Financial Applications Final Exam Answer Key

1) The goal on the firm should be A. maximization of profits B. optimization of aktionär wealth C. maximization of consumer fulfillment D. optimization of product sales The answer is T 2) An sort of a primary marketplace transaction can be A. a brand new issue of common share by AT&T B. a customer of several outstanding prevalent stock of AT&T C. AT&T repurchasing its own share from a stockholder N. one stockholder selling stocks of prevalent stock to a different individual The answer then is A 3) According to the organization problem, _________ represent the principals of any corporation. A. shareholders T. managers C. employees N. suppliers The answer then is A 4) Which of this following can be described as principle of basic economic management? A. Risk/return tradeoff B. Derivatives C. Share warrants N. Profit is absolutely necessary The answer is A 5) Another name for the acid test ratio is the A. current ratio B. quick ratio C. inventory turnover ratio D. average collection period The answer is B 6) The accounting rate of return on stockholders’ investments is measured by A. return on assets B. return on equity C. working income revenue D. became aware rate of inflation The answer then is B 7) If you are an buyer, which of this following will you prefer? A. Earnings about funds put in compound each year B. Salary on money invested mixture daily C. Earnings about funds put in would mixture monthly N. Earnings about funds put in would compound quarterly The answer is B 8) The primary purpose of a cash budget is to A. determine the level of investment in current and fixed property B. determine accounts payable C. provide a detailed plan of future cash flows D. determine the estimated income tax intended for the year The answer is C 9) Which of the following is a noncash charge? A. Devaluation expenses T. Interest charge C. The labels costs N. Administrative wages The answer is A 10) The break-even style enables the manager of your firm to A. compute the lowest price of common share for certain scenarios B. placed appropriate balance thresholds C. determine the amount of output that needs to be sold to cover all working costs N. determine the perfect amount of debt funding to use The answer is C 11) A zero-coupon bond A. pays no interest W. pays interest at a rate less than the market price C. is a junk relationship D. is sold at a deep discount at less than the par value The answer is D 12) If you have $20, 000 in an account generating 8% annually, what constant amount could you withdraw each year and have nothing at all remaining at the conclusion of your five years? A. $3, 525. 62 Udemærket. $5, 008. 76 C. $3, 408ps. 88 Deborah. $2, 465. 78 The answer then is C 13) At what rate need to $400 end up being compounded every year for it to grow to $716. 50 in ten years? A. 6% B. five per cent C. seven percent D. 8% The answer is A 14) The modern day value of your single near future sum A. increases when the number of discounted periods enhance B. is often larger than the near future sum C. depends upon the amount of discount periods D. raises as the discount price increases The answer is C 15) Which from the following is considered to be a spontaneous source of funding? A. Operating leases W. Accounts receivable C. Inventory D. Accounts payable The answer is D 16) Compute the payback period for a project with the following cash flows, if the company’s discount fee is 12%. Initial pay out = $450 Cash runs: Year one particular = $325 Year a couple of = $65 Year two to three = $22.99 A. two to three. 43 years B. several. 17 years C. 2 . 88 years D. 2 . 6 years The answer is D 17) For the NPV criteria, a project is usually acceptable if the NPV is usually __________, while for the profitability index, a project is usually acceptable if the profitability index is __________. A. less than zero, greater than the required returning B. greater than zero, greater than one C. greater than 1, greater than absolutely no D. greater than zero, less than one The answer is B 18) Which in the following is considered to be a deficiency of the IRR? A. It fails to effectively rank capital projects. Udemærket. It could develop more than one fee of drop by. C. That fails to use the time benefit of money. Deborah. It is not within accounting with regards to risk in capital cash strategy. The answer is Udemærket 19) The firm will need to accept self-employed projects in the event that A. the payback is less than the IRR B. the profitability index is usually greater than 1 . 0 C. the IRR is positive D. the NPV is usually greater than the discounted payback The answer is M 20) The most expensive source of capital is A. preferred stock B. new common inventory C. debts D. stored earnings The solution is B 21) The cost linked to each further dollar of financing to find investment assignments is *A. the gradual return* C. the little cost of capital C. free of risk rate Debbie. beta The solution is B 22) The XYZ Company is certainly planning a 50 dollars million improvement. The improvement is to be loaned by selling 20 dollars million in new debts and $30 million in new prevalent stock. The before-tax needed rate of return upon debt is usually 9%, and the required level of gain on collateral is 14%. If the enterprise is in the forty percent tax clump, what is the marginal expense of capital? A. 14. 0% B. on the lookout for. 0% C. 10. 6% D. 13. 5% The solution is C 23) Shawhan Source plans to take care of its best possible capital composition of thirty percent debt, twenty percent preferred inventory, and fifty percent common share far forward6171. The required gain on each element is: debt–10%; preferred stock–11%; and common stock–18%. Supposing a 40% marginal taxes rate, what after-tax level of gain must Shawhan Supply gain on the investments in the event the value with the firm is always to remain unrevised? A. 18. 0% F. 13. 0% C. 20. 0% G. 14. 2% The answer is N 24) Handle Brothers contains a debt proportion (debt to assets) of 40%. Supervision is questioning if the current capital structure is too conservative. Handle Brothers’ present EBIT is definitely $3 mil, and income available to common shareholders will be $1, 560, 000, with 342, 857 shares of common share outstanding. In the event the firm would be to instead include a financial debt ratio of 60%, added interest expenditure would cause profits on the market to stockholders to decline to $1, 440, 000, nevertheless only 228, 571 common shares will be outstanding. What is the difference in EPS in a debts ratio of 60% vs . 40%? A. $1. seventy five B. $2. 00 C. $3. 25 D. $4. 50 The answer then is A 25) Zybeck Corp. projects working income of $4 mil next year. The firm’s income tax rate is definitely 40%. Zybeck presently possesses 750, 500 shares of common inventory which have an industry value of $10 every share, not any preferred inventory, and no debts. The organization is looking at two alternatives to loans a new merchandise: (a) the issuance of $6 , 000, 000 of 10% bonds, or perhaps (b) the issuance of 60, 1000 new stocks and shares of prevalent stock. Any time Zybeck concerns common inventory this year, and what will be the projected EPS next year? A. $4. 94 B. $2. 96 C. $5. thirty-three D. $3. 20 The solution is B 26) _________ risk is generally thought about only a paper gain or damage. A. Purchase B. Translation C. Monetary D. Fiscal The answer is N 27) Capital markets in foreign countries A. present lower dividends than those obtainable in the domestic capital markets B. provide international diversity C. normally are becoming a smaller amount integrated because of the widespread accessibility to interest rate and currency trades D. had been getting smaller in past times decade The answer then is B 28) Buying and selling much more than one particular market to produce a riskless revenue is called A. profit optimization B. accommodement C. foreign trading N. an efficient marketplace The answer is T 29) What keeps foreign currency quotes in two unique countries in accordance with each other? A. Cross prices B. Forwards rates C. Arbitrage N. Spot prices The answer is C 30) One reason for international investment is to reduce A. portfolio risk B. price-earnings (P/E) ratios C. advantages in a foreign country D. exchange rate risk The answer is A