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FIN 575 Final Exam

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FIN 575 Final Exam (Latest)


1. During the project initiation, a project charter is created. The project
charter should include which of the following?

Project managers expenses

Analysis of budget

Selection of the senior project manager

Projects high-level deliverables

2. A project's budget should be based on a companys

strategy and financial goals

profitability

financial goals and equity

debt load and equity

3. Earned value management is a technique used to integrate projects

resources

scope, schedule, and resources

schedule, costs, and benefits

costs and profits

4. Bills Billiards has total assets of $8 million and a total asset


turnover of 2.9 times. If the return on assets is 11%, what is Bill's
profit margin?

11%

4.10%

2.50%

3.79%

5. What are the acceptance criteria for NPV?

If the NPV is less that $0, accept the project.

If the NPV is greater than $0, accept the project.

If the IRR is equal to 0%, reject the project.

If the NPV is equal to the discounted payback, accept the project.

6. The risk response plan answers what question?

What can be done if risk occurs? What is the backup plan?

What are project costs?

There is no need to plan for risk seldom occurs in a project.

How risk is to be managed

7. For the most recent year, Cals Cats had sales of $380,000, cost of
goods sold of $93,000, depreciation expense of $47,000, and
additions to retained earnings of $61,420. The firm had $52,000 in
interest expense, and 34% tax rate. What were the times interest
earned ratio?

2.2

5.8

4.61

2.8

8. Bobs Garages has sales of $41 million, total assets of $32 million,
and total debt of $11 million. If the profit margin is 12% what is the
return on equity (ROE)?

14%

12%

51%

23.40%

9. What are the components of project planning that need monitoring?

Resource procurement and quality

Project cost and risk

Project cost, risk, resource procurement and quality

Quality and control

10.
During project planning, the project team creates a work
breakdown structure that details work tasks that must be
completed. The work breakdown structure should include a

schedule of when every task will start and be completed

schedule of project staff meetings

set of management tasks

budget analysis

11.
The R. M. Senchack Corporation earned an operating profit
margin of 6% based on sales of $11 million and total assets of $6
million last year. What was Senchacks total asset turnover ratio?

0.54

5.4

1.8

12.
Why is the communication plan a crucial factor in project
success?

Ensures the timely generation, collection, storage, and disposition of


project information

Facilitates upper management communication with the workers

Reduces rumors in the organization

Communicates the economic value of the project to management

13.

A companys assets are financed with

debt

equity

equity or debt

equity and debt

14.
Part of financial planning for projects involves the
understanding of the inflows and outflows of cash that will be
created by the project. What tool can be used to track these cash
flows?

A NPV flow sheet

Profitability work sheet.

Project cash flow worksheet

Cash flow table

15.
Stokes, Inc. has net working capital of $7,900, current
liabilities of $5,220, and inventory of $2,000. What is the quick
ratio?

1.89

1.13

1.21

2.1

16.

What ratio measures a firms degree of indebtedness?

Debt ratio

Quick ratio

Fixed coverage ratio

Times interest earned ratio

17.

Which one of these terms is a type of debt financing?

Stock repurchases plans

Collateral

Trade credit

Bearer bonds

18.
The sum of the percentage of equity and debt multiplied by
their respective cost is called

weighted average cost of capital

capital asset pricing model

market value added

economic value added.

19.

Profitability ratios all have what same figure in the numerator?

Book value per

Net income

Price per share

Total assets

20.
Terrys Trash removal has a total debt ratio of 0.45. What is the
firms debt-to-equity ratio?

1.27

0.41

0.82

1.82

21.
An investment in a project should be undertaken only if the
expected return is greater than the

NPV

WACC

payback method

economic value added

22.
Brenda Smith, Inc. had a gross profit margin (gross profits
sales) of 25% and sales of $9.75 million last year. Seventy-five
percent of the firms sales are on credit and the remainder are cash
sales. Smiths current assets equal $1,550,000, its current liabilities
equal $300,000, and it has $150,000 in cash plus marketable
securities. If Smiths accounts receivable are $562,500, what is its
average collection period?

25 days

32 days

28 days

14 days

23.
You are considering a project with an initial cash outlay of
$160,000 and expected free cash flows of $40,000 at the end of each
year for 6 years. The required rate of return for this project is 10%.
What is the projects payback period?

4 years

4.5 years

6 years

5 years

24.

Project managers manage project cost by

monitoring inventory costs

monitoring opportunity costs

ensuring the work is progressing as planned

ensuring retail costs are controlled

25.
What is the primary weakness commonly associated with the
use of the payback method to evaluate a proposed investment?

This approach fails to take into account the time factor in the time value of
money.

The payback method uses the discounted cash flow process.

The payback method is able to recognize cash flows that occur after the
payback period.

The payback method is not appropriate for evaluating small projects.

26.
Fijisawa, Inc. is considering a major expansion of its product
line and has estimated the following free cash flows associated with

such an expansion. The initial outlay associated with


the expansion would be $1,950,000, and the project would generate
free cash flows of $450,000 per year for 6 years. The appropriate
required rate of return is 9%. Calculate the net present value and
the internal rate of return.

NPV=$66,098, IRR=10.5

NPV=$72,097, IRR=9.5

NPV=$68,663, IRR=10.2

NPV=$69,368, IRR=10

27.
Cost normally falls into the domain of managerial accounting
and has 4 essential proposes. Select the answer that is an essential
function of cost.

Used to calculate earned value cost

Used to calculate executive stock options

Used to calculate inventory costs

Used for planning future activities or budgets

28.

Select the answer that is an example of a cost classification?

Credit cost

Fixed cost

Retail cost

Inventory cost

29.

What are the four secondary processes in project control?

Schedule control, change control, risk control, and quality assurance


control

Value control, Inventory control, schedule control and quality control

Organizational control, cost control, inventory control, and risk control

Stakeholder control, organization control, risk control, and change control

30.
Stokes, Inc. has net working capital of $7,900, current
liabilities of $5,220, and inventory of $2,000. What is the current
ratio?

2.1

0.77

1.89

1.51

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