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TAMUC Fin504 exams WEEK 6 EXAM

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Question;Question 1. Question;Assume that the following relationships;for B. Huang;Total Asset Turnover Ratio =2;ROA =3%;ROE =5%;What is the debt to assets ratio assuming that the firm uses;only debt and common equity and all liabilities are long term debt?;10%;20%;30%;40%;50%;Question 2. Question;When considering the risk of;receiving cash flows, financial managers must be aware that;investors want higher returns for perceived;greater risk.;investors want a lower valued firm to;discourage future investors which might dilute their existing control.;investors expect dividends and capital gains;regardless of the risks associated with achieving them.;investors always want lower returns so that;the risk is minimized.;Points Received: 3 of 3;Comments;Question 3. Question;If the exchange rate from U.S.;dollars to Canadian dollars is $0.80/Canadian dollar, then the exchange rate;from Canadian dollars to U.S. dollars is;0.80 Canadian $/US dollar;$1.25 Canadian $/US dollar;$1.20 Canadian $/US dollar;$8.00 Canadian $/US dollar;Points Received: 3 of 3;Comments;Question 4. Question;ICU has current assets of;$800,000 and net fixed assets of $1,400,000. The firm expects its sales to;climb 25 percent next year from its current level of $3,500,000. ICU's only;current liability is accounts payable of $1,200,000. If both current assets and;current liabilities will increase proportionately with sales, what additional;financing will be needed by ICU next year? Assume ICU has a net profit margin;of 6 percent. An increase in net fixed assets of $500,000 will be required. The;firm pays out 50 percent of its earnings as dividends.;$400,000;$358,750;$178,750;Question 5. Question;Cash budgeting can be employed;effectively by management to;identify potential cash flow problems in;advance;aid them in capital budgeting;control retained earnings;coordinate cash and deferred expenses;Question 6. Question;The primary reason for the;divergence between the shareholder wealth maximization goal and the actual;goals pursued by management has been attributed to;separation of social responsibility and;stakeholders' concerns;separation of ownership and control;separation of personal welfare and long-run;profit goals;the granting of "golden parachute;contracts;Points Received: 3 of 3;Comments;Question 7. Question;The interest rate at which;banks in the Eurocurrency market lend to each other is known as the ____.;Eurocurrency currency rate (ECR);London interbank offer rate;exchange rate;interest rate parity;Points Received: 3 of 3;Comments;Question 8. Question;When an investor purchases;shares in a no-load common stock mutual fund, she is using a(n);primary intermediary;financial intermediary;over-the-counter market;broker;Points Received: 0 of 3;Comments;Question 9. Question;A firm's current ratio is 1.5;and its quick ratio is 1.0. If its current liabilities are $10,000, what are;its inventories?;$ 5,000;$10,000;$15,000;$20,000;Question 10. Question;In six years, your daughter;will be going to college. You wish to have a fund that will provide her $10,000;per year (end of year) for each of her four years in college. How much must you;put into that fund today if the fund will earn 10 percent in each of the 10;years?;$29,744.65;$29,783.76;$17,878.80;$21,651.10;Comments;Question 11. Question;The following ratio(s) that;would probably not be used to assess the profitability of a firm is;return on stockholders' equity;return on total assets;times interest earned;both return on stockholders' equity and;return on total assets;Points Received: 3 of 3;Comments;Question 12. Question;The two most important;disciplines on which financial management relies are;accounting and production;accounting and marketing;economics and marketing;accounting and economics;Points Received: 3 of 3;Comments;Question 13. Question;All of the following are;financial intermediaries EXCEPT;commercial banks;investment companies;thrift institutions;loan sharks;Points Received: 0 of 3;Comments;Question 14. Question;What is the holding period;return to an investor who bought 100 shares of Oil Slick stock nine months ago;for $36 per share, received two $50 dividend checks, and sold the stock today;at $38 a share.;5.56%;8.33%;11.11%;6.94%;Question 15. Question;You bought 100 shares of Risky;Venture stock six months ago for $14 per share and sold it yesterday for $12.;The company paid a total of $0.24 per share in dividends to you during the time;you held the stock. What was your holding period return?;-25.14%;-16.67%;-12.57%;16.00%;Question 16. Question;What is the present value of;the following net cash flows if the discount rate is 12%;Year Cash Flow;1-5 $10,000;each year;6-10 $15,000 each;year;11-15 $17,000 each;year;$151,400;$ 86,462;$144,037;$ 79,252;Question 17. Question;The U.S. financial markets are;said to be highly informationally efficient. This means;they process stock trades accurately and;quickly;the market provides quick access to a firm's;financial statements;they quickly reflect information relevant to;determining stock value;accurate stock quotes are quickly available;to all investors;Question 18. Question;Mr. Moore is 35 years old;today and is beginning to plan for his retirement. He wants to set aside an;equal amount at the end of each of the next 25 years so that he can retire at;age 60. He expects to live to the maximum age of 80 and wants to be able to;withdraw $25,000 per year from the account on his 61st through 80th birthdays.;The account is expected to earn 10 percent per annum for the entire period of;time. Determine the size of the annual deposits that must be made by Mr. Moore.;$212,850;$23,449;$2,164;$8,514;Question 19. Question;What is the cost of sales for;a firm with a gross profit margin of 30 percent, a net profit margin of 4;percent, and earnings after taxes of $20,000?;$200,000;$350,000;$150,000;$125,000;Question 20. Question;Giving top management ____ is;one method that ensures managers will act in the interest of shareholders in;merger decisions.;golden parachute" contracts;excellent pay;executive perks;job security;Question 21. Question;Jones Company sales last year;were $25 million and its total assets were $8 million. Accounts payable were $2;million and common stock and retained earnings were $5 million. Jones sales are;forecasted to be $30 million this year, earnings after tax are expected to be;3% of sales, and dividends of $250,000 are expected to be paid. Assuming that;the ratio of assets to sales and current liabilities to sales remain the same;this year as last year, determine the amount of additional financing required.;$550,000;$1,200,000;$300,000;None of the above;Points Received: 3 of 3;Comments;Question 22. Question;If the discount rate is 12%;what is the present value of the following cash flows;Year Cash Flow;1 $10,000;2 $11,000;3 $12,000;4 $13,000;5 $14,000;6-15 $15,000 each;year;$144,618;$127,923;$127,197;$ 90, 537;Question 23. Question;If you invest $10,000 in a;4-year certificate of deposit (CD) paying 10 percent interest compounded;annually, determine how much the CD will be worth at the end of 4 years.;$13,600;$45,730;$14,640;$15,958;Question 24. Question;Agency problems may give rise;to costs that ____ the market value of firms.;increase;decrease;do not affect;are not important to;Points Received: 3 of 3;Comments;Question 25. Question;Comet Powder Company has;purchased a piece of equipment costing $100,000. It is expected to generate a;ten-year stream of benefits amounting to $16,273 per year. Determine the rate;of return Comet expects to earn from this equipment.;16.3%;62.7%;10%;20%;Points Received: 3 of 3;Comments;Question 26. Question;Which of the following is;correct regarding the forms of market efficiency?;I. In an efficient capital market stock prices provide an;unbiased estimate of the true value of an enterprise.;II. In an efficient capital market, stock prices reflect the;present value of the firm?s expected cash flows.;I only;II only;Both I and II;Neither I nor II;Points Received: 3 of 3;Comments;Question 27. Question;Using a cash budget is more;useful than the percentage of sales method because;I. It can more precisely estimate the amount of financing;needed.;II. It can better estimate the time of financing need.;I only;II only;Both I and II;Neither I nor II;Points Received: 3 of 3;Comments;Question 28. Question;Nuking Gnats Pest Service;Inc. has a debt ratio of 50% and an equity multiplier of 2. What is Nuking;Gnats' stockholders' equity if total debt is $100,000?;$100,000;$150,000;$200,000;$50,000;Comments;Question 29. Question;Agency costs include all of;the following except;expenditures to monitor management's actions;providing stock as part of management's;compensation;flotation costs;bonding expenditures;Points Received: 3 of 3;Comments;Question 30. Question;What is the future value of a;$10,000 college tuition fund if the nominal rate of interest is 12 percent;compounded monthly for five years?;$17,623.42;$18,170;$16,105.10;$16,122.26;Question 31. Question;markets deal in long-term;securities having maturities greater than one year.;Credit;Money;Commodity futures;Capital;Points Received: 3 of 3;Comments;Question 32. Question;Air Atlantic (AA) has been;offered a 3-year old jet airliner under a 12-year lease arrangement. The lease;requires AA to make annual lease payments of $500,000 at the beginning of each;of the next 12 years. Determine the present value of the lease payments if the;opportunity cost of funds is 14 percent.;$2,830,000;$13,635,500;$6,000,000;$3,226,200;Points Received: 3 of 3;Comments;Question 33. Question;Given the following;information, calculate the inventory for Big Show Videos: Quick ratio = 1.2;Current assets = $12,000, Current ratio = 2.5;$4,800;$6,240;$7,200;$5,660

 

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