Ques 8: Which of the following is NOT a major criticism of boards of directors?
ID: 2673797 • Letter: Q
Question
Ques 8: Which of the following is NOT a major criticism of boards of directors?
A. they are not willing to fire CEO’s.
B. company management serving as board members.
C. their compensation is extravagant.
D. CEO serving as chairman of the board.
Ques 13: Auton, Inc. a manufacturer of robots had total revenues of
$2,000,000 in the year ending 2011 with an operating cost of $1,000,000. The
company's earnings are taxed at 30% and its annual interest expenses were
$300,000. The only depreciable asset the company owns is a specialized machine
that it bought for $1,000,000 and is depreciating over 5 years using the
straight line method. What is the firm's EBT?
A. $150,000
B. $350,000
C. $800,000
D. $500,000
Ques 16: Given the following information for Tandoori Grill Restaurant,
calculate its total asset turnover and return on equity ratios:
Net profit margin 8%
Return on total assets 15%
Debt ratio 30%
A. 1.875; 15.34%
B. 1.875; 21.43%
C. 2.000; 26.67%
D. 3.750; 26.67%
Ques 17: B. J. Industries has a current ratio of 2.5, with $2.5 million in
current assets. Due to sales growth, it wants to expand accounts receivable and
inventories by taking on additional short-term debt. If it wants to maintain a
minimum current ratio of 2.0, what is the maximum additional short-term funding
it can borrow?
A. $750,000
B. $350,000
C. $150,000
D. $500,000
Ques 20: Irani Brothers Company has total assets of $807,200, total equity of
$509,500, total sales of $945,300, and net income of $200,176. If management
wants a profit margin of 27.1% by how much should net income increase to reach
this profit margin goal?
A. $15,000
B. $56,000
C. $45,000
D. $10,000
Ques 21: Solar Solutions reports the following account balances: inventory of
$6,200, equipment of $6,200, accounts payable of $15,500, cash of $11,200, and
accounts receivable of $12,400. How much does the firm have in net working
capital?
A. $20,300
B. $10,300
C. $14,300
D. $ 8,100
Ques 23: XYZ Corp. has Sales of $1,000,000, and its most recent balance
sheet shows $27,000 in Cash, Total Assets of $805,000, Total Liabilities of
$287,000, Total Current Assets of $405,000, Total Current Liabilities of
$175,000, and Inventory of 210,000. The firm's Current and Quick ratios are:
A. 2.31 ; 0.80
B. 0.43 ; 0.90
C. 2.31 ; 1.11
D. 0.43 ; 1.25
Ques 26: Carrie needs to accumulate $40,000 to make a down payment on a
house at the end of 4 years. How much money should she deposit in a bank
account today to accomplish this if the bank pays 6% interest compounded per
year?
A. 33,425
B. 24,200
C. 27,892
D. 31,685
Ques 27: You are planning a trip to Europe in 5 years from now and you can save
$3,000 per year beginning one year from today. You plan to deposit these funds
in a bank account that pays 8% per year. How much money you would have
accumulated just after you make the 5th deposit?
A. 14,500
B. 19,287
C. 20,251
D. 17,600
Ques 29: Suppose a State of Maryland bond will pay $1,000 eight years
from now. If the going interest rate on these 8-year bonds is 5.5%, how much is
the bond worth today?
A. $651.60
B. $684.18
C. $718.39
D. $754.31
Ques 30: You inherited an oil well that will pay you $25,000 per year for 25
years, with the first payment being made today. If you think a fair return on
the well is 7.5%, how much should you ask for it if you decide to sell it?
A. $284,595
B. $299,574
C. $314,553
D. $330,281
Ques 40: The return
distribution for the asset XYZ is as shown below:
Return Probability
- 0.1 0.10
+ 0.1 0.40
+0.20 0.30
+0.30 0.20
What is the standard deviation for the XYZ returns?
A. 0.0125
B. 0.1118
C. 0.0625
D. 0.0791
Ques 41: The beta of Microsoft’s stock is 1.2, whereas the risk-free rate of
return is 4 percent. Assume that the expected return on the market is 16
percent. Then, what is the expected return on Microsoft stock?
A. 8.80%
B. 28.00%
C. 18.40%
D. 23.20%
Ques 42: If you have a 3 year loan that requires $1,000 payments each year at
7% annual interest rate what would be the present value of the loan?
A. $2,624.32
B. $3,000.00
C. $3,210.00
D. $2,803.74
Ques 43: Robert has a mortgage on his home of $400,000 and has a fixed rate
mortgage of 6.125% for 30 years. What would his monthly payments be for this
loan?
A. $2,041.67
B. $2,596.55
C. $2,430.45
D. $2,788.46
Ques 44: What is the effective annual interest rate?
A. The simplest interest rate charged.
B. Rate that reflects compounding.
C. Rate with bank fees included.
D. Interest rate quoted by banks.
Ques 45: Stern Associates is considering a project that has the following cash
flow data. What is the project's payback?
Year 0 1 2 3 4 5
Cash flows -$1,100 $300 $310 $320 $330 $340
A. 2.31 years
B. 2.56 years
C. 2.85 years
D. 3.16 years
E. 3.52 years
Ques 46: Oranges Inc. is considering a project that has the following cash flow
and Cost of Capital data. What is the project's discounted payback?
Cost of Capital: 10.00%
Year 0 1 2 3 4
Cash flows -$950 $525 $485 $445 $405
A. 1.61 years
B. 1.79 years
C. 1.99 years
D. 2.22 years
E. 2.44 years
Ques 47: Maxwell Food is considering a project that has the following cash flow
data. What is the project's IRR?
Year 0 1 2 3 4 5
Cash flows -$9,500 $2,000 $2,025 $2,050 $2,075 $2,100
A. 2.08%
B. 2.31%
C. 2.57%
D. 2.82%
E. 3.10%
Ques 48: Computing the Internal Rate of Return for a given set of cash flows,
especially when the final cash flow is negative, occasionally results in two
Internal Rates of Return. When this happens the best course of action is to:
A. Use the smaller of the two Internal Rates of Return.
B. Do not try to interpret the results because they are meaningless.
C. Use the larger of the two Internal Rates of Return.
D. Use the average of the two Internal Rates of Return.
Ques 49: Regarding Capital Budgeting, the authors contend that Internal Rate of
Return is superior to Net Present Value because:
A. Internal Rate of Return is intuitive and easy to understand.
B. Internal Rate of Return is based on the discounted cash flow technique.
C. With mutually exclusive projects, Net Present Value can lead to incorrect
investment decisions.
D. None of the above.
Ques 50: Bailey Company is considering developing a new iPhone app. The cost of
development is expected to be $750,000 (all incurred in time zero) and
management expects net cash flows from sale of the app to be $100,000 in year
one and $150,000, $225,000, $250,000, $280,000 and $300,000 in years two
through six, respectively. What is the Net Present Value of this project if the
discount rate is 12%?
A. $88,764
B. $838,764
C. $555,000
D. $1,305,000
Explanation / Answer
8) A 13)B 16)B 17)D 21)C 23)C 26)D 27)B 29)C 30)C 40)B 41)C 42)D 43)B 44)D 45)D 46)C 47)E 48)B 49)C 50)B