm borrows $35,000;for one year?;7.76 percent;8.00 percent;8.17 percent;8.33 percent;8.42 percent;37) The cash flow of a firm which is;available for distribution to the firm's creditors and stockholders is called;the;Operating cash flow.;Net capital spending.;Net working capital.;Cash flow from assets.;Cash flow to stockholders.;38) Which one of the following is a;source of cash?;Increase in accounts receivable;Decrease in notes payable;Decrease in common stock;Increase in accounts payable;Increase in inventory;39) An agent who maintains an;inventory from which he or she buys and sells securities is called a;Broker.;Trader.;Capitalist.;Principal.;Dealer.;40) You cannot attend the;shareholder's meeting for Alpha United so you authorize another shareholder to;vote on your behalf. What is the granting of this authority called?;Altering;Cumulative voting;Straight voting;Indenture agreement;Voting by proxy;41) The length of time between the;purchase of inventory and the receipt of cash from the sale of that inventory;is called the;Operating cycle.;Inventory period.;Accounts receivable period.;Accounts payable period.;Cash cycle.;42) Phil can afford $180 a month for;5 years for a car loan. If the interest rate is 8.6 percent, how much can he;afford to borrow to purchase a car?;$7,750.00;$8,348.03;$8,752.84;$9,266.67;$9,400.00;43) Which one of the following is;computed by dividing next year's annual dividend by the current stock price?;Yield to maturity;Total yield;Dividend yield;Capital gains yield;Growth rate;44) The decision to issue additional;shares of stock is an example of which one of the following?;Working capital management;Net working capital decision;Capital budgeting;Controller?s duties;Capital structure decision;45) An ordinary annuity is best;defined by which one of the following?;Increasing payments paid for a;definitive period of time;Increasing payments paid forever;Equal payments paid at regular;intervals over a stated time period;Equal payments paid at regular;intervals of time on an ongoing basis;Unequal payments that occur at set;intervals for a limited period of time;46) Which one of the following is a;capital budgeting decision?;Determining how many shares of stock;to issue;Deciding whether or not to purchase;a new machine for the production line;Deciding how to refinance a debt;issue that is maturing;Determining how much inventory to;keep on hand;Determining how much money should be;kept in the checking account;47) Travis invested $9,250 in an;account that pays 6 percent simple interest. How much more could he have earned;over a 7-year period if the interest had compounded annually?;$741.41;$773.58;$802.16;$833.33;$858.09;48) Net working capital is defined;as;Total liabilities minus;shareholders' equity.;Current liabilities minus;shareholders' equity.;Fixed assets minus long-term;liabilities.;Total assets minus total;liabilities.;Current assets minus current liabilities.;49) Bert owns a bond that will pay;him $75 each year in interest plus a $1,000 principal payment at maturity. What;is the $1,000 called?;Coupon;Face value;Discount;Yield;Dirty price;50) Which one of the following will;increase the value of a firm's net working capital?;Using cash to pay a supplier;Depreciating an asset;Collecting an accounts receivable;Purchasing inventory on credit;Selling inventory at a profit

 

Paper#47452 | Written in 18-Jul-2015

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