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Which financial statement reports the amounts of cash that the firm generated and
distributed during a particular time period?
Income statement
Balance sheet
Which of these provide a forum in which demanders of funds raise funds by issuing new
financial instruments, such as stocks and bonds?
Money markets
Investment banks
Primary markets
Secondary markets
The top part of Mars, Inc.'s 2013 balance sheet is listed as follows (in millions of dollars).
What are Mars, Inc.'s current ratio, quick ratio, and cash ratio for 2013?
4.2, 1.0, 0.2
Which of these ratios show the combined effects of liquidity, asset management, and debt
management on the overall operation results of the firm?
Financial
Profitability
Coverage
Liquidity
As new capital budgeting projects arise, we must estimate__________.
the cost of the stock being sold for the specific project
the cost of the loan for the specific project the float
What's the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?
6.1 percent
10.2 percent
6.0 percent
5.9 percent
We call the process of earning interest on both the original deposit and on the earlier
interest payments:
computing.
multiplying.
compounding.
discounting.
Which financial statement reports a firm's assets, liabilities, and equity at a particular point in
time?
Balance sheet
Income statement
You are trying to pick the least-expensive machine for your company. You have two choices:
machine A, which will cost $50,000 to purchase and which will have OCF of -$3,500 annually
throughout the machine's expected life of three years; and machine B, which will cost
$75,000 to purchase and which will have OCF of -$4,900 annually throughout that machine's
four-year life. Both machines will be worthless at the end of their life. If you intend to replace
whichever type of machine you choose with the same thing when its life runs out, again and
again out into the foreseeable future, and if your business has a cost of capital of 14 percent,
which one should you choose?
Machine A
Machine B
When firms use multiple sources of capital, they need to calculate the appropriate
they apply to each asset as they are purchased with their respective forms of debt or equity
Which of these is used as a measure of the total amount of available cash flow from a
project?
Which of these does NOT perform vital functions to securities markets of all sorts by
channeling funds from those with surplus funds to those with shortages of funds?
Secondary markets
Mutual funds
Insurance companies
Commercial banks
Will's Wheels, Inc. reported a debt-to-equity ratio of 0.65 times at the end of 2013. If the
firm's total debt at year-end was $5 million, how much equity does Will's Wheels have?
$7.69 million
$5 million
$0.65 million $3.25
million
Which of these is the term for portfolios with the highest return possible for each risk level?
Total portfolios
Modern portfolios
Optimal portfolios
Efficient portfolios
What are the tools available for the manager in financial planning?
Delaying disbursement of cash, reducing collection period, cash management, and Increasing inventory
turnover
Suppose that Model Nails, Inc.'s capital structure features 60 percent equity, 40 percent debt,
and that its before-tax cost of debt is 6 percent, while its cost of equity is 10 percent. If the
appropriate weighted average tax rate is 28 percent, what will be Model Nails' WACC?
7.73 percent
8.40 percent
8.00 percent
16.00 percent
Coefficient of variation
Standard deviation
Expected returns
Correlation coefficient
Which of the following terms means that during periods when interest rates change
substantially, bondholders experience distinct gains and losses in their bond investments?
Diversification
Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that
present more risk than the firm's average beta.
Using a divisional WACC versus a WACC for the firm's current operations will result in quite a few
incorrect decisions.
Using a firmwide WACC to evaluate new projects would have no impact on projects that present less risk
than the firm's average beta.
Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that
present less risk than the firm's average beta.
using the book value of the total assets divided by the number of shares outstanding
Which of these is the process of estimating expected future cash flows of a project using only
the relevant parts of the balance sheet and income statements?
Substitutionary analysis
Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25
years (ending 20 years from now). James can make a 20-year investment today and lock in a
10 percent interest rate. How much money should he invest now in order to have the same
amount of money in 20 years as Jane?
$7,346.64
$5,089.91
$3,160.43
$3,464.11
Which of the following can create ethical dilemmas between corporate managers and
stockholders?
Auditors
Board of directors
Agency relationship
Venture Capitalist
A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial
analysts believe the stock will be at their target price of $75.00 in two years. Compute the
value of this stock with a required return of 10 percent.
$79.14
$65.40
$65.57
$66.67
Which financial statement shows the total revenues that a firm earns and the total expenses
the firm incurs to generate those revenues over a specific period of time generally one
year?
Balance sheet
Income statement
If interest rates fall, U.S. Treasury bonds will have decreasing values.