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ID: 5129112

Question 1 - Multiple Choice Correct

Question: The most commonly quoted interest rate for Eurodollar overnight lending is known as FIBOR

LIBOR

PIBOR

None of the above Question 2 - Multiple Choice ID: 5129179

- The correct answer has been circled. Question: Cash flows associated with annuities are considered to be An uneven cash flow stream

A cash flow stream of the same amount (a constant cash flow stream)

A mix of constant and uneven cash flow streams

None of the above Question 3 - Multiple Choice Correct Question: A surplus budget position means that an entity's Income and expenditures are equal ID: 5129101

Income for the period exceeds expenses

Expenditures for the period exceed revenues

None of the above Question 4 - Multiple Choice Correct Question: Which one of the following statements is NOT correct? A leveraged firm is more risky than a firm that is not leveraged ID: 5129141

A leveraged firm is less risky than a firm that is not leveraged

A firm that uses debt magnifies the return to its shareholders

All of the above statements are correct Question 5 - Multiple Choice Correct Question: FV of multiple cash flows: Chandler Corp. is expecting a new project to start producing cash flows, beginning at the end of this year. They expect cash flows to be as follows: 1 $643,547 2 $678,214 3 $775,908 4 5 ID: 5129183

$778,326 $735,444

If they can reinvest these cash flows to earn a return of 8.2 percent, what is the future value of this cash flow stream at the end of five years? (Round to the nearest dollar.) $3,889,256

$4,227,118

$5,214,690

$4, 809,112 Question 6 - Multiple Choice Correct Question: The generally accepted accounting principles (GAAP) are Rules that outline how a firm can operate ethically ID: 5129120

Rules on how the firm will be valued in the event of a merger

Rules and procedures that define how companies are to maintain financial records and prepare financial reports

Rules for how a company can issue stock to raise money Question 7 - Multiple Choice ID: 5129190

- The correct answer has been circled. Question: Present value of an annuity: Transit Insurance Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.) $101,766

$124,868

$251,154

$186,250 Question 8 - Multiple Choice Correct Question: Which one of the following statements is NOT true? Present value calculations involve bringing a future amount back to the present ID: 5129155

The present value (PV) is often called the discounted value of future cash payments

The present value factor is more commonly called the discount factor

All of the above are true statements Question 9 - Multiple Choice Correct Question: Which one of the following steps is NOT involved in solving future value problems? ID: 5129171

First. add up the values All of the above are necessary steps Question 10 . discount each cash flow for its time period Third. $1.214.400.Multiple Choice Correct Question: The going concern assumption implies that A firm will continue to be in business for the foreseeable future ID: 5129122 A firm will be going out of business in the near future A firm will continue to operate in the near future but only after being acquired by another firm None of the above Question 12 .) $4.650 for the next three years. Inc. 233.Multiple Choice Correct Question: FV of multiple cash flows: International Shippers. draw a timeline to make sure that each cash flow is placed in the correct time period Second. What is the future value of these earnings if the firm's opportunity cost is 13 percent? (Round to the nearest dollar.Multiple Choice Correct Question: Using higher discount rates will ID: 5129158 .900.865 $4.Multiple Choice Correct Question: Financial markets in which equity and debt instruments with maturities greater than one year are traded are called Money markets ID: 5129084 Capital markets Stock markets None of the above Question 14 .455. and $1.Multiple Choice Correct Question: Which of the following is a basic source of funds for the firm? Debt ID: 5129078 Equity Asset liquidations A and B above Question 13 .345.212 Question 11 .900.360 ID: 5129187 $4.446 $3.875. have forecast earnings of $1.551.

681 None of the above Question 18 . has an accounts receivable turnover of 3. How much will he have at the end of three years? (Round to the nearest dollar.500 today in a bank CD that will earn interest at 5. quick ratios will tend to be much larger than current ratios The higher the number.Multiple Choice Correct Question: If you just purchased a share of IBM through a New York Stock Exchange-based transaction.436.Multiple Choice Correct Question: Future value: Carlos Lopes is looking to invest for the next three years.Multiple Choice Correct Question: Efficiency ratio: If Viera.) $8.Multiple Choice Correct Question: The general level of interest rates tends to follow Deflation ID: 5129116 The business cycle The default cycle All of the above Question 17 . Inc. what is its level of receivables? ID: 5129145 . you participated in A primary market transaction ID: 5129104 A secondary market transaction A futures market transaction None of the above Question 16 .9 times and net sales of $3.812.870 ID: 5129165 $8. the more liquid the firm and the better its ability to pay its short-term bills Question 19 .Not affect the present value of the future cash flow Increase the present value of any future cash flow Decrease the present value of any future cash flow None of the above Question 15 .000 $8.Multiple Choice Correct Question: Which of the following is NOT true of liquidity ratios? They measure the ability of the firm to meet short-term obligations with short-term assets without putting the firm in financial trouble ID: 5129139 There are two commonly used ratios to measure liquidity ± current ratio and quick ratio For manufacturing firms. He is looking to invest $7.75 percent annually.

403.Multiple Choice Correct Question: Future value measures What one or more cash flows are worth at the end of a specified period ID: 5129151 What one or more cash flows that is to be received in the future will be worth today Both A and B None of the above Question 24 .Multiple Choice Correct Question: All but one of the following is true of common-size balance sheets Each asset and liability item on the balance sheet is standardized by dividing it by total assets ID: 5129137 Balance sheet accounts are represented as percentages of total assets Each asset and liability item on the balance sheet is standardized by dividing it by sales Common-size financial statements allow us to make meaningful comparisons between the financial statements of two firms that are different in size Question 21 .Multiple Choice Correct Question: Calculating the present and future values of multiple cash flows is relevant For businesses only ID: 5129174 For individuals only For both individuals and businesses None of the above Question 23 .234 $13.Multiple Choice Correct Question: The NYSE is an example of An over-the-counter market exchange ID: 5129107 An organized exchange An electronic market exchange All of the above Question 22 .Multiple Choice Correct Question: Present value: Tommie Harris is considering an investment that pays 6.000 in seven years? (Round to the nearest dollar.567 $1.5 percent annually.234 Question 20 .) ID: 5129169 .340.357 $81. How much must he invest today such that he will have $25.$881.

Which of the following choices should she opt for? Three-year CD at 6.000 earning a return of 5.Multiple Choice Correct Question: Your aunt is looking to invest a certain amount today.850 $26.625 $16.Multiple Choice Correct Question: Which of the following stock exchange organizational forms has no physical location? A futures exchange ID: 5129109 An over-the-counter market An auction market None of the above Question 28 .) ID: 5129194 .75% annual rate Three-year CD at 6. What is the value of the payment that he can receive in perpetuity? (Round to the nearest dollar.Multiple Choice Correct Question: A mutual fund is an example of A commercial bank ID: 5129114 An insurance company An investment fund A pension fund Question 27 .088 Question 25 .$23. Question: Which one of the following does NOT change a firm's current ratio? The firm collects on its accounts receivables The firm purchases inventory by taking a short-term loan The firm pays down its accounts payables None of the above Question 26 .75 percent.The correct answer has been circled.25% annual rate Three-year CD at 7% annual rate Question 29 .Multiple Choice Correct Question: Perpetuity: Chris Collinge has funded a retirement investment with $250.474 $38.Multiple Choice ID: 5129140 .5% annual rate ID: 5129162 Three-year CD at 6.

common equity of $1.Multiple Choice Correct Question: Teakap. and retained earnings of $1.The correct answer has been circled.$12. has current assets of $1.022 ID: 5129130 $2.041.500.678 $171.Multiple Choice Correct ID: 5129131 .375 $14. and retained earnings of $134. The firm has long-term debt of $76.176.332.812.Multiple Choice Correct Question: Secondary financial markets are similar to Direct auction markets ID: 5129103 New-car markets Used-car markets All of the above Question 34 . a gymnastic equipment manufacturer.369 for the year ending September 30. What amount of current liabilities does this firm have? $94.612 $803.010 $2.Multiple Choice ID: 5129129 .012.000. Inc. provided the following information to its accountants.900 Question 30 .792 $505. How much long-term debt does the firm have? $1.010 Question 32 .250 $14. common stock of $200.Multiple Choice Correct Question: Using lower discount rates will Not affect the present value of the future cash flow ID: 5129160 Increase the present value of any future cash flow Decrease the present value of any future cash flow None of the above Question 33 .347. and other assets of $4.468.456.461.190.217 None of the above Question 31 .445. It also has current liabilities of $1. net fixed assets of $356.150 $15. 2006.312 and total assets of $4.123. The company had current assets of $145.000. Question: Tumbling Haven.303.844.

What is the firm's current ratio? 1.314.334. long-term debt of $178.Multiple Choice Correct Question: When analysts and investors determine the value of a firm's stock. and creditor Regulator. and accounts payables of $469.413.000. cash of $73. The company had current assets of $153. Inc.73 1. shareholder.Multiple Choice Correct Question: The present value of multiple cash flows is Greater than the sum of the cash flows ID: 5129177 Equal to the sum of all the cash flows Less than the sum of the cash flows None of the above Question 39 .331. How much retained earnings does the firm have? $405. has completed its fiscal year and reported the following information. creditor.553. and other assets of $7.Multiple Choice Correct ID: 5129164 .83 ID: 5129143 0.Multiple Choice Correct Question: Maddux.648 ID: 5129127 $243..648 $167.Question: Financial statements can be analyzed from which of the following three different perspectives Management. The firm also has current liabilities worth $65.566 Question 38 . inventory of $451. regulator. shareholder. they should consider The size of the expected cash flows associated with owning the stock ID: 5129097 The timing of the cash flows The riskiness of the cash flows All of the above Question 36 . and creditor Shareholder.67 None of the above Question 37 . and bondholder Management.Multiple Choice Correct Question: Liquidity ratio: Bathez Corp.000.822. and regulator Question 35 .913.227.918 $573. has receivables of $334. net fixed assets of $412. and common stock of $162.

349.Question: Future value: Ning Gao is planning to buy a house in five years.000 $44.000 today in an index mutual fund that will provide her a return of 12 percent annually.78 times 2.932.34 times ID: 5129144 1. its products. what is its accounts receivable turnover? 0. has accounts receivables of $654.803 and net sales of $1.95 times None of the above Question 44 .Multiple Choice Correct Question: Capital budgeting decisions generally involve The fixed asset portion of the balance sheet ID: 5129082 The short-term portion of the balance sheet The current liability portion of the balance sheet All of the above Question 41 . and its activities Audited financial statements. How much will she have at the end of five years? (Round to the nearest dollar. including limited historical financial data All three of the above sections are included in the annual report Question 43 .Multiple Choice Correct ID: 5129123 .Multiple Choice Correct Question: Efficiency ratio: If Randolph Corp.Multiple Choice Correct Question: Which of the following owners is protected by limited liability? A sole proprietor ID: 5129091 A general partner A limited partner None of the above Question 42 .) $45.059 None of the above Question 40 . She is looking to invest $25.000 $28.Multiple Choice Correct Question: Which of the following sections do annual reports typically contain? Financial summary related to the past year's performance ID: 5129118 Information about the company.

How much long-term debt does the firm have? $54.756. The firm has 420. It had accounts payables of $9. The company's net fixed assets are $42. Its market value on December 31. inventory worth $13.Multiple Choice Correct Question: Which of the following cannot be engaged in managing the business? A sole proprietor ID: 5129089 A general partner A limited partner None of the above .05 ID: 5129148 $3.75 million.3 million. The company had cash worth $1. and the machinery is being depreciated annually at an amount of $230.Question: Trekkers Footwear bought a piece of machinery on January 1. What is the firm's share price? $34.789.822.Multiple Choice Correct Question: Working capital management decisions involve How a firm's day-to-day financial matters should be managed ID: 5129081 How the firm should finance its assets Which productive assets the firm should employ All of the above Question 46 .75 million Question 45 .68 $11.000 shares outstanding and a P-E ratio of 11.80 Question 47 .342 $12. 2008 is $1.2 times.342 ID: 5129128 $76. notes payables of $2.008.334 Question 48 .331.234. common stock of $22.000 for 10 years. 2008.3 million $1.480.Multiple Choice Correct Question: Galan Associates prepared its financial statement for 2008 based on the information given here. and accounts receivables of $7. The asset's value should be recognized on the balance sheet at $2.558.000 $1.61 million $230.000. 2006 at a cost of $2.276.314 $18.Multiple Choice Correct Question: Market-value ratios: Perez Electronics Corp. and retained earnings of $14.20 $36. has reported that its net income for 2006 is $1.351. and other assets are $1. The firm's accountant is preparing its financial statement for the fiscal year end on December 31.

Multiple Choice Correct ID: 5129102 Question: The financial market where a new security is sold for the first time is A primary market A secondary market An indirect market None of the above Question 50 .Multiple Choice Correct Question: About 75 percent of all businesses in the United States are Sole proprietorships ID: 5129086 Partnerships Corporations Limited liability partnerships .Question 49 .

Similar investments today will yield 6 percent. that will pay annual coupons of 10 percent. most secondary market transactions are done over the counter Question 3 . the NASDAQ is the largest in the world and the NYSE is the second largest ID: 5129243 In terms of the number of companies listed and shares traded on a daily basis. and their shares trade more frequently than firms whose securities trade on NYSE In the United States. ID: 5129232 Question 1 . NASDAQ is larger than the NYSE Firms listed on the NASDAQ tend to be.024 $979 $886 $1. How much should you pay for the bond? (Round to the nearest dollar.Multiple Choice Correct Question: Bond price: Your friend recommends that you invest in a three-year bond issued by Trimer.Multiple Choice Correct Question: Which one of the following statements is true about secondary markets in the United States? In terms of total volume of activity and total capitalization of the firms listed. Questions answered correctly. Students answers.The correct answer has been circled.Multiple Choice ID: 5129265 . on average.The correct answer has been circled. larger in size. Correct answers. Inc. Question: Which one of the following statements is NOT true? The risk that the lender may not receive payments as promised is called default risk Investors must pay a premium to purchase a security that exposes them to default risk .107 Question 2 .EXAM 2 Your test grade is 86 percent The professor has configured this test to allow students to review: y y y y Questions answered incorrectly. Question: Which one of the following statements about IRR is NOT true? The IRR is the discount rate that makes the NPV greater than zero The IRR is a discounted cash flow method The IRR is an expected rate of return None of the above Question 4 .) $1.Multiple Choice ID: 5129226 .

Modified Internal rate of return: What is the MIRR on this project? (Round to the nearest percent.000. What will be the current market price of these bonds if the opportunity cost for similar investments in the market is 6. It expects the project to generate cash flows of $13.000. Assume that coupon payments are normally semiannual. The cost of capital is 20 percent.) 36% ID: 5129288 37% 38% 39% Question 7 .Multiple Choice Correct Question: Turnbull Corp.000.U. is in the process of constructing a new plant at a cost of $30 million.S.000. If we know the following information about Stock Z.000 Coupon payments are usually made quarterly The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value Question 8 .000 over the next three years.S. then what return will it produce in the Lukewarm state of the world? Return Probability ID: 5129198 . Treasury securities do not have any default risk and are the best proxy measure for the risk-free rate All of the above are true statements Question 5 .Multiple Choice Correct Question: The expected return for Stock Z is 30 percent.000. Treasury has issued 10-year zero coupon bonds with a face value of $1. and 29. for most corporate bonds is $1.Multiple Choice Correct Question: Which one of the following statements about vanilla bonds is NOT true? They have no special provisions ID: 5129211 The face value.75 percent? (Round to the nearest dollar. or par value.) $684 ID: 5129238 $860 $515 $604 Question 6 .Multiple Choice Correct Question: Which ONE of the following statements is true about common stock? Common stock is considered to have a fixed maturity ID: 5129246 Owners of common stock are guaranteed dividend payment by the firm Owners of common stock have the lowest-priority claim on the firm's assets in the event of bankruptcy Common-stock holders have unlimited liability Question 9 .Multiple Choice Correct Question: Zero coupon bonds: The U.000. $23.

25 0. has bought some new machinery at a cost of $1.225.20 ? 0.67 years. The firm expects the project to generate annual cash flows of $7 million over the next five years. will this project be accepted? 2.875.40 0.000 ID: 5129270 $3.67 years.785 $580.Multiple Choice Correct Question: Payback: Kathleen Dancewear Co.250.785 $21.25 20% 30% 40% It is impossible to determine Question 10 . Its cost of capital is 18 percent. Internal rate of return: What is the internal rate of return on this project? (Round to the nearest percent. The plant is expected to generate annual cash flows of $1.50 0.) 17% ID: 5129296 18% 19% 20% Question 13 .000.225.Multiple Choice Correct Question: Net present value: Gao Enterprises plans to build a new plant at a cost of $3. If the firm's required rate of return is 18 percent. what is the NPV of this project? $2.Poor Lukewarm Dynamite! 0.000 over the next five years. yes ID: 5129275 2.Multiple Choice Correct Question: Bonds sell at a discount off the par value when market rates for similar bonds are Less than the bond's coupon rate ID: 5129216 Greater than the bond's coupon rate Equal to the bond's coupon rate Market rates are irrelevant in determining a bond's price Question 12 . What is the payback period for this project? If their acceptance period is three years.000 for the next five years. The impact of the new machinery will be felt in the additional annual cash flows of $375.875 Question 11 .000.830.250.Multiple Choice Correct Question: Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. no .

The first project deals with building access roads to a new terminal at the local airport. The firm's decision will be to Accept both projects because they are independent projects ID: 5129252 Accept both projects because they are contingent projects Pick the one that adds the most value because they are mutually exclusive projects Pick neither project Question 17 .Multiple Choice Correct Question: Which of the following investment classes had the greatest average return based on recent historical data? Intermediate-Term Government Bonds ID: 5129204 .Multiple Choice ID: 5129201 .3. The stock paid a dividend of $3 during the year.Multiple Choice Correct Question: A construction firm is evaluating two value-adding projects. no Question 14 . What was the stock's rate of return from capital appreciation during the year? (Round your answer to the nearest percent.Multiple Choice Correct Question: Two projects are considered to be mutually exclusive if The projects perform the same function ID: 5129251 Selecting one would automatically eliminate accepting the other Both A and B None of the above Question 16 . and it is now worth $24.Multiple Choice Correct Question: The largest holders of equity securities are Mutual funds ID: 5129241 Pension funds Foreign investors Households Question 18 . Question: Francis purchased a stock one year ago for $20.The correct answer has been circled. The second project is to build a parking garage on a piece of land that the firm owns adjacent to the airport.) 17% 20% 29% 35% Question 15 .33 years. yes 3.33 years.

875 percent. the function of secondary markets is to provide profitability for the shares of securities they own An active secondary market causes firms to sell their new debt or equity issues at a higher cost of funds All of the above are true statements Question 22 .Multiple Choice Correct Question: Bond price: Regatta. Investors buying the bond today can expect to earn a yield to maturity of 6.) 10% ID: 5129284 12% 14% 16% Question 20 . Its cost of capital is 16 percent. What should the company's bonds be priced at today? Assume annual coupon payments. $3 million.044 ID: 5129235 $938 $970 $1. ID: 5129290 .Long-Term Government Bonds Large U.) $1. This bond has four years to maturity and pays a coupon of 10 percent on a semiannual basis.5 million. Inc.Multiple Choice Correct Question: Internal rate of return: Lowell Communications. and $5 million over the next four years. $4 million. has been installing a fiber-optic network at a cost of $18 million.7 million over the next 10 years.Multiple Choice Correct Question: Jamaica Corp. The firm expects the project to generate cash flows of $2 million.Multiple Choice Correct Question: Bond price: Kevin Oh is planning to sell a bond that he owns. Stocks Question 19 . (Round to the nearest dollar. outstanding shares of stock are bought and sold among investors ID: 5129242 For an investor.Multiple Choice Correct Question: Which one of the following statements is true about secondary markets? In secondary markets. is adding a new assembly line at a cost of $8.S.066 $1. Similar bonds in the current market will yield 12 percent. Inc. Stocks Small U.S. The firm expects annual cash flows of $3. What will be the price that he will get for his bond? (Round to the nearest dollar.014 $923 Question 21 .25 percent coupon rate.102 Question 23 . has six-year bonds outstanding that pay a 8.) $972 ID: 5129230 $1. What is this project's internal rate of return? (Round to the nearest percent.

It expects the project to generate cash flows of $13.Multiple Choice Correct Question: Payback: Elmer Sporting Goods is getting ready to produce a new line of golf clubs by investing $1.2 years 1. The investment will result in additional cash flows of $525. The cost of capital is 20 percent.Multiple Choice Correct Question: Bonds sell at a premium over the par value when market rates for similar bonds are Less than the bond's coupon rate ID: 5129217 Greater than the bond's coupon rate Equal to the bond's coupon rate Market rates are irrelevant in determining a bond's price Question 25 .000.000. and 29. and 1.200.Multiple Choice Correct Question: If a bond's coupon rate is equal to the market rate.2 years 2.43 years 1.000.7 years . $23.366 $1.888 $777.000.85 million.213. is in the process of constructing a new plant at a cost of $30 million.Multiple Choice ID: 5129285 .The correct answer has been circled.57 years More than 3 years Question 26 . What is the payback period for this project? 3 years ID: 5129273 2. Question: Turnbull Corp.713 Question 24 .000.000 over the next three years.7 years 2. $812. Payback: What is the payback period for this project? 1.Net present value: What is the net present value of this project? $645.000 over the next three years.000.500. then the bond will sell At a price equal to its face value ID: 5129215 At a price greater than its face value At a price less than its face value None of the above are true Question 27 .909 $905.

and does this investment meet the firm's payback criteria? 4.87 years.75% Question 32 .375 over the next six years. has invested $2. The firm uses payback period criteria of not accepting any project that takes more than four years to recover costs.178. What is the total return to Ahmet from owning the stock? (Round your answer to the nearest whole percent.25 ID: 5129197 12.13 years.165.25 Probability 0.Multiple Choice Correct Question: Payback: Creighton.386.Multiple Choice Correct Question: Ahmet purchased a stock for $45 one year ago.Multiple Choice Correct ID: 5129209 Question: Which one of the following statements is NOT true? Prices in the corporate bond market also tend to be more volatile than the markets for stocks or money market securities Corporate bonds are more marketable than the securities that have higher daily trading volumes The market for corporate bonds is thin The largest investors in corporate bonds are life insurance companies and pension funds Question 29 .755.Multiple Choice Correct Question: Use the following table to calculate the expected return for the asset. The company anticipates cash flows of $424.500. yes 3.05 0.) ID: 5129199 . During the year. $512. $764.87 years.Multiple Choice Correct Question: If you were to compare the returns of an individual stock to a market index.75% 15. Inc. $561. $816.10 015 0.15 0. no ID: 5129274 4.13 years.50 0.Question 28 .75% 16.997.800 on equipment.50% 13. The returns of the individual stock will show more variability than those of the market index ID: 5129206 The returns of the individual stock will show less variability than those of the market index The returns of the individual stock will show the same level of variability than those of the market index.10 0. if they have the same beta None of the above Question 30 . no Question 31 . select the answer below that is most true. What is the payback period. yes 3.50. Return 0. and $825. the stock paid a dividend of $2. The stock is now worth $65.

Multiple Choice ID: 5129222 . and it is now worth $31. What is the ID: 5129276 . Which of the following must be true? The stock is worth $30 today ID: 5129203 The stock is worth $0 today The stock paid no dividends during the year Both B and C must be true Question 34 .Multiple Choice Correct Question: Moshe purchased a stock for $30 last year.50 during the year.) 6% ID: 5129202 15% 24% 26% Question 35 . who is designated by the exchange to represent orders placed by public customers Question 36 .Multiple Choice Correct Question: Gwen purchased a stock one year ago for $25. buyers and sellers face each other directly and bargain over price ID: 5129244 The NASDAQ is the most efficient equity market in the United States The New York Stock Exchange is the best-known example of an auction market The auctioneer in this case is the specialist.2 million over the next seven years.The correct answer has been circled. bond prices increase Long-term bonds are more price volatile than short-term bonds of similar risk Question 37 .Multiple Choice Correct Question: Which one of the following statements is NOT true about auction markets? In an auction market.5% 44% 35% 50% Question 33 . He found out today that he had a -100 percent return on his investment. What was the stock's rate of return income during the year? (Round your answer to the nearest percent.Multiple Choice Correct Question: Payback: Carmen Electronics bought new machinery for $5 million. The stock paid a dividend of $1. Question: Which one of the following statements is NOT true? Interest rate risk is the risk that bond prices will change as interest rates change Interest rate changes and bond prices are inversely related As interest rates increase. This is expected to result in additional cash flows of $1.

no Question 38 . Question: Jamaica Corp. $3 million.5 million. yes 3.Multiple Choice Correct Question: Capital rationing implies that The firm does not have enough resources to fund all of the available projects ID: 5129255 Funding needs equal funding resources The available capital will be allocated equally to all available projects None of the above Question 40 .Multiple Choice Correct Question: Which of the following are aspects of independent projects? Their cash flows are related ID: 5129249 Their cash flows are unrelated Selecting one would automatically eliminate accepting the other None of the above Question 42 .Multiple Choice Correct Question: Two projects are considered to be independent if Selecting one would have no bearing on accepting the other ID: 5129250 Their cash flows are unrelated Both A and B None of the above Question 39 . The firm expects the project to generate cash flows of $2 million. will this project be accepted? 4. Payback: What is the payback period for this project? 2.17 years. is adding a new assembly line at a cost of $8.9 years 3.4 years Question 41 .83 years. $4 million. no 3.Multiple Choice ID: 5129224 .8 years 2.payback period for this project? If their acceptance period is five years.Multiple Choice ID: 5129289 .17 years.1 years 3.The correct answer has been circled. yes 4. and $5 million over the next four years.83 years. Its cost of capital is 16 percent.

at a low transaction cost.) $872 ID: 5129229 $1.Multiple Choice Correct Question: Bond price: Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent.066 $990 $945 . and the total return to Julio for owning the stock was 37 percent. Assuming annual payments. bondholders would be willing to pay a premium ID: 5129213 The conversion ratio is set so that the firm's stock price must appreciate 15 to 20 percent before it is profitable to convert bonds into equity Convertible bonds can be converted into shares of common stock at some predetermined ratio at the discretion of the bondholder All of the above are true Question 46 .Multiple Choice Correct Question: Julio purchased a stock one year ago for $27. What is the dollar amount of dividends that he received for owning the stock during the year? $4 ID: 5129200 $5 $6 $7 Question 44 . The interest rate for similar bonds is currently 9 percent.Multiple Choice Correct Question: Applying the valuation procedure to common stocks is more difficult than applying it to bonds because The size and timing of the dividend cash flows are less certain than the coupon payments for bonds ID: 5129247 Common stocks have no final maturity date Unlike the rate of return. and at a price close to its fair market value To sell at a profit under all circumstances To sell the security above its par value None of the above Question 43 .Multiple Choice Correct Question: Which one of the following statements is true? To secure the conversion option on a bond. or yield. on bonds. the rate of return on common stock is not directly observable All of the above are true Question 45 .Correct Question: Marketability is the ability of an investor To sell a security quickly. The stock is now worth $32. what is the present value of the bond? (Round to the nearest dollar.

4 years Question 48 . Question: Strange Manufacturing Company is purchasing a production facility at a cost of $21 million.S.Multiple Choice Correct Question: Which one of the following statements is NOT true about common stock? Common-stock holders have the right to vote on the selection of the board of directors for the firm ID: 5129245 Common stock is considered to have no fixed maturity Owners of common stock are guaranteed dividend payments by the firm Common-stock holders have limited liability Question 49 .50 0.2 years 3.Multiple Choice Correct Question: Use the following table to calculate the expected return for the asset.S.75% 20.25 ID: 5129196 15.10 0.50% 18. Return 0.Multiple Choice ID: 5129293 .00% 17.00% Question 50 . Stocks Small U.25 0.Multiple Choice Correct Question: Which of the following investment classes had the greatest variability in returns for recent historical data? Intermediate-Term Government Bonds ID: 5129205 Long-Term Government Bonds Large U.The correct answer has been circled.8 years 3.20 0.0 years 3.25 Probability 0. Its cost of capital is 18 percent.Question 47 . Payback: What is the payback period for this project? 2. Stocks . The firm expects the project to generate annual cash flows of $7 million over the next five years.

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