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FIN 504 FINAL

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Question;FIN 504;?;are obligations of the U.S. Treasury with common;maturities of one to seven years and that are generally issued in minimum;denominations of $5,000.;A.;Treasury notes;B.;Treasury bills;C.;Federal agency issues;D.;Banker's acceptances;?;The firm's financing requirements can be separated into;A.;current liabilities and long-term funds;B.;current assets and fixed assets;C.;current liabilities and long-term debt;D.;seasonal and permanent;?;Debt is generally the least expensive source of capital. This is;primarily due to;A.;fixed interest payments;B.;its position in the;priority of claims on assets and earnings in the event of liquidation;C.;the tax deductibility of interest payments;D.;the secured nature of a debt obliga;?;The capital impairment restrictions are established to;A.;reduce dividends equal to or below the current earnings level;B.;constrain the firm to paying dividends which do not require;additional borrowing;cprotect the shareholder;D;provide a sufficient base;to protect creditors' claims;?;The portion of a firm's current assets financed with long-term;funds may be called;A.;working capital;B.;accounts receivable;C.;net working capital;D.;Inventory;?;Earnings before interest and taxes (EBIT) is a descriptive label;for;A.;operating profits;B.;net profits before taxes;C.;earnings per share;D.;gross profits;?;At a firm's quarterly dividend meeting held on December 5, the;directors declared a $1.50 per share cash dividend to be paid to the holders of;record on Monday, January 1. Before the dividend was declared, the firm's;accumulated retained earnings balance and cash balance were $1,280,000 and;$30,000 respectively. The firm has 10,000 shares of common stock outstanding.;On January 2, the cash, dividends payable, and retained earnings accounts had;balances of;A.;$15,000, $0, and;$1,265,000, respectively;B.;$30,000, $15,000, and $1,280,000, respectively;C.;$30,000, $0, and $1,265,000, respectively;D.;$15,000, $0, and $1,280,000, respectively;?;If a firm has a limited capital budget and too many good capital;projects to fund them all, it is said to be facing the problem of;A.;constrained capital;B.;wealth optimization;C.;capital rationing;D.;profitability;?;analysis is a technique used to assess the returns;associated with various cost structures and levels of sales.;A.;Time-series;B.;Marginal;C.;Breakeven;D.;Ratio;?;Systematic risk is also referred to as;A.;diversifiable risk;B.;economic risk;C.;nondiversifiable risk;D.;Not Relevant;?;Net working capital is defined as;A.;a ratio measure of liquidity best used in cross-sectional;analysis;B.;the portion of the firm's assets financed with short-term funds;C.;current liabilities minus current assets;D.;current assets minus;current liabilities;is a series of equal annual cash flows.;A.;A mixed stream;B.;A conventional;C.;A non-conventional;D.;An annuity;?;A corporation is selling an existing asset for $21,000. The;asset, when purchased, cost $10,000, was being depreciated under MACRS using a;five-year recovery period, and has been depreciated for four full years. If the;assumed tax rate is 40 percent on ordinary income and capital gains, the tax;effect of this transaction is;A.;$0 tax liability;B.;$7,560 tax liability;C.;$4,400 tax liability;D.;$7,720 tax liability;?;The ________ is the rate of return a firm must earn on its;investments in projects in order to maintain the market value of its stock.;A.;net present value;B.;cost of capital;C.;internal rate of return;D.;gross profit margin;?;A behavioral approach that evaluates the impact on the firm's;return of simultaneous changes in a number of project variables is called;A.;sensitivity analysis;B.;scenario analysis;C.;simulation analysis;D.;All of the above;?;The objective of ________ is to select the group of projects;that provides the highest overall net present value and does not require more;dollars than are budgeted.;A.;capital rationing;B.;scenario analysis;C.;certainty equivalents;D.;sensitivity analysis;?;A corporation has decided to replace an existing asset with a;newer model. Two years ago, the existing asset originally cost $30,000 and was;being depreciated under MACRS using a five-year recovery period. The existing;asset can be sold for $25,000. The new asset will cost $75,000 and will also be;depreciated under MACRS using a five-year recovery period. If the assumed tax;rate is 40 percent on ordinary income and capital gains, the initial investment;is;A.;$42,000;B.;$52,440;C.;$54,240;D.;$50,000;?;A $60,000 outlay for a new machine with a usable life of 15;years is called;A.;capital expenditure;B.;operating expenditure;C.;replacement expenditure;D.;None of the above;?;A $60,000 outlay for a new machine with a usable life of 15 years;is called;A.;capital expenditure;B.;operating expenditure;C.;replacement expenditure;D.;None of the above;?;A bank lends a firm $500,000 for one year at 8 percent and;requires compensating balances of 10 percent of the face value of the loan. The;effective annual interest rate associated with this loan is;A.;8.9 percent;B.;8 percent;C.;7.2 percent;D.;7.0 percent;?;Most firms employ ________ financing strategy.;A.;an aggressive;B.;a conservative;C.;a trade-off;D.;a seasonal;?;The theoretical basis from which the concept of risk-adjusted;discount rates is derived is;A.;the Gordon model;B.;the capital asset pricing model;C.;simulation theory;D.;the basic cost of money;?;The conversion of current assets from inventory to receivables;to cash provides the ________ of cash used to pay the current liabilities;which represents a(n) ________ of cash.;A.;outflow, inflow;B.;use, source;C.;source, use;D.;inflow, outflow;?;A common approach of estimating the variability of returns;involving forecasting the pessimistic, most likely, and optimistic returns;associated with the asset is called;A.;marginal analysis;B.;sensitivity analysis;C.;break-even analysis;D.;financial statement analysis;?;A corporation has decided to replace an existing asset with a;newer model. Two years ago, the existing asset originally cost $70,000 and was;being depreciated under MACRS using a five-year recovery period. The existing;asset can be sold for $30,000. The new asset will cost $80,000 and will also be;depreciated under MACRS using a five-year recovery period. If the assumed tax;rate is 40 percent on ordinary income and capital gains, the initial investment;is;A.;$48,560;B.;$44,360;C.;$49,240;D.;$27,600;?;The advantage of using the low-regular-and-extra dividend policy;is that;A.;the firm avoids giving;the shareholders false hopes;B.;if the firm's earnings drop, so does the dividend payment;C.;the extra dividend may become a regular event;D.;cyclical shifts in earnings may be avoided;?;The ________ measures the amount of time it takes the firm to;recover its initial investment.;A.;average rate of return;B.;internal rate of return;C.;net present value;D.;payback period;?;In a revolving credit agreement, the firm pays interest on;A.;the full line of credit;B.;the unused portion of the line of credit;C.;only the amount actually borrowed;D.;the amount actually;borrowed and commitment fees on any unused portion of the loan;?;The two major sources of short-term financing are;A.;a line of credit and accounts payable;B.;accounts payable and;accruals;C.;a line of credit and accruals;D.;?;accounts receivable;and notes payable;?;The purpose of adding an asset with a negative or low positive;beta is to;A.;reduce profit;B.;reduce risk;C.;increase profit;D.;increase risk;?;The shareholder receiving a stock dividend receives;A.;a share of common stock of equal value to their existing shares;of common stock.;B.;cash;C.;additional shares of common stock and cash;D.;nothing of value;?;The shareholder receiving a stock dividend receives;A.;a share of common stock of equal value to their existing shares;of common stock.;B.;cash;C.;additional shares of common stock and cash;D.;nothing of value;?;The most difficult set of accounts to predict are;A.;current assets;B.;stockholder's equity;C.;fixed assets;D.;long-term debt;?;In evaluating the initial investment for a capital budgeting;project;A.;an increase in net working capital is considered a cash inflow;B.;a decrease in net working capital is considered a cash outflow;C.;an increase in net;working capital is considered a cash outflow;D.;net working capital does not have to be considered;?;The evaluation of capital expenditure proposals to determine;whether they meet the firm's minimum acceptance criteria is called;A.;the ranking approach;B.;an independent investment;C.;the accept-reject;approach;D.;a mutually exclusive investment;?;effectively raises the interest cost to the borrower on;a line of credit.;A.;An operating change;restriction;B.;An annual cleanup;C.;A compensating balance;D.;A commitment fee;?;The primary purpose of a stock split is to;A.;issue additional shares;B.;increase the dividend;C.;reduce the price of stock;D.;reduce trading activity;?;The approximate before-tax cost of debt for a 15-year, 10;percent, $1,000 par value bond selling at $950 is;A.;10 percent;B.;10.6 percent;C.;12 percent;D.;15.4 percent;?;The most common motive for adding fixed assets to the firm is;A.;expansion;B.;replacement;C.;renewal;D.;transformation;?;firm is evaluating an investment proposal which has an initial;investment of $5,000 and cash flows presently valued at $4,000. The net present;value of the investment is ________.;A.;-$1,000;B.;$0;C.;$1,000;D.;$1.25;?;The cost of capital reflects the cost of funds;A.;over a short-run time period;B.;at a given point in time;C.;over a long-run time;period;D.;at current book values;?;The long-term funds of the firm are called;A.;debt;B.;assets;capital;C.;Equity;?;The net effect of a stock repurchase is;A.;similar to the payment of a stock dividend;B.;similar to a cash;dividend;C.;similar to a stock split;D.;similar to a reverse stock split;?;When common stock is repurchased and retired, the underlying;motive is to;A.;delay taxes;B.;boost the stock's dividends;C.;distribute the excess;cash to the owners;D.;reduce the retained earnings balance;?;An investment advisor has recommended a $50,000 portfolio;containing assets R, J, and K, $25,000 will be invested in asset R, with an;expected annual return of 12 percent, $10,000 will be invested in asset J, with;an expected annual return of 18 percent, and $15,000 will be invested in asset;K, with an expected annual return of 8 percent. The expected annual return of;this portfolio is;A.;12.67%;B.;12.00%;C.;10.00%;D.;unable to be determined from the information provided;?;Prime-grade commercial paper will most likely have a higher;annual return than;A.;a Treasury bill;B.;a preferred stock;C.;a common stock;D.;an investment-grade bond;?;The payment of cash dividends to corporate stockholders is;decided by the;A.;management;B.;stockholders;C.;SEC;D.;board of directors;?;An approach to capital rationing that involves graphing project;returns in descending order against the total dollar investment to determine;the group of acceptable projects is called the;A.;net present value approach;B.;the internal rate of;return approach;C.;the payback approach;D.;the profitability index approach;?;The goal of an efficient portfolio is to;A.;maximize risk for a given;level of return;B.;maximize risk in order to maximize profit;C.;minimize profit in order to minimize risk;D.;minimize risk for a given level of return;?;The before-tax cost of debt for a firm which has a 40 percent;marginal tax rate is 12 percent. The after-tax cost of debt is;A.;4.8 percent;B.;6.0 percent;C.;7.2 percent;D.;12 percent;?;firm has a line of credit and borrows $25,000 at 9 percent;interest for 180 days or half a year. What is the effective rate of interest on;this loan if the interest is paid in advance?;A.;4.7 percent;B.;9.4 percent;C.;9.9 percent;D.;10.3 percent

 

Paper#54732 | Written in 18-Jul-2015

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