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Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
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4.0 Points |
The primary disadvantage of accrual accounting is that
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[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
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[removed] B.it does not appropriately measure accounting profit. |
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[removed] C.it does not recognize accounts receivable. |
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[removed] D.it does not adequately show the actual cash flow position of the firm
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Gross profit is equal to
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Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
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uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
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The Sarbanes-Oxley Act was passed in an effort to
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uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
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[removed] A.interest expense |
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[removed] B.cost of goods sold |
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[removed] C.depreciation |
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[removed] D.selling and administrative expense |
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Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
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[removed] A.assets |
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[removed] B.common stock |
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[removed] C.preferred stock |
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[removed] D.bonds |
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Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
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[removed] A.$35 per share |
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[removed] B.$25 per share |
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[removed] C.$15 per share |
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[removed] D.Not enough information to tell |
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Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
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uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
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[removed] A.$60.00 |
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[removed] B.$15.00 |
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[removed] C.$6.67 |
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[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
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Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
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Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
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[removed] A.common stock and corporate bonds. |
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[removed] B.treasury bills and commercial paper. |
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[removed] C.certificates of deposit and preferred stock. |
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[removed] D.all of these. |
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uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
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Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
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Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
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Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
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Question 21 of 25 |
4.0 Points |
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Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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Question 22 of 25 |
4.0 Points |
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Which of the following is an outflow of cash?
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[removed] A.profitable operations |
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[removed] B.the sale of equipment |
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[removed] C.the sale of the company’s common stock |
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[removed] D.the payment of cash dividends |
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uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
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[removed] A.40% |
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[removed] B.12% |
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[removed] C.20% |
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[removed] D.25% |
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4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
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4.0 Points |
Which of the following is an inflow of cash?
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[removed] A.funds spent in normal business operations |
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[removed] B.the purchase of a new factory |
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[removed] C.the sale of the firm’s bonds |
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[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
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The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
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[removed] A.the greater the price increase from an increase in interest rates. |
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[removed] B.the less the price increase from an increase in interest rates. |
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[removed] C.the greater the price increase from a decrease in interest rates. |
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[removed] D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
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[removed] A.stock. |
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[removed] B.bonds. |
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[removed] C.preferred stock. |
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[removed] D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed] A.$3.00 |
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[removed] B.$37.50 |
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[removed] C.$50.00 |
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[removed] D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
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[removed] A.is unaffected. |
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[removed] B.goes down. |
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[removed] C.goes up. |
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[removed] D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
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The required return by investors is important to financial managers for all of the following reasons except:
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[removed] A.It influences the firm’s cost of financing |
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[removed] B.It influences their stock price |
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[removed] C.It is the primary driver of their financial ratios |
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[removed] D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed] A.4.41% |
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[removed] B.9.0% |
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[removed] C.1.89% |
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[removed] D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
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[removed]A.the greater the price increase from an increase in interest rates. |
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[removed]B.the less the price increase from an increase in interest rates. |
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[removed]C.the greater the price increase from a decrease in interest rates. |
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[removed]D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
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[removed]A.stock. |
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[removed]B.bonds. |
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[removed]C.preferred stock. |
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[removed]D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed]A.$3.00 |
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[removed]B.$37.50 |
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[removed]C.$50.00 |
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[removed]D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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Question 10 of 25 |
4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
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[removed]A.is unaffected. |
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[removed]B.goes down. |
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[removed]C.goes up. |
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[removed]D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
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The required return by investors is important to financial managers for all of the following reasons except:
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[removed]A.It influences the firm’s cost of financing |
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[removed]B.It influences their stock price |
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[removed]C.It is the primary driver of their financial ratios |
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[removed]D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed]A.4.41% |
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[removed]B.9.0% |
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[removed]C.1.89% |
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[removed]D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
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Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
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[removed] A.expected value. |
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[removed] B.internal rate of return. |
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[removed] C.standard deviation. |
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[removed] D.coefficient of variation. |
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Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
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[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
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[removed] B.A beta of 1.0 is of equal risk with the market. |
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[removed] C.A beta of greater than 1.0 has less risk than the market. |
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[removed] D.Two of the above are true. |
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uestion 3 of 25 |
4.0 Points |
Capital rationing
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[removed] A.is a way of preserving the assets of the firm over the long term. |
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[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
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[removed] C.assures stockholder wealth maximization. |
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[removed] D.assures maximum potential profitability. |
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Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
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Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
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4.0 Points |
Simulation models allow the planner to:
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[removed] A.reduce the standard deviations of projects. |
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[removed] B.test possible changes in each variable. |
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[removed] C.deal with the uncertainty in forecasting outcome |
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D.b and c.
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Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
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Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
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Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
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[removed] A.Coefficient of correlation |
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[removed] B.Coefficient of variation |
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[removed] C.Standard deviation of returns |
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[removed] D.Net present value |
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Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
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Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
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Which of the following is a false statement?
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uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
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Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
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[removed] A.operating income less taxes plus depreciation. |
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[removed] B.operating income less taxes. |
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[removed] C.operating income before depreciation and taxes plus depreciation. |
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[removed] D.operating income after taxes minus depreciation. |
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4.0 Points |
There are several disadvantages to the payback method, among them:
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[removed] A.payback ignores the time value of money. |
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[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
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[removed] C.payback is Basic to use and to understand. |
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[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
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uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
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[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
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[removed] B.concentrates on the liquidity aspects of investment projects. |
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[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
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[removed] D.none of these. |
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Question 17 of 25 |
4.0 Points |
As the cost of capital increases
|
[removed] A.fewer projects are accepted. |
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|
[removed] B.more projects are accepted. |
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|
[removed] C.project selection remains unchanged. |
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|
[removed] D.None of these. |
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|
Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
|
|
4.0 Points |
The payback method considers all cash inflows.
|
|
uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
|
[removed] A.capital formation in the economy. |
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|
[removed] B.planning future financing needs. |
|
|
[removed] C.evaluating investment alternatives. |
|
|
[removed] D.minimizing the cost of capital. |
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|
4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
|
|
uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
|
[removed] A.The payback method considers cash flows after the payback has been reached. |
|
|
[removed] B.The payback method does not consider the time value of money. |
|
|
[removed] C.The payback method uses discounted cash-flow techniques. |
|
|
[removed] D.The payback method generally leads to the same decision as other investment selection methods |
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|
uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
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Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
|
|
uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
|
[removed] A.collection of data. |
|
|
[removed] B.idea development. |
|
|
[removed] C.assign probabilities. |
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|
[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury s
|
Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
|
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4.0 Points |
The primary disadvantage of accrual accounting is that
|
[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
|
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|
[removed] B.it does not appropriately measure accounting profit. |
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|
[removed] C.it does not recognize accounts receivable. |
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|
[removed] D.it does not adequately show the actual cash flow position of the firm
.
Gross profit is equal to
|
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|
Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
|
|
uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
|
The Sarbanes-Oxley Act was passed in an effort to
|
|
uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
|
[removed] A.interest expense |
|
|
[removed] B.cost of goods sold |
|
|
[removed] C.depreciation |
|
|
[removed] D.selling and administrative expense |
|
|
Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
|
[removed] A.assets |
|
|
[removed] B.common stock |
|
|
[removed] C.preferred stock |
|
|
[removed] D.bonds |
|
|
Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
|
[removed] A.$35 per share |
|
|
[removed] B.$25 per share |
|
|
[removed] C.$15 per share |
|
|
[removed] D.Not enough information to tell |
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|
Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
|
|
uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
|
[removed] A.$60.00 |
|
|
[removed] B.$15.00 |
|
|
[removed] C.$6.67 |
|
|
[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
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|
Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
|
|
Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
|
[removed] A.common stock and corporate bonds. |
|
|
[removed] B.treasury bills and commercial paper. |
|
|
[removed] C.certificates of deposit and preferred stock. |
|
|
[removed] D.all of these. |
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uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
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Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
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Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
|
|
Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
|
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Question 21 of 25 |
4.0 Points |
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Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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Question 22 of 25 |
4.0 Points |
|||
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Which of the following is an outflow of cash?
|
[removed] A.profitable operations |
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|
[removed] B.the sale of equipment |
|
|
[removed] C.the sale of the company’s common stock |
|
|
[removed] D.the payment of cash dividends |
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|
uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
|
[removed] A.40% |
|
|
[removed] B.12% |
|
|
[removed] C.20% |
|
|
[removed] D.25% |
|
|
4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
|
|
4.0 Points |
Which of the following is an inflow of cash?
|
[removed] A.funds spent in normal business operations |
|
|
[removed] B.the purchase of a new factory |
|
|
[removed] C.the sale of the firm’s bonds |
|
|
[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
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The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
|
[removed] A.the greater the price increase from an increase in interest rates. |
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[removed] B.the less the price increase from an increase in interest rates. |
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[removed] C.the greater the price increase from a decrease in interest rates. |
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[removed] D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
|
[removed] A.stock. |
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[removed] B.bonds. |
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[removed] C.preferred stock. |
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[removed] D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed] A.$3.00 |
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[removed] B.$37.50 |
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[removed] C.$50.00 |
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[removed] D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed] A.is unaffected. |
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[removed] B.goes down. |
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|
[removed] C.goes up. |
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[removed] D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
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The required return by investors is important to financial managers for all of the following reasons except:
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[removed] A.It influences the firm’s cost of financing |
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[removed] B.It influences their stock price |
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[removed] C.It is the primary driver of their financial ratios |
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[removed] D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed] A.4.41% |
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[removed] B.9.0% |
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[removed] C.1.89% |
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[removed] D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
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[removed]A.the greater the price increase from an increase in interest rates. |
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[removed]B.the less the price increase from an increase in interest rates. |
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[removed]C.the greater the price increase from a decrease in interest rates. |
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[removed]D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
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[removed]A.stock. |
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[removed]B.bonds. |
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[removed]C.preferred stock. |
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[removed]D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed]A.$3.00 |
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[removed]B.$37.50 |
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[removed]C.$50.00 |
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[removed]D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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Question 10 of 25 |
4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed]A.is unaffected. |
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[removed]B.goes down. |
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[removed]C.goes up. |
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[removed]D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
|
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
uestion 20 of 25 |
4.0 Points |
|
The time value of money concept becomes less critical as the prime rate increases.
|
||
|
Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
|
||
|
Question 22 of 25 |
4.0 Points |
|
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
|
||
|
Question 23 of 25 |
4.0 Points |
|
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed]A.It influences the firm’s cost of financing |
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|
[removed]B.It influences their stock price |
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|
[removed]C.It is the primary driver of their financial ratios |
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[removed]D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
||
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed]A.4.41% |
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[removed]B.9.0% |
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[removed]C.1.89% |
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[removed]D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
|
Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
|
[removed] A.expected value. |
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[removed] B.internal rate of return. |
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[removed] C.standard deviation. |
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[removed] D.coefficient of variation. |
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Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
|
[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
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[removed] B.A beta of 1.0 is of equal risk with the market. |
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[removed] C.A beta of greater than 1.0 has less risk than the market. |
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[removed] D.Two of the above are true. |
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uestion 3 of 25 |
4.0 Points |
Capital rationing
|
[removed] A.is a way of preserving the assets of the firm over the long term. |
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|
[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
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|
[removed] C.assures stockholder wealth maximization. |
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[removed] D.assures maximum potential profitability. |
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Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
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Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
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4.0 Points |
Simulation models allow the planner to:
|
[removed] A.reduce the standard deviations of projects. |
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|
[removed] B.test possible changes in each variable. |
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|
[removed] C.deal with the uncertainty in forecasting outcome |
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D.b and c.
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Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
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Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
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Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
|
[removed] A.Coefficient of correlation |
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|
[removed] B.Coefficient of variation |
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|
[removed] C.Standard deviation of returns |
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[removed] D.Net present value |
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Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
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Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
|
Which of the following is a false statement?
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uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
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Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
|
[removed] A.operating income less taxes plus depreciation. |
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|
[removed] B.operating income less taxes. |
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|
[removed] C.operating income before depreciation and taxes plus depreciation. |
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|
[removed] D.operating income after taxes minus depreciation. |
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4.0 Points |
There are several disadvantages to the payback method, among them:
|
[removed] A.payback ignores the time value of money. |
|
|
[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
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|
[removed] C.payback is Basic to use and to understand. |
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|
[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
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|
uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
|
[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
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|
[removed] B.concentrates on the liquidity aspects of investment projects. |
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|
[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
|
|
[removed] D.none of these. |
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Question 17 of 25 |
4.0 Points |
As the cost of capital increases
|
[removed] A.fewer projects are accepted. |
|
|
[removed] B.more projects are accepted. |
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|
[removed] C.project selection remains unchanged. |
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|
[removed] D.None of these. |
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|
Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
|
|
4.0 Points |
The payback method considers all cash inflows.
|
|
uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
|
[removed] A.capital formation in the economy. |
|
|
[removed] B.planning future financing needs. |
|
|
[removed] C.evaluating investment alternatives. |
|
|
[removed] D.minimizing the cost of capital. |
|
|
4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
|
|
uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
|
[removed] A.The payback method considers cash flows after the payback has been reached. |
|
|
[removed] B.The payback method does not consider the time value of money. |
|
|
[removed] C.The payback method uses discounted cash-flow techniques. |
|
|
[removed] D.The payback method generally leads to the same decision as other investment selection methods |
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|
uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
|
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Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
|
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uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
|
[removed] A.collection of data. |
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[removed] B.idea development. |
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[removed] C.assign probabilities. |
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[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best represents the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured debt, s
|
Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
|
|
4.0 Points |
The primary disadvantage of accrual accounting is that
|
[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
|
||||||||||||||||
|
[removed] B.it does not appropriately measure accounting profit. |
|
||||||||||||||||
|
[removed] C.it does not recognize accounts receivable. |
|
||||||||||||||||
|
[removed] D.it does not adequately show the actual cash flow position of the firm
.
Gross profit is equal to
|
|
|
Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
|
|
uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
|
The Sarbanes-Oxley Act was passed in an effort to
|
|
uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
|
[removed] A.interest expense |
|
|
[removed] B.cost of goods sold |
|
|
[removed] C.depreciation |
|
|
[removed] D.selling and administrative expense |
|
|
Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
|
[removed] A.assets |
|
|
[removed] B.common stock |
|
|
[removed] C.preferred stock |
|
|
[removed] D.bonds |
|
|
Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
|
[removed] A.$35 per share |
|
|
[removed] B.$25 per share |
|
|
[removed] C.$15 per share |
|
|
[removed] D.Not enough information to tell |
|
|
Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
|
|
uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
|
[removed] A.$60.00 |
|
|
[removed] B.$15.00 |
|
|
[removed] C.$6.67 |
|
|
[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
|
|
Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
|
|
Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
|
[removed] A.common stock and corporate bonds. |
|
|
[removed] B.treasury bills and commercial paper. |
|
|
[removed] C.certificates of deposit and preferred stock. |
|
|
[removed] D.all of these. |
|
|
uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
|
|
Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
|
|
Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
|
|
Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
|
|
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|
Question 21 of 25 |
4.0 Points |
|||
|
|
|
|
||
Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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|
Question 22 of 25 |
4.0 Points |
|||
|
|
|
|
||
Which of the following is an outflow of cash?
|
[removed] A.profitable operations |
|
|
[removed] B.the sale of equipment |
|
|
[removed] C.the sale of the company’s common stock |
|
|
[removed] D.the payment of cash dividends |
|
|
uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
|
[removed] A.40% |
|
|
[removed] B.12% |
|
|
[removed] C.20% |
|
|
[removed] D.25% |
|
|
4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
|
|
4.0 Points |
Which of the following is an inflow of cash?
|
[removed] A.funds spent in normal business operations |
|
|
[removed] B.the purchase of a new factory |
|
|
[removed] C.the sale of the firm’s bonds |
|
|
[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
|
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
|
||||||
|
Question 3 of 25 |
4.0 Points |
|||||
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
|
|||
|
Question 4 of 25 |
4.0 Points |
|||
|
|
|
|
||
(point) The longer the time to maturity:
|
[removed] A.the greater the price increase from an increase in interest rates. |
|
|
[removed] B.the less the price increase from an increase in interest rates. |
|
|
[removed] C.the greater the price increase from a decrease in interest rates. |
|
|
[removed] D.the less the price decrease from a decrease in interest rates. |
|
|
Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
|
|||
|
Question 6 of 25 |
4.0 Points |
|||
|
|
|
|
||
Financial capital does not include
|
[removed] A.stock. |
|
|
|
|
[removed] B.bonds. |
|
|
|
|
[removed] C.preferred stock. |
|
|
|
|
[removed] D.working capital. |
|
|
|
|
Question 7 of 25 |
4.0 Points |
||
|
|
|
|
|
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
|
[removed] A.$3.00 |
|
|
|
|
[removed] B.$37.50 |
|
|
|
|
[removed] C.$50.00 |
|
|
|
|
[removed] D.none of these |
|
|
|
|
Question 8 of 25 |
4.0 Points |
||
|
|
|
|
|
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
|
|
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
|
|
|||
|
4.0 Points |
||||
|
|
|
|
||
(point) The calculation of the cost of capital depends upon historical costs of funds.
|
|
|||
|
Question 11 of 25 |
4.0 Points |
|||
|
|
|
|
||
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
uestion 17 of 25 |
4.0 Points |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed] A.is unaffected. |
|
|
[removed] B.goes down. |
|
|
[removed] C.goes up. |
|
|
[removed] D.need more information. |
|
|
uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
|
|
|||
|
Question 19 of 25 |
4.0 Points |
|||
|
|
|
|
||
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
|
|||
|
uestion 20 of 25 |
4.0 Points |
|||
|
|
|
|
||
The time value of money concept becomes less critical as the prime rate increases.
|
|
|||
|
Question 21 of 25 |
4.0 Points |
|||
|
|
|
|
||
If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
|
|
|||
|
Question 22 of 25 |
4.0 Points |
|||
|
|
|
|
||
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
|
|
|||
|
Question 23 of 25 |
4.0 Points |
|||
|
|
|
|
||
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed] A.It influences the firm’s cost of financing |
|
|
|
|
[removed] B.It influences their stock price |
|
|
|
|
[removed] C.It is the primary driver of their financial ratios |
|
|
|
|
[removed] D.It helps when pricing new issues of securities |
|
|
|
|
uestion 24 of 25 |
4.0 Points |
||
|
|
|
|
|
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed] A.4.41% |
|
||||||||||
|
[removed] B.9.0% |
|
||||||||||
|
[removed] C.1.89% |
|
||||||||||
|
[removed] D.6.43% |
|
||||||||||
|
You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
|
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
|
|||||
|
Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
Question 4 of 25 |
4.0 Points |
|
(point) The longer the time to maturity:
|
[removed]A.the greater the price increase from an increase in interest rates. |
|
|
[removed]B.the less the price increase from an increase in interest rates. |
|
|
[removed]C.the greater the price increase from a decrease in interest rates. |
|
|
[removed]D.the less the price decrease from a decrease in interest rates. |
|
Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
||
|
Question 6 of 25 |
4.0 Points |
|
Financial capital does not include
|
[removed]A.stock. |
|||
|
[removed]B.bonds. |
|||
|
[removed]C.preferred stock. |
|||
|
[removed]D.working capital. |
|||
|
Question 7 of 25 |
4.0 Points |
||
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
|
[removed]A.$3.00 |
|||
|
[removed]B.$37.50 |
|||
|
[removed]C.$50.00 |
|||
|
[removed]D.none of these |
|||
|
Question 8 of 25 |
4.0 Points |
||
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
|
|
Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
|
||
|
Question 10 of 25 |
4.0 Points |
|
(point) The calculation of the cost of capital depends upon historical costs of funds.
|
||
|
Question 11 of 25 |
4.0 Points |
|
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
uestion 17 of 25 |
4.0 Points |
||||||||||||||||||||||||||||||||||||||||||||||||
(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed]A.is unaffected. |
|
|
[removed]B.goes down. |
|
|
[removed]C.goes up. |
|
|
[removed]D.need more information. |
|
uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
|
||
|
Question 19 of 25 |
4.0 Points |
|
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
uestion 20 of 25 |
4.0 Points |
|
The time value of money concept becomes less critical as the prime rate increases.
|
||
|
Question 21 of 25 |
4.0 Points |
|
If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
|
||
|
Question 22 of 25 |
4.0 Points |
|
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
|
||
|
Question 23 of 25 |
4.0 Points |
|
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed]A.It influences the firm’s cost of financing |
|||
|
[removed]B.It influences their stock price |
|||
|
[removed]C.It is the primary driver of their financial ratios |
|||
|
[removed]D.It helps when pricing new issues of securities |
|||
|
uestion 24 of 25 |
4.0 Points |
||
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed]A.4.41% |
|||||||||||
|
[removed]B.9.0% |
|||||||||||
|
[removed]C.1.89% |
|||||||||||
|
[removed]D.6.43% |
|||||||||||
You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
|
Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
|
[removed] A.expected value. |
|
|
[removed] B.internal rate of return. |
|
|
[removed] C.standard deviation. |
|
|
[removed] D.coefficient of variation. |
|
|
Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
|
[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
|
|
[removed] B.A beta of 1.0 is of equal risk with the market. |
|
|
[removed] C.A beta of greater than 1.0 has less risk than the market. |
|
|
[removed] D.Two of the above are true. |
|
|
uestion 3 of 25 |
4.0 Points |
Capital rationing
|
[removed] A.is a way of preserving the assets of the firm over the long term. |
|
|
[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
|
|
[removed] C.assures stockholder wealth maximization. |
|
|
[removed] D.assures maximum potential profitability. |
|
|
Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
|
|
Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
|
|
4.0 Points |
Simulation models allow the planner to:
|
[removed] A.reduce the standard deviations of projects. |
|
|
[removed] B.test possible changes in each variable. |
|
|
[removed] C.deal with the uncertainty in forecasting outcome |
|
D.b and c.
|
Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
|
|
Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
|
|
Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
|
[removed] A.Coefficient of correlation |
|
|
[removed] B.Coefficient of variation |
|
|
[removed] C.Standard deviation of returns |
|
|
[removed] D.Net present value |
|
|
Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
|
|
Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
|
Which of the following is a false statement?
|
|
uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
|
|
Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
|
[removed] A.operating income less taxes plus depreciation. |
|
|
[removed] B.operating income less taxes. |
|
|
[removed] C.operating income before depreciation and taxes plus depreciation. |
|
|
[removed] D.operating income after taxes minus depreciation. |
|
|
4.0 Points |
There are several disadvantages to the payback method, among them:
|
[removed] A.payback ignores the time value of money. |
|
|
[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
|
|
[removed] C.payback is Basic to use and to understand. |
|
|
[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
|
|
uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
|
[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
|
|
[removed] B.concentrates on the liquidity aspects of investment projects. |
|
|
[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
|
|
[removed] D.none of these. |
|
|
Question 17 of 25 |
4.0 Points |
As the cost of capital increases
|
[removed] A.fewer projects are accepted. |
|
|
[removed] B.more projects are accepted. |
|
|
[removed] C.project selection remains unchanged. |
|
|
[removed] D.None of these. |
|
|
Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
|
|
4.0 Points |
The payback method considers all cash inflows.
|
|
uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
|
[removed] A.capital formation in the economy. |
|
|
[removed] B.planning future financing needs. |
|
|
[removed] C.evaluating investment alternatives. |
|
|
[removed] D.minimizing the cost of capital. |
|
|
4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
|
|
uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
|
[removed] A.The payback method considers cash flows after the payback has been reached. |
|
|
[removed] B.The payback method does not consider the time value of money. |
|
|
[removed] C.The payback method uses discounted cash-flow techniques. |
|
|
[removed] D.The payback method generally leads to the same decision as other investment selection methods |
|
|
uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
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Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
|
|
uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
|
[removed] A.collection of data. |
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[removed] B.idea development. |
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[removed] C.assign probabilities. |
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[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best represents the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured
|
Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
|
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4.0 Points |
The primary disadvantage of accrual accounting is that
|
[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
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|
[removed] B.it does not appropriately measure accounting profit. |
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[removed] C.it does not recognize accounts receivable. |
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|
[removed] D.it does not adequately show the actual cash flow position of the firm
.
Gross profit is equal to
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Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
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uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
|
The Sarbanes-Oxley Act was passed in an effort to
|
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uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
|
[removed] A.interest expense |
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|
[removed] B.cost of goods sold |
|
|
[removed] C.depreciation |
|
|
[removed] D.selling and administrative expense |
|
|
Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
|
[removed] A.assets |
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|
[removed] B.common stock |
|
|
[removed] C.preferred stock |
|
|
[removed] D.bonds |
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Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
|
[removed] A.$35 per share |
|
|
[removed] B.$25 per share |
|
|
[removed] C.$15 per share |
|
|
[removed] D.Not enough information to tell |
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Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
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uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
|
[removed] A.$60.00 |
|
|
[removed] B.$15.00 |
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|
[removed] C.$6.67 |
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|
[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
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Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
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Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
|
[removed] A.common stock and corporate bonds. |
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|
[removed] B.treasury bills and commercial paper. |
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|
[removed] C.certificates of deposit and preferred stock. |
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|
[removed] D.all of these. |
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uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
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Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
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Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
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Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
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Question 21 of 25 |
4.0 Points |
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Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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Question 22 of 25 |
4.0 Points |
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Which of the following is an outflow of cash?
|
[removed] A.profitable operations |
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[removed] B.the sale of equipment |
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|
[removed] C.the sale of the company’s common stock |
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|
[removed] D.the payment of cash dividends |
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uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
|
[removed] A.40% |
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|
[removed] B.12% |
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|
[removed] C.20% |
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|
[removed] D.25% |
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4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
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4.0 Points |
Which of the following is an inflow of cash?
|
[removed] A.funds spent in normal business operations |
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|
[removed] B.the purchase of a new factory |
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|
[removed] C.the sale of the firm’s bonds |
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|
[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
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The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
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[removed] A.the greater the price increase from an increase in interest rates. |
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[removed] B.the less the price increase from an increase in interest rates. |
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[removed] C.the greater the price increase from a decrease in interest rates. |
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[removed] D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
|
[removed] A.stock. |
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[removed] B.bonds. |
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[removed] C.preferred stock. |
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[removed] D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed] A.$3.00 |
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[removed] B.$37.50 |
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[removed] C.$50.00 |
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[removed] D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
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[removed] A.is unaffected. |
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[removed] B.goes down. |
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[removed] C.goes up. |
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[removed] D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
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The required return by investors is important to financial managers for all of the following reasons except:
|
[removed] A.It influences the firm’s cost of financing |
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|
|
[removed] B.It influences their stock price |
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|
[removed] C.It is the primary driver of their financial ratios |
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[removed] D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed] A.4.41% |
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[removed] B.9.0% |
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[removed] C.1.89% |
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[removed] D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
|
(point) The longer the time to maturity:
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[removed]A.the greater the price increase from an increase in interest rates. |
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[removed]B.the less the price increase from an increase in interest rates. |
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[removed]C.the greater the price increase from a decrease in interest rates. |
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[removed]D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
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[removed]A.stock. |
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[removed]B.bonds. |
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[removed]C.preferred stock. |
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[removed]D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed]A.$3.00 |
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[removed]B.$37.50 |
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[removed]C.$50.00 |
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[removed]D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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Question 10 of 25 |
4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
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[removed]A.is unaffected. |
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[removed]B.goes down. |
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[removed]C.goes up. |
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[removed]D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
|
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed]A.It influences the firm’s cost of financing |
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|
[removed]B.It influences their stock price |
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[removed]C.It is the primary driver of their financial ratios |
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[removed]D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed]A.4.41% |
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[removed]B.9.0% |
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[removed]C.1.89% |
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[removed]D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
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Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
|
[removed] A.expected value. |
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[removed] B.internal rate of return. |
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[removed] C.standard deviation. |
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[removed] D.coefficient of variation. |
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Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
|
[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
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[removed] B.A beta of 1.0 is of equal risk with the market. |
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[removed] C.A beta of greater than 1.0 has less risk than the market. |
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[removed] D.Two of the above are true. |
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uestion 3 of 25 |
4.0 Points |
Capital rationing
|
[removed] A.is a way of preserving the assets of the firm over the long term. |
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[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
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[removed] C.assures stockholder wealth maximization. |
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[removed] D.assures maximum potential profitability. |
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Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
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Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
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4.0 Points |
Simulation models allow the planner to:
|
[removed] A.reduce the standard deviations of projects. |
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[removed] B.test possible changes in each variable. |
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[removed] C.deal with the uncertainty in forecasting outcome |
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D.b and c.
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Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
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Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
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Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
|
[removed] A.Coefficient of correlation |
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|
[removed] B.Coefficient of variation |
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[removed] C.Standard deviation of returns |
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[removed] D.Net present value |
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Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
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Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
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Which of the following is a false statement?
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uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
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Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
|
[removed] A.operating income less taxes plus depreciation. |
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[removed] B.operating income less taxes. |
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[removed] C.operating income before depreciation and taxes plus depreciation. |
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[removed] D.operating income after taxes minus depreciation. |
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4.0 Points |
There are several disadvantages to the payback method, among them:
|
[removed] A.payback ignores the time value of money. |
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|
[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
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|
[removed] C.payback is Basic to use and to understand. |
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|
[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
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uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
|
[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
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|
[removed] B.concentrates on the liquidity aspects of investment projects. |
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|
[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
|
|
[removed] D.none of these. |
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Question 17 of 25 |
4.0 Points |
As the cost of capital increases
|
[removed] A.fewer projects are accepted. |
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|
[removed] B.more projects are accepted. |
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|
[removed] C.project selection remains unchanged. |
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|
[removed] D.None of these. |
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Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
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4.0 Points |
The payback method considers all cash inflows.
|
|
uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
|
[removed] A.capital formation in the economy. |
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|
[removed] B.planning future financing needs. |
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|
[removed] C.evaluating investment alternatives. |
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|
[removed] D.minimizing the cost of capital. |
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4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
|
|
uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
|
[removed] A.The payback method considers cash flows after the payback has been reached. |
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|
[removed] B.The payback method does not consider the time value of money. |
|
|
[removed] C.The payback method uses discounted cash-flow techniques. |
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|
[removed] D.The payback method generally leads to the same decision as other investment selection methods |
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|
uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
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Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
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uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
|
[removed] A.collection of data. |
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[removed] B.idea development. |
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[removed] C.assign probabilities. |
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[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best represent
|
Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
|
|
4.0 Points |
The primary disadvantage of accrual accounting is that
|
[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
|
||||||||||||||||
|
[removed] B.it does not appropriately measure accounting profit. |
|
||||||||||||||||
|
[removed] C.it does not recognize accounts receivable. |
|
||||||||||||||||
|
[removed] D.it does not adequately show the actual cash flow position of the firm
.
Gross profit is equal to
|
|
|
Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
|
|
uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
|
The Sarbanes-Oxley Act was passed in an effort to
|
|
uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
|
[removed] A.interest expense |
|
|
[removed] B.cost of goods sold |
|
|
[removed] C.depreciation |
|
|
[removed] D.selling and administrative expense |
|
|
Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
|
[removed] A.assets |
|
|
[removed] B.common stock |
|
|
[removed] C.preferred stock |
|
|
[removed] D.bonds |
|
|
Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
|
[removed] A.$35 per share |
|
|
[removed] B.$25 per share |
|
|
[removed] C.$15 per share |
|
|
[removed] D.Not enough information to tell |
|
|
Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
|
|
uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
|
[removed] A.$60.00 |
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[removed] B.$15.00 |
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[removed] C.$6.67 |
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|
[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
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Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
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Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
|
[removed] A.common stock and corporate bonds. |
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|
[removed] B.treasury bills and commercial paper. |
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|
[removed] C.certificates of deposit and preferred stock. |
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|
[removed] D.all of these. |
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uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
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Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
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Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
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Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
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Question 21 of 25 |
4.0 Points |
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Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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Question 22 of 25 |
4.0 Points |
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Which of the following is an outflow of cash?
|
[removed] A.profitable operations |
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[removed] B.the sale of equipment |
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[removed] C.the sale of the company’s common stock |
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|
[removed] D.the payment of cash dividends |
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uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
|
[removed] A.40% |
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[removed] B.12% |
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[removed] C.20% |
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|
[removed] D.25% |
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4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
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4.0 Points |
Which of the following is an inflow of cash?
|
[removed] A.funds spent in normal business operations |
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|
[removed] B.the purchase of a new factory |
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[removed] C.the sale of the firm’s bonds |
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|
[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
|
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
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The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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|
||
(point) The longer the time to maturity:
|
[removed] A.the greater the price increase from an increase in interest rates. |
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|
[removed] B.the less the price increase from an increase in interest rates. |
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|
[removed] C.the greater the price increase from a decrease in interest rates. |
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|
[removed] D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
|||
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|
||
Financial capital does not include
|
[removed] A.stock. |
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|
[removed] B.bonds. |
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|
[removed] C.preferred stock. |
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|
[removed] D.working capital. |
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|
Question 7 of 25 |
4.0 Points |
||
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|
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
|
[removed] A.$3.00 |
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|
[removed] B.$37.50 |
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|
[removed] C.$50.00 |
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|
[removed] D.none of these |
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Question 8 of 25 |
4.0 Points |
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|
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
|
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4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
|
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|
4.0 Points |
||||
|
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|
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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|
Question 11 of 25 |
4.0 Points |
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|
||
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed] A.is unaffected. |
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|
[removed] B.goes down. |
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|
[removed] C.goes up. |
|
|
[removed] D.need more information. |
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|
uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
|
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|
Question 19 of 25 |
4.0 Points |
|||
|
|
|
|
||
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
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|
uestion 20 of 25 |
4.0 Points |
|||
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|
||
The time value of money concept becomes less critical as the prime rate increases.
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|
Question 21 of 25 |
4.0 Points |
|||
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|
||
If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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|
Question 22 of 25 |
4.0 Points |
|||
|
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|
||
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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|
Question 23 of 25 |
4.0 Points |
|||
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|
||
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed] A.It influences the firm’s cost of financing |
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|
|
[removed] B.It influences their stock price |
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|
|
[removed] C.It is the primary driver of their financial ratios |
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|
[removed] D.It helps when pricing new issues of securities |
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|
uestion 24 of 25 |
4.0 Points |
||
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|
|
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed] A.4.41% |
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|
[removed] B.9.0% |
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|
[removed] C.1.89% |
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|
[removed] D.6.43% |
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|
You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
|
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
|
|||||
|
Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
Question 4 of 25 |
4.0 Points |
|
(point) The longer the time to maturity:
|
[removed]A.the greater the price increase from an increase in interest rates. |
|
|
[removed]B.the less the price increase from an increase in interest rates. |
|
|
[removed]C.the greater the price increase from a decrease in interest rates. |
|
|
[removed]D.the less the price decrease from a decrease in interest rates. |
|
Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
||
|
Question 6 of 25 |
4.0 Points |
|
Financial capital does not include
|
[removed]A.stock. |
|||
|
[removed]B.bonds. |
|||
|
[removed]C.preferred stock. |
|||
|
[removed]D.working capital. |
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|
Question 7 of 25 |
4.0 Points |
||
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
|
[removed]A.$3.00 |
|||
|
[removed]B.$37.50 |
|||
|
[removed]C.$50.00 |
|||
|
[removed]D.none of these |
|||
|
Question 8 of 25 |
4.0 Points |
||
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
|
|
Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
|
||
|
Question 10 of 25 |
4.0 Points |
|
(point) The calculation of the cost of capital depends upon historical costs of funds.
|
||
|
Question 11 of 25 |
4.0 Points |
|
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
|
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|
uestion 17 of 25 |
4.0 Points |
||||||||||||||||||||||||||||||||||||||||||||||||
(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed]A.is unaffected. |
|
|
[removed]B.goes down. |
|
|
[removed]C.goes up. |
|
|
[removed]D.need more information. |
|
uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
|
||
|
Question 19 of 25 |
4.0 Points |
|
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
uestion 20 of 25 |
4.0 Points |
|
The time value of money concept becomes less critical as the prime rate increases.
|
||
|
Question 21 of 25 |
4.0 Points |
|
If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
|
||
|
Question 22 of 25 |
4.0 Points |
|
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
|
||
|
Question 23 of 25 |
4.0 Points |
|
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed]A.It influences the firm’s cost of financing |
|||
|
[removed]B.It influences their stock price |
|||
|
[removed]C.It is the primary driver of their financial ratios |
|||
|
[removed]D.It helps when pricing new issues of securities |
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|
uestion 24 of 25 |
4.0 Points |
||
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed]A.4.41% |
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|
[removed]B.9.0% |
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|
[removed]C.1.89% |
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|
[removed]D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
|
Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
|
[removed] A.expected value. |
|
|
[removed] B.internal rate of return. |
|
|
[removed] C.standard deviation. |
|
|
[removed] D.coefficient of variation. |
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|
Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
|
[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
|
|
[removed] B.A beta of 1.0 is of equal risk with the market. |
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|
[removed] C.A beta of greater than 1.0 has less risk than the market. |
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|
[removed] D.Two of the above are true. |
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|
uestion 3 of 25 |
4.0 Points |
Capital rationing
|
[removed] A.is a way of preserving the assets of the firm over the long term. |
|
|
[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
|
|
[removed] C.assures stockholder wealth maximization. |
|
|
[removed] D.assures maximum potential profitability. |
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|
Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
|
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Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
|
|
4.0 Points |
Simulation models allow the planner to:
|
[removed] A.reduce the standard deviations of projects. |
|
|
[removed] B.test possible changes in each variable. |
|
|
[removed] C.deal with the uncertainty in forecasting outcome |
|
D.b and c.
|
Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
|
|
Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
|
|
Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
|
[removed] A.Coefficient of correlation |
|
|
[removed] B.Coefficient of variation |
|
|
[removed] C.Standard deviation of returns |
|
|
[removed] D.Net present value |
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|
Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
|
|
Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
|
Which of the following is a false statement?
|
|
uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
|
|
Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
|
[removed] A.operating income less taxes plus depreciation. |
|
|
[removed] B.operating income less taxes. |
|
|
[removed] C.operating income before depreciation and taxes plus depreciation. |
|
|
[removed] D.operating income after taxes minus depreciation. |
|
|
4.0 Points |
There are several disadvantages to the payback method, among them:
|
[removed] A.payback ignores the time value of money. |
|
|
[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
|
|
[removed] C.payback is Basic to use and to understand. |
|
|
[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
|
|
uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
|
[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
|
|
[removed] B.concentrates on the liquidity aspects of investment projects. |
|
|
[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
|
|
[removed] D.none of these. |
|
|
Question 17 of 25 |
4.0 Points |
As the cost of capital increases
|
[removed] A.fewer projects are accepted. |
|
|
[removed] B.more projects are accepted. |
|
|
[removed] C.project selection remains unchanged. |
|
|
[removed] D.None of these. |
|
|
Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
|
|
4.0 Points |
The payback method considers all cash inflows.
|
|
uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
|
[removed] A.capital formation in the economy. |
|
|
[removed] B.planning future financing needs. |
|
|
[removed] C.evaluating investment alternatives. |
|
|
[removed] D.minimizing the cost of capital. |
|
|
4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
|
|
uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
|
[removed] A.The payback method considers cash flows after the payback has been reached. |
|
|
[removed] B.The payback method does not consider the time value of money. |
|
|
[removed] C.The payback method uses discounted cash-flow techniques. |
|
|
[removed] D.The payback method generally leads to the same decision as other investment selection methods |
|
|
uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
|
|
Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
|
|
uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
|
[removed] A.collection of data. |
|
|
[removed] B.idea development. |
|
|
[removed] C.assign probabilities. |
|
|
[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best represents the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured debt, subordinated debentures
B.Senior debentures, subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
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Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
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4.0 Points |
The primary disadvantage of accrual accounting is that
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[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
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[removed] B.it does not appropriately measure accounting profit. |
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[removed] C.it does not recognize accounts receivable. |
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[removed] D.it does not adequately show the actual cash flow position of the firm
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Gross profit is equal to
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Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
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uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
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The Sarbanes-Oxley Act was passed in an effort to
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uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
|
[removed] A.interest expense |
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[removed] B.cost of goods sold |
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[removed] C.depreciation |
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[removed] D.selling and administrative expense |
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Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
|
[removed] A.assets |
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[removed] B.common stock |
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[removed] C.preferred stock |
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[removed] D.bonds |
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Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
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[removed] A.$35 per share |
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[removed] B.$25 per share |
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[removed] C.$15 per share |
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[removed] D.Not enough information to tell |
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Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
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uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
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[removed] A.$60.00 |
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[removed] B.$15.00 |
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[removed] C.$6.67 |
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[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
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Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
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Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
|
[removed] A.common stock and corporate bonds. |
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[removed] B.treasury bills and commercial paper. |
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[removed] C.certificates of deposit and preferred stock. |
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[removed] D.all of these. |
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uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
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Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
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Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
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Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
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Question 21 of 25 |
4.0 Points |
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Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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Question 22 of 25 |
4.0 Points |
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Which of the following is an outflow of cash?
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[removed] A.profitable operations |
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[removed] B.the sale of equipment |
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[removed] C.the sale of the company’s common stock |
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[removed] D.the payment of cash dividends |
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uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
|
[removed] A.40% |
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[removed] B.12% |
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[removed] C.20% |
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[removed] D.25% |
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4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
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4.0 Points |
Which of the following is an inflow of cash?
|
[removed] A.funds spent in normal business operations |
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[removed] B.the purchase of a new factory |
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[removed] C.the sale of the firm’s bonds |
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[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
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The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
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[removed] A.the greater the price increase from an increase in interest rates. |
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[removed] B.the less the price increase from an increase in interest rates. |
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[removed] C.the greater the price increase from a decrease in interest rates. |
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[removed] D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
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[removed] A.stock. |
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[removed] B.bonds. |
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[removed] C.preferred stock. |
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[removed] D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed] A.$3.00 |
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[removed] B.$37.50 |
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[removed] C.$50.00 |
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[removed] D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
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[removed] A.is unaffected. |
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[removed] B.goes down. |
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[removed] C.goes up. |
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[removed] D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
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The required return by investors is important to financial managers for all of the following reasons except:
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[removed] A.It influences the firm’s cost of financing |
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[removed] B.It influences their stock price |
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[removed] C.It is the primary driver of their financial ratios |
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[removed] D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed] A.4.41% |
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[removed] B.9.0% |
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[removed] C.1.89% |
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[removed] D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
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The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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(point) The longer the time to maturity:
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[removed]A.the greater the price increase from an increase in interest rates. |
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[removed]B.the less the price increase from an increase in interest rates. |
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[removed]C.the greater the price increase from a decrease in interest rates. |
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[removed]D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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Question 6 of 25 |
4.0 Points |
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Financial capital does not include
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[removed]A.stock. |
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[removed]B.bonds. |
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[removed]C.preferred stock. |
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[removed]D.working capital. |
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Question 7 of 25 |
4.0 Points |
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The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
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[removed]A.$3.00 |
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[removed]B.$37.50 |
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[removed]C.$50.00 |
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[removed]D.none of these |
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Question 8 of 25 |
4.0 Points |
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In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
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Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
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Question 10 of 25 |
4.0 Points |
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(point) The calculation of the cost of capital depends upon historical costs of funds.
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Question 11 of 25 |
4.0 Points |
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As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
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[removed]A.is unaffected. |
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[removed]B.goes down. |
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[removed]C.goes up. |
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[removed]D.need more information. |
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uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
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Question 19 of 25 |
4.0 Points |
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(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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uestion 20 of 25 |
4.0 Points |
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The time value of money concept becomes less critical as the prime rate increases.
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Question 21 of 25 |
4.0 Points |
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If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
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Question 22 of 25 |
4.0 Points |
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The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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Question 23 of 25 |
4.0 Points |
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The required return by investors is important to financial managers for all of the following reasons except:
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[removed]A.It influences the firm’s cost of financing |
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[removed]B.It influences their stock price |
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[removed]C.It is the primary driver of their financial ratios |
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[removed]D.It helps when pricing new issues of securities |
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uestion 24 of 25 |
4.0 Points |
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Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
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[removed]A.4.41% |
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[removed]B.9.0% |
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[removed]C.1.89% |
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[removed]D.6.43% |
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You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
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Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
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Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
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[removed] A.expected value. |
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[removed] B.internal rate of return. |
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[removed] C.standard deviation. |
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[removed] D.coefficient of variation. |
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Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
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[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
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[removed] B.A beta of 1.0 is of equal risk with the market. |
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[removed] C.A beta of greater than 1.0 has less risk than the market. |
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[removed] D.Two of the above are true. |
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uestion 3 of 25 |
4.0 Points |
Capital rationing
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[removed] A.is a way of preserving the assets of the firm over the long term. |
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[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
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[removed] C.assures stockholder wealth maximization. |
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[removed] D.assures maximum potential profitability. |
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Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
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Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
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4.0 Points |
Simulation models allow the planner to:
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[removed] A.reduce the standard deviations of projects. |
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[removed] B.test possible changes in each variable. |
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[removed] C.deal with the uncertainty in forecasting outcome |
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D.b and c.
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Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
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Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
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Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
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[removed] A.Coefficient of correlation |
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[removed] B.Coefficient of variation |
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[removed] C.Standard deviation of returns |
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[removed] D.Net present value |
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Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
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Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
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Which of the following is a false statement?
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uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
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Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
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[removed] A.operating income less taxes plus depreciation. |
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[removed] B.operating income less taxes. |
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[removed] C.operating income before depreciation and taxes plus depreciation. |
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[removed] D.operating income after taxes minus depreciation. |
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4.0 Points |
There are several disadvantages to the payback method, among them:
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[removed] A.payback ignores the time value of money. |
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[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
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[removed] C.payback is Basic to use and to understand. |
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[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
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uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
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[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
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[removed] B.concentrates on the liquidity aspects of investment projects. |
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[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
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[removed] D.none of these. |
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Question 17 of 25 |
4.0 Points |
As the cost of capital increases
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[removed] A.fewer projects are accepted. |
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[removed] B.more projects are accepted. |
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[removed] C.project selection remains unchanged. |
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[removed] D.None of these. |
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Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
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4.0 Points |
The payback method considers all cash inflows.
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uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
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[removed] A.capital formation in the economy. |
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[removed] B.planning future financing needs. |
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[removed] C.evaluating investment alternatives. |
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[removed] D.minimizing the cost of capital. |
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4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
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uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
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[removed] A.The payback method considers cash flows after the payback has been reached. |
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[removed] B.The payback method does not consider the time value of money. |
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[removed] C.The payback method uses discounted cash-flow techniques. |
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[removed] D.The payback method generally leads to the same decision as other investment selection methods |
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uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
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Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
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uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
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[removed] A.collection of data. |
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[removed] B.idea development. |
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[removed] C.assign probabilities. |
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[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best rep
|
Finc400 quiz 1-8
art 1 of 1 – Week 1 Quiz |
The firm’s price-earnings (P/E) ratio is influenced by its
|
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4.0 Points |
The primary disadvantage of accrual accounting is that
|
[removed] A.it does not match revenues and expenses in the period in which they are incurred. |
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|
[removed] B.it does not appropriately measure accounting profit. |
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[removed] C.it does not recognize accounts receivable. |
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[removed] D.it does not adequately show the actual cash flow position of the firm
.
Gross profit is equal to
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|
Question 5 of 25 |
4.0 Points |
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
|
|
uestion 6 of 25 |
4.0 Points |
Ratios are used to compare different firms in the same industry.
|
The Sarbanes-Oxley Act was passed in an effort to
|
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uestion 8 of 25 |
4.0 Points |
Which of the following is not subtracted out in arriving at operating income?
|
[removed] A.interest expense |
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|
[removed] B.cost of goods sold |
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|
[removed] C.depreciation |
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|
[removed] D.selling and administrative expense |
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Question 9 of 25 |
4.0 Points |
Which of the following is not a primary source of capital to the firm?
|
[removed] A.assets |
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|
[removed] B.common stock |
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[removed] C.preferred stock |
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|
[removed] D.bonds |
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Question 10 of 25 |
4.0 Points |
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?
|
[removed] A.$35 per share |
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|
[removed] B.$25 per share |
|
|
[removed] C.$15 per share |
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|
[removed] D.Not enough information to tell |
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Question 11 of 25 |
4.0 Points |
Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.
|
|
uestion 12 of 25 |
4.0 Points |
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of
|
[removed] A.$60.00 |
|
|
[removed] B.$15.00 |
|
|
[removed] C.$6.67 |
|
|
[removed] D.the market assigns a stock price independent of EPS and the P/E ratio. |
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|
Question 13 of 25 |
4.0 Points |
The P/E ratio is strongly related to the past performance of the firm.
|
|
Question 14 of 25 |
4.0 Points |
Money markets would include which of the following securities?
|
[removed] A.common stock and corporate bonds. |
|
|
[removed] B.treasury bills and commercial paper. |
|
|
[removed] C.certificates of deposit and preferred stock. |
|
|
[removed] D.all of these. |
|
|
uestion 15 of 25 |
4.0 Points |
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
|
|
Question 16 of 25 |
4.0 Points |
Preferred stock is excluded from stockholders equity because it does not have full voting rights.
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Question 17 of 25 |
4.0 Points |
Sales minus cost of goods sold is equal to earnings before taxes.
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Question 20 of 25 |
4.0 Points |
Asset utilization ratios relate balance sheet assets to income statement sales.
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Question 21 of 25 |
4.0 Points |
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Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.
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Question 22 of 25 |
4.0 Points |
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Which of the following is an outflow of cash?
|
[removed] A.profitable operations |
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|
[removed] B.the sale of equipment |
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|
[removed] C.the sale of the company’s common stock |
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|
[removed] D.the payment of cash dividends |
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|
uestion 23 of 25 |
4.0 Points |
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
|
[removed] A.40% |
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|
[removed] B.12% |
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|
[removed] C.20% |
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|
[removed] D.25% |
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|
4.0 Points |
The income statement is the major device for measuring the profitability of a firm over a period of time.
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4.0 Points |
Which of the following is an inflow of cash?
|
[removed] A.funds spent in normal business operations |
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|
[removed] B.the purchase of a new factory |
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[removed] C.the sale of the firm’s bonds |
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|
[removed] D.the retirement of the firm’s bonds |
Week 2
Question 1 of 25 4.0 Points
A lower price for the firm’s product will reduce the firm’s breakeven point.
A. True
B. False
Question 2 of 25 4.0 Points
(point) Profit is generally adequate to finance significant growth.
A. True
B. False
Question 3 of 25 4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 4 of 25 4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 5 of 25 4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 6 of 25 4.0 Points
If fixed costs rise while other variables stay constant
A.the breakeven point rises.
B.degree of operating leverage increases.
C.total profit declines.
D.all of these
Question 7 of 25 4.0 Points
Operating leverage emphasizes the impact of using fixed assets in the business.
A. True
B. False
Question 8 of 25 4.0 Points
(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A.is higher.
B.is lower.
C.is the same.
D.can be either higher or lower.
Question 9 of 25 4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Question 10 of 25 4.0 Points
(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?
A.decrease in inventory.
B.increase in retained earnings.
C.decrease in accounts payable.
D.decrease in accounts receivable.
Question 11 of 25 4.0 Points
An increase in sales and profits generates the necessary cash required for economic growth.
A. True
B. False
Question 12 of 25 4.0 Points
The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.
A. True
B. False
Question 13 of 25 4.0 Points
Pro forma financial statements are
A.the most comprehensive means of financial forecasting.
B.often required by prospective creditors.
C.projections of financial statements for a future period.
D.all of these.
Question 14 of 25 4.0 Points
(point) When the cost of raw materials is increasing, FIFO accounting
A.yields higher ending inventory values than LIFO.
B.produces higher unit sales than using LIFO.
C.yields higher cost of goods sold than LIFO.
D.All of these.
Question 15 of 25 4.0 Points
(point) If sales volume exceeds the break-even point, the firm will experience
A.an operating loss.
B.an operating profit.
C.an increase in plant and equipment.
D.an increase in stock price.
Question 16 of 25 4.0 Points
The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.
A. True
B. False
Question 17 of 25 4.0 Points
(point) Leverage works best when volume is increasing.
A. True
B. False
Question 18 of 25 4.0 Points
(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.
A. True
B. False
Question 19 of 25 4.0 Points
If the price per unit decreases because of competition but the cost structure remains the same
A.the breakeven point rises.
B.the degree of combined leverage declines.
C.the degree of financial leverage declines.
D.All of these
Question 20 of 25 4.0 Points
Sales (100,000 units) $ 1,000,000
Variable costs 300,000
Contribution margin 700,000
Fixed manufacturing costs 200,000
Operating income 500,000
Interest 75,000
Earnings before taxes 425,000
Taxes (30%) 127,500
Net Income $ 297,500
Refer to the figure above. The Degree of Operating Leverage is
A.1.40x
B.1.56x
C.3.33x
D.2.22x
Question 21 of 25 4.0 Points
(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.
A. True
B. False
Question 22 of 25 4.0 Points
(point) As the contribution margin rises, the breakeven point goes down.
A. True
B. False
Question 23 of 25 4.0 Points
(point) In the percent-of-sales method, an increase in dividends
A.will increase required new funds.
B.will decrease required new funds.
C.has no effect on required new funds.
D.more information is needed.
Question 24 of 25 4.0 Points
Which of the following is not true about leverage?
A.operating leverage influences the top half of the income statement, determining EBIT.
B.financial leverage deals with the bottom half of the income statement, determining EPS
C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
D.none of these
Question 25 of 25 4.0 Points
The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.
A. True
B. False
Week 3
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
|
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
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Question 3 of 25 |
4.0 Points |
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The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
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Question 4 of 25 |
4.0 Points |
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|
||
(point) The longer the time to maturity:
|
[removed] A.the greater the price increase from an increase in interest rates. |
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|
[removed] B.the less the price increase from an increase in interest rates. |
|
|
[removed] C.the greater the price increase from a decrease in interest rates. |
|
|
[removed] D.the less the price decrease from a decrease in interest rates. |
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Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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|
Question 6 of 25 |
4.0 Points |
|||
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|
||
Financial capital does not include
|
[removed] A.stock. |
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|
[removed] B.bonds. |
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|
|
[removed] C.preferred stock. |
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|
[removed] D.working capital. |
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|
Question 7 of 25 |
4.0 Points |
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|
|
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
|
[removed] A.$3.00 |
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|
|
[removed] B.$37.50 |
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|
[removed] C.$50.00 |
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|
[removed] D.none of these |
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|
Question 8 of 25 |
4.0 Points |
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|
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
|
|
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
|
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|
4.0 Points |
||||
|
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|
||
(point) The calculation of the cost of capital depends upon historical costs of funds.
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|
Question 11 of 25 |
4.0 Points |
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|
||
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
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(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
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uestion 17 of 25 |
4.0 Points |
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(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed] A.is unaffected. |
|
|
[removed] B.goes down. |
|
|
[removed] C.goes up. |
|
|
[removed] D.need more information. |
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|
uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
|
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|
Question 19 of 25 |
4.0 Points |
|||
|
|
|
|
||
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
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|||
|
uestion 20 of 25 |
4.0 Points |
|||
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|
||
The time value of money concept becomes less critical as the prime rate increases.
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|
Question 21 of 25 |
4.0 Points |
|||
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|
||
If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
|
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|
Question 22 of 25 |
4.0 Points |
|||
|
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|
||
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
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|
Question 23 of 25 |
4.0 Points |
|||
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|
||
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed] A.It influences the firm’s cost of financing |
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|
|
[removed] B.It influences their stock price |
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|
|
[removed] C.It is the primary driver of their financial ratios |
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|
[removed] D.It helps when pricing new issues of securities |
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|
uestion 24 of 25 |
4.0 Points |
||
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|
|
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed] A.4.41% |
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||||||||||
|
[removed] B.9.0% |
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|
[removed] C.1.89% |
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|
[removed] D.6.43% |
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|
You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 4
FINC400
Week 4
The quiz is accessible once and is available for the duration of 1.5-hours. Please do not exit from the quiz unless it has been completed, as it will not be accessible again.
If the inflation premium for a bond goes up, the price of the bond
|
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
|
|||||
|
Question 3 of 25 |
4.0 Points |
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
Question 4 of 25 |
4.0 Points |
|
(point) The longer the time to maturity:
|
[removed]A.the greater the price increase from an increase in interest rates. |
|
|
[removed]B.the less the price increase from an increase in interest rates. |
|
|
[removed]C.the greater the price increase from a decrease in interest rates. |
|
|
[removed]D.the less the price decrease from a decrease in interest rates. |
|
Question 5 of 25 |
4.0 Points |
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
||
|
Question 6 of 25 |
4.0 Points |
|
Financial capital does not include
|
[removed]A.stock. |
|||
|
[removed]B.bonds. |
|||
|
[removed]C.preferred stock. |
|||
|
[removed]D.working capital. |
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|
Question 7 of 25 |
4.0 Points |
||
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
|
[removed]A.$3.00 |
|||
|
[removed]B.$37.50 |
|||
|
[removed]C.$50.00 |
|||
|
[removed]D.none of these |
|||
|
Question 8 of 25 |
4.0 Points |
||
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
|
|
Question 9 of 25 |
4.0 Points |
The calculation of the cost of capital depends upon historical costs of funds.
|
||
|
Question 10 of 25 |
4.0 Points |
|
(point) The calculation of the cost of capital depends upon historical costs of funds.
|
||
|
Question 11 of 25 |
4.0 Points |
|
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
(point) An annuity may be defined as
As the time period until receipt increases, the present value of an amount at a fixed interest rate
(point) Within the capital asset pricing model
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
When inflation rises, preferred stock prices fall.
|
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|
uestion 17 of 25 |
4.0 Points |
||||||||||||||||||||||||||||||||||||||||||||||||
(point) If the inflation premium for a bond goes up, the price of the bond
|
[removed]A.is unaffected. |
|
|
[removed]B.goes down. |
|
|
[removed]C.goes up. |
|
|
[removed]D.need more information. |
|
uestion 18 of 25 |
4.0 Points |
The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.
|
||
|
Question 19 of 25 |
4.0 Points |
|
(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
|
||
|
uestion 20 of 25 |
4.0 Points |
|
The time value of money concept becomes less critical as the prime rate increases.
|
||
|
Question 21 of 25 |
4.0 Points |
|
If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.
|
||
|
Question 22 of 25 |
4.0 Points |
|
The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.
|
||
|
Question 23 of 25 |
4.0 Points |
|
The required return by investors is important to financial managers for all of the following reasons except:
|
[removed]A.It influences the firm’s cost of financing |
|||
|
[removed]B.It influences their stock price |
|||
|
[removed]C.It is the primary driver of their financial ratios |
|||
|
[removed]D.It helps when pricing new issues of securities |
|||
|
uestion 24 of 25 |
4.0 Points |
||
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
|
[removed]A.4.41% |
|||||||||||
|
[removed]B.9.0% |
|||||||||||
|
[removed]C.1.89% |
|||||||||||
|
[removed]D.6.43% |
|||||||||||
You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
|
Week 5
FINC400
Week 5 Quiz” for FINC400 I004 Sum 13
|
Question 1 of 25 |
4.0 Points |
In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the
|
[removed] A.expected value. |
|
|
[removed] B.internal rate of return. |
|
|
[removed] C.standard deviation. |
|
|
[removed] D.coefficient of variation. |
|
|
Question 2 of 25 |
4.0 Points |
Which of the following is a characteristic of beta?
|
[removed] A.Beta measures only the volatility of returns on an individual bond relative to a bond market index. |
|
|
[removed] B.A beta of 1.0 is of equal risk with the market. |
|
|
[removed] C.A beta of greater than 1.0 has less risk than the market. |
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|
[removed] D.Two of the above are true. |
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|
uestion 3 of 25 |
4.0 Points |
Capital rationing
|
[removed] A.is a way of preserving the assets of the firm over the long term. |
|
|
[removed] B.is a less than optimal way to arrive at capital budgeting decisions. |
|
|
[removed] C.assures stockholder wealth maximization. |
|
|
[removed] D.assures maximum potential profitability. |
|
|
Question 4 of 25 |
4.0 Points |
Capital budgeting is only a concern of finance and accounting personnel.
|
|
Question 5 of 25 |
4.0 Points |
Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.
|
|
4.0 Points |
Simulation models allow the planner to:
|
[removed] A.reduce the standard deviations of projects. |
|
|
[removed] B.test possible changes in each variable. |
|
|
[removed] C.deal with the uncertainty in forecasting outcome |
|
D.b and c.
|
Question 7 of 25 |
4.0 Points |
The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.
|
|
Question 8 of 25 |
4.0 Points |
The cost of capital is assumed to contain no risk for the firm.
|
|
Question 9 of 25 |
4.0 Points |
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?
|
[removed] A.Coefficient of correlation |
|
|
[removed] B.Coefficient of variation |
|
|
[removed] C.Standard deviation of returns |
|
|
[removed] D.Net present value |
|
|
Question 10 of 25 |
4.0 Points |
To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.
|
|
Question 11 of 25 |
4.0 Points |
Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.
|
Which of the following is a false statement?
|
|
uestion 13 of 25 |
4.0 Points |
Regardless of risk, no projects should be accepted unless they earn more than the firm’s weighted average cost of capital.
|
|
Question 14 of 25 |
4.0 Points |
Cash flow can be said to equal
|
[removed] A.operating income less taxes plus depreciation. |
|
|
[removed] B.operating income less taxes. |
|
|
[removed] C.operating income before depreciation and taxes plus depreciation. |
|
|
[removed] D.operating income after taxes minus depreciation. |
|
|
4.0 Points |
There are several disadvantages to the payback method, among them:
|
[removed] A.payback ignores the time value of money. |
|
|
[removed] B.payback emphasizes receiving money back as fast as possible for reinvestment. |
|
|
[removed] C.payback is Basic to use and to understand. |
|
|
[removed] D.payback can be used in conjunction with time adjusted methods of evaluation. |
|
|
uestion 16 of 25 |
4.0 Points |
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
|
[removed] A.assumes that cash flows are reinvested at the project’s internal rate of return. |
|
|
[removed] B.concentrates on the liquidity aspects of investment projects. |
|
|
[removed] C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital. |
|
|
[removed] D.none of these. |
|
|
Question 17 of 25 |
4.0 Points |
As the cost of capital increases
|
[removed] A.fewer projects are accepted. |
|
|
[removed] B.more projects are accepted. |
|
|
[removed] C.project selection remains unchanged. |
|
|
[removed] D.None of these. |
|
|
Question 18 of 25 |
4.0 Points |
The capital budgeting decisions of a firm will have no effect on the share price of the common stock.
|
|
4.0 Points |
The payback method considers all cash inflows.
|
|
uestion 20 of 25 |
4.0 Points |
Capital budgeting is primarily concerned with
|
[removed] A.capital formation in the economy. |
|
|
[removed] B.planning future financing needs. |
|
|
[removed] C.evaluating investment alternatives. |
|
|
[removed] D.minimizing the cost of capital. |
|
|
4.0 Points |
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
|
|
uestion 22 of 25 |
4.0 Points |
Which of the following statements about the “payback method” is true?
|
[removed] A.The payback method considers cash flows after the payback has been reached. |
|
|
[removed] B.The payback method does not consider the time value of money. |
|
|
[removed] C.The payback method uses discounted cash-flow techniques. |
|
|
[removed] D.The payback method generally leads to the same decision as other investment selection methods |
|
|
uestion 23 of 25 |
4.0 Points |
The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.
|
|
Question 24 of 25 |
4.0 Points |
Simulation models allow the analyst to test possible changes in the variables used in the model.
|
|
uestion 25 of 25 |
4.0 Points |
The first step in the capital budgeting process is
|
[removed] A.collection of data. |
|
|
[removed] B.idea development. |
|
|
[removed] C.assign probabilities. |
|
|
[removed] D.determine cashflow. |
Week 7
Question 1 of 25
4.0 Points
A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
A.the common stockholders.
B.the preferred stockholders.
C.the bondholders.
D.two of the above.
Question 17 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 18 of 25
4.0 Points
The higher the bond rating
A.the higher the interest rate on a bond.
B.the lower the interest rate on a bond.
C.the higher the call premium.
D.the lower the call premium
Question 19 of 25
4.0 Points
The purpose of cumulative voting is
A.to maintain majority control of the board of directors.
B.to allow minority stockholders the possibility of a voice on the board of directors.
C.to obstruct unfriendly mergers and takeover efforts.
D.to prevent the dilution of common stock through pre-emptive rights offerings.
Question 20 of 25
4.0 Points
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
Correct
A. True
B. False
Question 21 of 25
4.0 Points
Preferred stock is the least used of all long-term securities because
A.investors can get higher returns after taxes in other investments.
B.preferred dividends are considered regular (fixed) obligations but are not tax-deductible.
C.flotation costs are extremely high compared to bonds.
D.all of these.
Question 22 of 25
4.0 Points
Which of the following is not a form of yield on a bond?
A.coupon rate (nominal yield)
B.current yield
C.dividend yield
D.yield to maturity
Question 23 of 25
4.0 Points
There are a number of possible advantages to a rights offering:
A.current shareholders are protected against dilution.
B.the firm has a built-in market of knowledgeable investors.
C.distribution costs are lower than a public offering.
D.all of these.
Question 24 of 25
4.0 Points
The yield to maturity is the internal rate of return on a bond.
Correct
A. True
B. False
Question 25 of 25
4.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor.
Correct
A. True
B. False
Week 8
Question 1 of 25
4.0 Points
Cash flow is equal to earnings before taxes minus depreciation.
A. True
B. False
Question 2 of 25
4.0 Points
Which of the following would not be included in the balance sheet investment account?
A.stocks of other corporations
B.long term government bonds
C.marketable securities
D.investments in other corporations
Question 3 of 25
4.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its
A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.
Question 4 of 25
4.0 Points
The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:
A.40%
B.12%
C.20%
D.25%
Question 5 of 25
4.0 Points
(point) The break-even point can be calculated as
A.variable costs divided by contribution margin.
B.total costs divided by contribution margin.
C.variable cost times contribution margin.
D.fixed cost divided by contribution margin.
Question 6 of 25
4.0 Points
The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.
A. True
B. False
Question 7 of 25
4.0 Points
If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?
A.$100,000
B.$30,000
C.$15,000
D.$145,000
Question 8 of 25
4.0 Points
The contribution margin is equal to price per unit minus total costs per unit.
A. True
B. False
Part 3 of 6 – Week 1 Practice Quiz 16.0 Points
Question 9 of 25
4.0 Points
For most firms, the primary motive for holding cash is the transaction motive.A. True
B. False
Question 10 of 25
4.0 Points
A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
A.quality production
B.large safety stocks
C.close ties between suppliers, manufacturers, and customers
D.minimizing inventory levels
Question 11 of 25
4.0 Points
Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer’s checks have cleared but only $600 of its own, calculate its float.
A.$1,200
B.$1,100
C.$300
D.$700
Question 12 of 25
4.0 Points
Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.
A. True
B. False
Part 4 of 6 – Final Exam 20.0 Points
Question 13 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 14 of 25
4.0 Points
(point) As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 15 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 16 of 25
4.0 Points
Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?
A.4.41%
B.9.0%
C.1.89%
D.6.43%
Question 17 of 25
4.0 Points
If the yield to maturity on a bond is greater than the coupon rate, you can assume:
A.interest rates have decreased
B.the price is below the par
C.the price is above the par
D.risk premiums have decreased
Part 5 of 6 – Final Exam 16.0 Points
Question 18 of 25
4.0 Points
The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
A.assumes that cash flows are reinvested at the project’s internal rate of return.
B.concentrates on the liquidity aspects of investment projects.
C.assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
D.none of these.
Question 19 of 25
4.0 Points
In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.
A. True
B. False
Question 20 of 25
4.0 Points
There are several disadvantages to the payback method, among them:
A.payback ignores the time value of money.
B.payback emphasizes receiving money back as fast as possible for reinvestment.
C.payback is Basic to use and to understand.
D.payback can be used in conjunction with time adjusted methods of evaluation.
Question 21 of 25
4.0 Points
Which of the following is a characteristic of beta?
A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.
B.A beta of 1.0 is of equal risk with the market.
C.A beta of greater than 1.0 has less risk than the market.
D.Two of the above are true.
Part 6 of 6 – Final Exam 16.0 Points
Question 22 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 23 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 24 of 25
4.0 Points
If a corporate charter includes a provision for preemptive rights, the stockholders
A.must sell their stock to the company.
B.get first option to buy additional issues of common stock.
C.may purchase existing treasury stock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best represents the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured debt, subordinated debentures
B.Senior debentures,
subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
vvvvvvvvvvvvvvvvvresents the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured debt, subordinated debentures
B.Senior debentures, subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
s the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured debt, subordinated debentures
B.Senior debentures, subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
debt, subordinated debentures
B.Senior debentures, subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
ubordinated debentures
B.Senior debentures, subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
tock.
D.cannot utilize cumulative voting procedures.
Question 25 of 25
4.0 Points
Which of the following best represents the hierarchy of creditor and stockholder claims?
A.Common stock, senior secured debt, subordinated debentures
B.Senior debentures, subordinated debentures, junior secured debt
C.Senior secured debt, subordinated debentures, common stock
D.Preferred stock, secured debt, debentures.
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