1.
The Securities Investor Protection Corporation protects individuals from
·
brokerage firm failures
·
making poor investment decisions
·
fraud by corporations
·
other investors who fail to make delivery
2.
You just purchased a parcel of land for $10,000. If you expect a 12% annual
rate of return on your investment, how much will you sell the land for in 10
years?
·
$38,720
·
$39,720
·
$31,060
·
$25,000
3.
When calculating the weighted average cost of capital, which of the following
has to be adjusted for taxes?
·
Debt
·
Preferred stock
·
Retained earnings
·
Common stock
4.
Buying and selling in more than one market to make a riskless profit is called:
·
profit maximization.
·
globalization
·
arbitrage.
·
international trading.
5.
Which of the following is true about bonds?
·
They have a fixed maturity, and they pay an
amount equal to the maturity value times the coupon rate each year.
·
At maturity of the bond, the investor
receives the market price of the bond.
·
They are obligations from the investor to
the corporation.
·
Their interest rate always varies with the
Consumer Price Index
6.
Compute the payback period for a project with the following cash flows, if the
company's discount rate is 12%.
Initial
outlay = $450
Cash
flows: Year 1 = $325
Year 2 = $65
Year 3 = $100
·
3.17 years
·
2.6 years
·
2.88 years
·
3.43 years
7.
Which of the following best describes why cash flows are utilized rather than
accounting profits when evaluating capital projects?
·
Cash flows have a greater present value than
accounting profits.
·
Cash flows improve the tax position of a
firm more than accounting profits.
·
Cash flows are more stable than accounting
profits.
·
Cash flows reflect the timing of benefits
and costs more accurately than accounting profits.
8.
Delta Inc. is considering the purchase of a new machine which is expected to
increase sales by $10,000 in addition to increasing non-depreciation expenses
by $3,000 annually. Due to the sales increase, Delta expects its working
capital to increase $1,000 during the life of the project. Delta will
depreciate the machine using the straight-line method over the project's five
year life to a salvage value of zero. The machine's purchase price is $20,000.
The firm has a marginal tax rate of 34 percent, and its required rate of return
is 12 percent. The machine's initial cash outflow is:
· $23,000.
· $20,000.
· $27,000.
· $21,000.
9.
Which of the following is most likely to occur if a firm over-invests in net
working capital?
·
The return on investment will be lower than
it should be.
·
The times interest earned ratio will be
lower than it should be.
·
The current ratio will be lower than it
should be.
·
The quick ratio will be lower than it should
be.
10.
Metals Corp. has $2,575,000 of debt, $550,000 of preferred stock, and
$18,125,000 of common equity. Metals Corp.'s after-tax cost of debt is 5.25%,
preferred stock has a cost of 6.35%, and newly issued common stock has a cost
of 14.05%. What is Metals Corp.'s weighted average cost of capital?
·
8.32%
·
6.56%
·
10.84%
·
12.78%
11.
Which of the following financial ratios is the best measure of the operating
effectiveness of a firm's management?
·
Return on investment
·
Gross profit margin
·
Current ratio
·
Quick ratio
12.
We compute the profitability index of a capital-budgeting proposal by Initial
outlay = $1,748.80
·
dividing the present value of the annual
after-tax cash flows by the cost of capital.
·
multiplying the cash inflow by the IRR.
·
multiplying the IRR by the cost of capital.
·
dividing the present value of the annual
after-tax cash flows by the cost of the project.
Find the quiz answers here FIN 370 Week 5 Complete
13.
A company collects 60% of its sales during the month of the sale, 30% one month
after the sale, and 10% two months after the sale. The company expects sales of
$10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in
November. How much money is expected to be collected in October?
·
$15,000
·
$35,000
·
$25,000
·
$45,000
14.
Which of the following could offset the higher risk exposure a company would
face if it’s current ratio and net working capital were relatively low?
·
Its accounts receivable collection policy
could increase the average collection period.
·
It could offer no discounts for early
payment by its customers.
·
It could buy back some of its shares in the
open market in order to reduce its equity.
·
Its current assets would need to be highly
liquid.
15.
The Oviedo Thespians are planning to present performances of their Florida
Revue on 2 consecutive nights in January. It will cost them $5,000 per night
for theater rental, event insurance and professional musicians. The theater
will also take 10% of gross ticket sales. How many tickets must they sell at
$10.00 per ticket to raise $1,000 for their organization?
·
1,314 tickets
·
1,112 tickets
·
1,223 tickets
·
1000 tickets
16.
Aspects of demand risk controllable by the firm include:
·
product quality.
·
interest rates.
·
entry of external competitors.
·
status of the regional and national economy.
17.
Which of the following is true regarding Investment Banks?
·
As of 2010, stand alone Investment banks are
numerous.
·
Under the Glass-Steagal act, commercial
banks were allowed to operate as Investment banks.
·
As a result of the financial crisis of 2008,
all stand-alone Investment banks either failed, were merged into commercial
banks, or became commercial banks.
·
When Glass-Steagal was repealed in 1999,
commercial banks and Investment banks had to be separate entities.
18.
Given an accounts receivable turnover of 8 and annual credit sales of $362,000,
the average collection period (360-day year) is
·
60 days.
·
75 days
·
90 days.
·
45 days.
Complete Answers just a click away FIN 370 Week 2 Complete
19.
When the impact of taxes is considered, as the firm takes on more debt
·
there will be no change in total cash flows.
·
cash flows will increase because taxes will
decrease.
·
the weighted average cost of capital will
increase.
·
both taxes and total cash flow to
stockholders and bondholders will decrease.
20.
If you have $20,000 in an account earning 8% annually, what constant amount
could you withdraw each year and have nothing remaining at the end of five
years?
·
$5,008.76
·
$3,525.62
·
$3,408.88
·
$2,465.78
21.
Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2014;
sales were $3,450,000 in fiscal 2013. Assume the following figures for the
fiscal year ending 2013: cash $70,000; accounts receivable $250,000; inventory
$400,000; net fixed assets $520,000; accounts payable $235,000; and accruals
$155,000. Use the percent-of-sales method to forecast cash for the fiscal year
ending 2014.
·
$75,003
·
$216,418
·
$120,725
·
$319,604
22.
If managers are making decisions to maximize shareholder wealth, then they are
primarily concerned with making decisions that should:
·
maximize sales revenues
·
either increase or have no effect on the
value of the firm's common stock.
·
increase the market value of the firm's
common stock.
·
positively affect profits.
23.
Project Sigma requires an investment of $1 million and has a NPV of $10.
Project Delta requires an investment of $500,000 and has a NPV of $150,000. The
projects involve unrelated new product lines. What is your evaluation of these
two projects?
·
Only project Delta should be accepted.
Alpha's NPV is too low for the investment.
·
Neither project should be accepted because
they might compete with one another
·
The company should look at other investment
criteria, not just NPV.
·
Both projects should be accepted because
they have positive NPV's
24.
Capital Structure Theory in general assumes that:
·
A firm's value is determined by discounting
the firm's expected cash flows by the WACC.
·
A firm's cost of capital rises as a firm
uses more financial leverage.
·
A firm's value is determined by capitalizing
(discounting) the firm's expected net income by the firm's cost of equity.
·
A firm's cash flows will grow indefinitely
at a constant rate.
25.
Which of the following best describes why cash flows are utilized rather than
accounting profits when evaluating capital projects?
·
Cash flows reflect the timing of benefits
and costs more accurately than accounting profits.
·
Cash flows have a greater present value than
accounting profits.
·
Cash flows improve the tax position of a
firm more than accounting profits.
·
Cash flows are more stable than accounting
profits.
26.
Which of the following is not part of the underwriting process?
·
the syndicate
·
the prospectus
·
the Federal Reserve
·
the Securities and Exchange Commission
27.
Long-term financial plans typically encompass:
·
6 to 12 months.
·
5 to 10 years.
·
about 5 years.
·
the entire lifecycle of the corporation.
28.
Accounting break-even analysis solves for the level of sales that will result
in:
·
IRR = Cost of Capital.
·
net income = $0.00.
·
Free cash flow = $0.00.
·
NPV = $0.00.
29.
Which of the following statements best represents what finance is about?
·
How political, social, and economic forces
affect corporations
·
Reducing risk
·
Creation and maintenance of economic wealth
·
Maximizing profits
30.
Which of the following goals is in the best long-term interest of stockholders?
·
Risk minimization
·
Maximizing of the market value of the
existing shareholders' common stock
·
Maximizing sales revenues
·
Profit maximization
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field of education from last 5 years. This article covers the basic of FIN 370 Week 5 Final Exam from UOP. Other topics in the class are as follows:
