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Five Finance MCQs Set

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Question;1) This year Jones Corp achieved an ROE of 17.7%. Suppose the Board of Directors of Jones mandates thatmanagement take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, andAssets remain the same next year, what effect would you expect this new Leverage policy will have on Jones ROE?Select: 1Jones ROE will increase.Jones ROE will decrease.Jones ROE will remain the same.2) On the Income Statement, which of the following would be classified as a variable cost?Select: 1Promotion ExpenseDepreciation ExpenseDirect Labor ExpenseR&D Expense3) It is January 2nd. Senior management of Jones meets to determine their investment plan for the year. They decideto fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFOhappily notes this will raise their Leverage (=assets/equity) to a new target of 2.7. Assume the stock can be issued atyesterdays stock price ($39.45). Which of the following statements are true? Check all that apply.Select: 3The Jones bond issue will be $3,353,250Jones will issue stock totaling $1,972,500Total investment for Jones will be $5,325,750The Jones Working Capital will be unchanged at $15,188Long term debt will increase from $84,887,453 to $86,859,953Total Assets will rise to $228,662,0004) The Browns workforce complement will grow by 10% (rounded to the nearest person) next year. Ignoring downsizing fromautomating, what would their total recruiting cost be? Assume Brown spends the same amount extra above the $1,000recruiting base as they did last year.BrownNeeded Complement547Complement5471st Shift Complement3832nd Shift Complement164Overtime%0.0%Turnover Rate6.3%New EmployeesSeparated EmployeesRecruiting SpendTraining HoursProductivity IndexRecruiting CostSeparation CostTraining CostTotal HR Admin Cost1210$5,00080123.0%$725$0$876$1,601Labor Contract Next YearWages$3,612,000$3,010,0002.0%Annual Raise$330,0002,500Profit Sharing$275,000$28.15Benefits5.0%5) Company Baldwin invested $57,612,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $35,038,817 at 13.8% interest, and equity of $22,573,183. Depreciation is 15 years straightline. For this transaction alone which of the following statements are true? Select: 5Cash went down by $57,612,000 when the plant was purchased.Cash went up when the Bond was issued by $35,038,817.Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.On the Balance sheet, Long Term Debt changed by $35,038,817.Cash was pulled from retained earnings to cover the $22,573,183 difference between the plant purchase and bond issue.Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by$22,573,183, the difference between the investment $57,612,000 and the bond $35,038,817.Depreciation increased by $3,840,800.On the Balance sheet, Plant & Equipment increased by $57,612,000.

 

Paper#48195 | Written in 18-Jul-2015

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