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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#50213 | Written in 18-Jul-2015

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