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(TCO 4) There are several disadvantages to the payback method, among them:




Question;2. (TCO 4) There are several disadvantages;to the payback method, among them: (Points: 4) payback ignores cash flows;beyond the payback point. payback can be used in conjunction with time adjusted;methods of evaluation. payback is easy to use and to understand. none of the above;is a disadvantage. Question 3.3. (TCO 3 and 4) You can ensure;that an investment is expected to create value for (Points: 4) have a PI equal;to zero. produce negative rates of return. have positive AARs. have positive;IRRs. have positive NPVs. Question 4.4. (TCO 3 and 4) What is the net;present value of a project with the following cash flows, if the discount rate;is 10 percent? Year 0 1 2 3 4 Cash flow -$32,000 $9,000 $10,000 $15,200 $7,800;(Points: 4) $1,085.25 $1,193.77 $3,498.28 $4,102.86 $4,513.15 Question 5.5. (TCO 4) Leward Manufacturing;is spending $115,000 to update its equipment. This is necessary if the firm;wishes to be competitive in the marketplace and provide a wide array of product;models. The company estimates that these updates will improve its cash inflows;by $27,500 a year, for eight years. What is the payback period? (Points: 4) 4.18;years 5.82 years 6.62 years 7.79 years This project never pays back Question 6.6. (TCO 4) The situation that;exists when the units within a business are allotted a fixed amount of money;for capital budgeting, is referred to as: (Points: 4) soft rationing. hard;rationing. unit capital rationing. allocated planning. strategic planning. Question 7.7. (TCO 4) Assume Company X;plans to invest $60,000 in industrial equipment. Using Tables 9.6 and 9.7 of;your textbook (Page 277), which is the first year depreciation amount under;MACRS? (Points: 4) $12,000 $8,574 $19,800 None of the above Question 8.8. (TCO 1 and 4) Assume a;project has earnings before depreciation, and taxes of $110,000, depreciation;of $40,000, and that the firm has a 30 percent tax bracket. What is the;after-tax cash flow for the project? (Points: 4) $47,000 $89,000 a loss of;$21,000 none of these Question 9.9. (TCO 8) Which of the;following statements is true regarding systematic risk? (Points: 4) is;diversifiable is the total risk associated with surprise events it is measured;by beta it is measured by standard deviation Question 10.10. (TCO 8) Which statement is;not true regarding risk? (Points: 4) the expected return is usually not the;same as the actual return a key to assess risk is determining how much risk an;investment adds to a portfolio some risks can not be decreased or mitigated by;the financial manager. the higher the risk, the higher the return investors;require for the investment all of the above are true statements Question 11.11. (TCO 8) The stock of;Chocolate Galore is expected to produce the following returns, given the;various states of the economy. What is the expected return on this stock? State;of Economy Probability of State of Economy Rate of Return Recession.02 -.06;Normal.88.11 Boom.10.17 (Points: 4) 7.33 percent 9.82 percent 11.26;percent 11.33 percent 11.50 percent Question 12.12. (TCO 8) You own a portfolio;that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and;$5,500 in stock D. What is the portfolio weight of stock B? (Points: 4) 14.79;percent 15.91 percent 18.42 percent 19.07 percent 19.46 percent 1. (TCO 5) Royal Petroleum Co. can buy a;piece of equipment that can be financed with debt at a cost of 6 percent;(after-tax) and common equity at a cost of 18 percent. Assume debt and common;equity each represent 50 percent of the firm's capital structure. What is the;weighted average cost of capital? (Points: 4) between 3 and 9% about 12% more;than 14% about 11% none of the above Question 2.2. (TCO 5, 6 and 7) An issue of;common stock is expected to pay a dividend of $4.80 at the end of the year. Its;growth rate is equal to eight percent. If the required rate of return is 13;percent, what is its current price? (Points: 4) $103.68 $36.92 $96.00 none of;these;3. (TCO 4) A project;has the following cash flows. What is the internal rate of return?;Year;0;1;2;3;Cash;flow;-$520,000;$112,900;$367,200;$204,600;(Points: 4);less than 10%;approximately 14%;more than 16%;more than 18% but less than 20%;Question 4.4. (TCO 5, 6 and 7) Which one of the following is a;correct statement? (Points: 4);Current tax laws favor debt;financing.;A decrease in the dividend growth;rate increases the cost of equity.;An increase in the systematic risk;of a firm will decrease the firm's cost of capital.;A decrease in a firm's debt-equity;ratio will usually decrease the firm's cost of capital.;The cost of preferred stock;decreases when the tax rate increases.;Question 5.5. (TCO 5, 6 and 7) The;preferred stock of Blue Sky Air pays an annual dividend of $7.25 a share;and sells for $54 a share. What is the firm's cost of preferred stock? (Points;4);8.56 percent;9.32 percent;11.85 percent;13.43 percent;14.47 percent;Question 6.6. (TCO 2);Which one of the following decreases the cash account? (Points: 4);A payment due is received from a;client;Dividends are paid to shareholders;Raw materials are purchased and paid;for with credit;A new machine is purchased and paid;for with the business line of credit;Question 7.7. (TCO 2) Which one of the following statements is;true? (Points: 4);There is an opportunity cost;associated with not offering credit.;The costs of the credit application;process and the costs expended in the collection process are not;carrying costs of granting credit.;Character, refers to the ability of;a firm to meet its credit obligations out its operating cash flows.;The optimal credit policy, is the;policy that produces the largest amount of sales for a firm.;Question 8.8. (TCO 2) Delphinia's has the following estimated;quarterly sales for next year. The accounts receivable period is 30 days.;What is the expected accounts receivable balance at the end of the second;quarter? Assume each month has 30 days.;Q1;Q2;Q3;Q4;Sales;$1,800;$1,700;$2,100;$1,900;(Points: 4);$567;$600;$821;$1,134;$1,200;Question 9.9. (TCO 1) Which one of the;following statements is true regarding the goal of financial management? (Points;4);The;goal of maximizing the value per share of existing stock is relevant to all;organizations.;The ultimate goal of financial;management is maximizing earnings and profits.;For a company considering;international operations, the goal will be the same but the company will have;to consider the local, social, economical, and political environment in the;decision-making process.;None of the above are true;statements.;1.(TCO 1) Which one of the following activities best exemplify;working capital management? (Points: 4);Sale long-term bonds to raise;funds for a new machine.;Determine the return of a;potential long-term project.;Calculate the cash flows for a;long-term project.;Manage payments to suppliers.;Question 2.2. (TCO 1) Market values reflect which of the;following: (Points: 4);The amount someone is willing to;pay today for an asset.;The value of the asset based on;generally-accepted accounting principles.;The asset?s historical cost.;A and B only;None of the above;Question 3.3. (TCO 3) Regional Bank offers you an APR of 19;percent compounded semiannually, and Local Bank offers you an EAR of;20.10 percent for a new automobile loan. You should choose;because its _______ is lower. (Points: 4);Regional Bank, APR;Local Bank, EAR;Regional Bank, EAR;Local Bank, APR;Question 4.4. (TCO 3) Thirteen years from now, you will be;inheriting $30,000. What is this inheritance worth to you today, if you;can earn four percent interest compounded annually? (Points;4);$18,017.22;$20,741.87;$23,190.98;$26,359.88;$28,846.15;Question 5.5. (TCO 3) Paper Pro needed;a new store. The company spent $48,750 to refurbish an old shop and create;the current facility. The firm borrowed the refurbishment cost;at eight percent annual interest for 11 years, with payment of;principal and interest due monthly. What is the amount of each;monthly payment? (Points: 4);$91.05;$284.13;$556.50;$682.87;$731.60;Question 6.6. (TCO 3) John borrowed $5,500 four years ago at;an annual interest rate of 10 percent. The loan term is seven years.;Since he borrowed the money, Sonny has been making annual payments of;$550 to the bank. Which type of loan does John have? (Points: 4);interest-only;pure discount;compounded;amortized;complex;Question 7.7. (TCO 3) Fanta Cola has $1,000 par value bonds;outstanding at 12 percent interest. The bonds mature in 25;years. What is the current price of the bond if the YTM is 16 percent?;Assume annual interest payments. (Points: 4);$1315;$1300;$756;$1000;Question 8.8. (TCO 7) Which one of the following statements;concerning financial leverage is correct? (Points: 4);The benefits of leverage are;unaffected by the amount of a firm's earnings.;The use of leverage will always;increase a firm's earnings per share.;The shareholders of a firm are;exposed to greater risk anytime a firm uses financial leverage.;Earnings per share are unaffected;by changes in a firm's debt-equity ratio.;Financial leverage is beneficial;to a firm only when the firm has minimal earnings.;Question 9.9. (TCO 3) SmithKline Company's bonds are currently;selling for $1,157.75 per $1000 par-value bond. The bonds have a 10;percent coupon rate and will mature in 10 years. What is the;approximate yield to maturity? (Points: 4);6.96%;7.69%;11.0%;12.1%;Question 10.10. (TCO 8) Which one of the following is correct;regarding bonds? (Points: 4);Most;bonds do not carry default risk.;Municipal bonds are free of;default risk.;Bonds are not sensitive to;changes in the interest rates.;Moody?s and Standard and Poor?s;provide information regarding a bond?s interest rate risk.;None of the above is true;1.(TCO 6 and 7) The document that outlines the covenants and;duties existing between bondholders and the issuing corporation is;called (Points: 5);an indenture.;a debenture.;secured debt.;protective covenants.;Question 2.2. (TCO 2) Which of the following does not reduce;collection float? (Points: 5);consolidate all lockboxes into;one lockbox, located near the home office.;consolidate all lockboxes into;one lockbox, located far from the home office.;make sure all checks it;receives are properly dated and signed.;utilize the benefits of the;Check Clearing Act for the 21st Century.;Question 3.3. (TCO 2) Storage and tracking costs, insurance and;taxes, and losses due to theft are examples of: (Points: 6);Inventory depletion costs;Sunk costs;Carrying costs;Shortage costs


Paper#51947 | Written in 18-Jul-2015

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