Question 1: A $120,000.00 investment will pay $34,883.50 year one, $43,604.37 year two, $34,883.50 year three, $17,441.75 year four, and $8,720.87 year five, what is the IRR ?
[a] 6.25%
[b] 6.50%
[c] 6.75%
[d] 7.00%
[e] 7.25%
Question 2: Ponderosa Co. bonds sell for $846.04. The coupon rate is 8 percent and the bonds mature in 25 years. Interest is paid semi-annually and the firm's tax rate is 34 percent. What is the aftertax cost of debt?
[a] 3.18 percent
[b] 4.99 percent
[c] 6.36 percent
[d] 9.34 percent
[e] 9.64 percent
Question 3: Jorge, Inc., has 200,000 shares of stock outstanding. The firm has an EBIT of $1 million and interest paid of $100,000. The tax rate is 34 percent. What is Jorge's earnings per share?
[a] $0.20
[b] $1.65
[c] $2.97
[d] $3.30
[e] $5.00
Question 4: What is the present value of $1,969.88 to be received in 10 years if the discount rate is 4% per year?
[a] $1,642.66
[b] $1,560.86
[c] $1,458.60
[d] $1,330.78
[e] $1,064.62
Question 5: How much must be deposited at 8% each of the next 16 years to have $5,685.80 ?
[a] $187.50
[b] $221.00
[c] $248.00
[d] $269.50
[e] $286.50
Question 6: What is the annual rate of return on $7,000.00 invested for 4 years with an ending value of $18,790.48?
[a] 1.75%
[b] 3.50%
[c] 7.00%
[d] 14.00%
[e] 28.00%
Question 7: A firm had year end 2004 and 2005 retained earnings balance of $670,000 and $560,000, respectively. The firm reported net profits after taxes of $100,000 in 2005. The firm paid dividends in 2005 of _________.
(a) $10,000
(b) $100,000
(c) $110,000
(d) $210,000
Question 8: A firm had the following accounts and financial data for 2005:
|
Sales revenue
|
$3,060
|
Cost of goods sold
|
$1,800
|
|
Accounts receivable
|
500
|
Preferred stock dividends
|
18
|
|
Interest expense
|
126
|
Tax rate
|
40%
|
|
Total operating expenses
|
600
|
Number of common shares
|
1,000
|
|
Accounts payable
|
240
|
outstanding
|
|
The firm’s earnings per share, rounded to the nearest cent, for 2005 was ______.
(a) $0.53
(b) $0.51
(c) $0.32
(d) $0.30
Question 9: What is the dividend on an 8 percent preferred stock that currently sells for $45 and has a face value of $50 per share?
(a) $3.33
(b) $3.60
(c) $4.00
(d) $5.00
Question 10: In October, a firm had an ending cash balance of $35,000. In November, the firm had a net cash flow of $40,000. The minimum cash balance required by the firm is $25,000. At the end of November, the firm had
(a) an excess cash balance of $50,000.
(b) an excess cash balance of $75,000.
(c) required total financing of $15,000.
(d) required total financing of $5,000.
Question 11: A firm has actual sales in November of $1,000 and projected sales in December and January of $3,000 and $4,000, respectively. The firm makes 10 percent of its sales for cash, collects 40 percent of its sales one month following the sale, and collects the balance two months following the sale. The firm’s total expected cash receipts in January
(a) are $700.
(b) are $2,100.
(c) are $1,900.
(d) cannot be determined with the information provided.
Question 12: A firm must choose from six capital budgeting proposals outlined below. The firm is subject to capital rationing and has a capital budget of $1,000,000; the firm’s cost of capital is 15 percent.
|
Project
|
Initial Investment
|
IRR
|
NPV
|
|
1
|
$200,000
|
19%
|
$100,000
|
|
2
|
400,000
|
17
|
20,000
|
|
3
|
250,000
|
16
|
60,000
|
|
4
|
200,000
|
12
|
-5,000
|
|
5
|
150,000
|
20
|
50,000
|
|
6
|
400,000
|
15
|
150,000
|
Using the internal rate of return approach to ranking projects, which projects should the firm accept?
(a) 1, 2, 3, 4, and 5
(b) 1, 2, 3, and 5
(c) 2, 3, 4, and 6
(d) 1, 3, 4, and 6
Question 13: Using the net present value approach to ranking projects, which projects should the firm accept?
(a) 1, 2, 3, 4, and 5
(b) 1, 2, 3, 5, and 6
(c) 2, 3, 4, and 5
(d) 1, 3, 5, and 6