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Question;1.(TCO A) Which of the following statements is CORRECT? (Points: 10);One of the disadvantages of incorporating a;business is that the owners then become subject to liabilities in the event the;firm goes bankrupt.;Sole proprietorships are subject to more regulations than corporations.;In any type of partnership, every partner has the same rights, privileges, and;liability exposure as every other partner.;Sole proprietorships and partnerships generally have a tax advantage over many;corporations, especially large ones.;Corporations of all types are subject to the corporate income tax.;2.(TCO G) A security analyst obtained the following information from;Prestopino Products? financial statements;? Retained earnings at the end of 2009 were $700,000, but retained earnings at;the end of 2010 had declined to $320,000.;? The company does not pay dividends.;? The company?s depreciation expense is its only non-cash expense, it has no;amortization charges.;? The company has no non-cash revenues.;? The company?s net cash flow (NCF) for 2010 was $150,000.;On the basis of this information, which of the following statements is CORRECT?;(Points: 10);Prestopino had negative net income in 2010.;Prestopino?s depreciation expense in 2010 was less than $150,000.;Prestopino had positive net income in 2010, but its income was less than its;2009 income.;Prestopino's NCF in 2010 must be higher than its NCF in 2009.;Prestopino?s cash on the balance sheet at the end of 2010 must be lower than;the cash it had on the balance sheet at the end of 2009.;3.(TCO G) LeCompte Corp. has $312,900 of assets, and it uses only;common equity capital (zero debt). Its sales for the last year were $620,000;and its net income after taxes was $24,655. Stockholders recently voted in a;new management team that has promised to lower costs and get the return on;equity up to 15%. What profit margin would LeCompte need in order to achieve;the 15% ROE, holding everything else constant? (Points: 10);7.57%;7.95%;8.35%;8.76%;9.20%;4.(TCO B) You want to buy a new sports car three years from now, and;you plan to save $4,200 per year, beginning one year from today. You will;deposit your savings in an account that pays 5.2% interest. How much will you;have just after you make the third deposit, three years from now? (Points: 10);$11,973;$12,603;$13,267;$13,930;$14,626;5.(TCO B) At a rate of 6.5%, what is the future value of the;following cash flow stream?;Years: 0 1 2 3 4;--------|-----------|----------|---------;CFs: $0 $75 $225 $0 $300 (Points: 10);$526.01;$553.69;$582.83;$613.51;$645.80;6.(TCO B) Farmers Bank offers to lend you $50,000 at a nominal rate;of 5.0%, simple interest, with interest paid quarterly. Merchants Bank offers;to lend you the $50,000, but it will charge 6.0%, simple interest, with;interest paid at the end of the year. What's the difference in the effective;annual rates charged by the two banks? (Points: 10);1.56%;1.30%;1.09%;0.91%;0.72%;7.(TCO D) A 15-year bond with a face value of $1,000 currently sells;for $850. Which of the following statements is CORRECT? (Points: 10);The bond?s coupon rate exceeds its current;yield.;The bond?s current yield exceeds its yield to maturity.;The bond?s yield to maturity is greater than its coupon rate.;The bond?s current yield is equal to its coupon rate.;If the yield to maturity stays constant until the bond matures, the bond?s;price will remain at $850.;8.(TCO D) Ezzell Enterprises? noncallable bonds currently sell for;$1,165. They have a 15-year maturity, an annual coupon of $95, and a par value;of $1,000. What is their yield to maturity? (Points: 10);6.20%;6.53%;6.87%;7.24%;7.62%;9.(TCO C) Keys Corporation's five-year bonds yield 7.00%, and;five-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the;inflation premium for five-year bonds is %, the liquidity premium for Keys;bonds is % versus zero for T-bonds, and the maturity risk premium for all bonds;is found with the formula MRP = (t - 1) x 0.1%, where of years to maturity.;What is the default risk premium (DRP) on Keys' bonds? (Points: 10);0.99%;1.10%;1.21%;1.33%;1.46%;10.(TCO C) Assume that the risk-free rate remains constant, but the;market risk premium declines. Which of the following is most likely to occur?;(Points: 10);The required return on a stock with will not change.;The required return on a stock with beta > 1.0 will increase.;The return on "the market" will remain constant.;The return on "the market" will increase.;The required return on a stock with beta < 1.0 will decline.


Paper#51674 | Written in 18-Jul-2015

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