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October
2013Batch
wWiz,4
INSTILUCTIONS:Choosethe lctter-choicethat corresponds to your bestanswer.No needfor a separateanswer
sheet.Chggkirgof answersstartsl5 minutesbeforetime. Startnow andANSWER EFFICIENTLV.
-/TennisCompanyhas P 5,000,000in inventoryand P 2,000.000in accountsreceivable. Its averagedaily
-,l( salesare P 100,000.The firm:s payabledeferralperiod is 30 days. What is the lengthof the firm's cash
conversion period?
, . o. lO0days c. 50 days
b. 60days 40 days
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Items2 and3 arpbasedon the following information
Nadal Company is negotiatingfor the purchaseof equipmeutthat would cost P 100,000{with the
expectationthat P 20,000per ye:rrcould be savedin after-taxcas[costs if the equipmentwere qcquired.The
equipment'sestimatedusefullife isJq+years,with no residuaf?6[i6,andwould be depreciated !y tfic straight-
line method.
Zr''6that is the paybackperiod'l
-" 4. 4.0 years c. 4.5 1'ears
b. 4.4 years 5.0 .vcars
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X 3. What is rate
tlre accrualaccounting of returnbasedon the initial investment?
a. 30% c. t2%
,y. 20"/o d. 100
Itemsjl and 5 arebasedon the followitg.ilfbrrncion
corporationffi;,ff;}|lr,J:Hrffieyear
rheRafa 2013: ' u i)
rt I i

P 3 5millio n T , a t \ . ( --lt -a :
lnterestexpense P 5 million-. '
P 4 million
ifl'fi#*ffI$il'lffff*r*
rario a
30%'"' *;
Commonsharesotrtstaniling P 2 million
Effcctivecorporateincometax tale 40%
+:->V66. is the e:pectedcomnronstockdividond pcr !b! frr lle Gorporationfor 20I 3?
--- ,F P 2.l0 c. ? 2.7&
' b. P 2.34 d. , P 3.9o
5. lf$*aCorporation's commonstock is expectedto tr* at a price/earnings ratio of eiglrt, what woutd be
marketpriceper share(to the nearestpeso)? ?o = hv
- /--.fr"
- a. p 1 2 5 c. p 6 g I rf
b. P7 2 {vse
6. An organizationoffers its customerscredit termsof !/10..On
nct 20. One+hirdof the customersiakc the cash
/1 q5€ount and thc remaihingcustomerspay on UviA. average,20 units are sold per day, priced at
..'-'Q10,000each. Ttrerateof salesis uniformthroughoutthe year. Usinga 360-dayyear,the organizationhas

a. 13days .8..- 17days /

b. 15days d. 20 davs
7. Thc management of FedererCorporationis consideringa lockboxsvstem. The bank will chargcP 10.b00
annuallyfor the servics,which will savethe firm approxirhatelyP 5,000in processingcosts. ,Thelockbox
systemwill reduccthe float for cashreceiptsby tbfse days. Assumingthe averagedaily cashreceiptsare
equalto P 100,000,and short-terminterestcosts,are57e,calcularethe bene.fitor loss from adoptingthe
lockboxslstem.
a. P 5,000loss ,*: P 10,000benefit
b. P 10.000loss d. P 5,000benefit
X 8. During 2013,Dlokovic purcfrased P 1,920,0fi)of inventory. The 2013costof goodssold was P1,890,000
I andthg endinginventoryat December3l , 2013was P 360,000 What wasthe 2013 inventoryturnover?
L .':" 1.1
,{ 5.0 c. 6.0
b ,w - d 64 it ' ; ) , ' '
I tct
. 7. .-

. 9. Companyhas beenofferedtradecredit termsof/!)-10,net 30. Using a 365day year, what is the

-. - '

-/' -\f6nay
nsminalcost of not taking advantageof the discountif the firm payson the 35* day after the purchase?
a. 14.z%o c. 37.60A
b. 32.204 45.2.yo
 ReS A -?Ae Reoauo
5c444 a( Aaraata'lal MSQuiz4
MS Quiz4 (pntober2013 Batch)- page2
-/
of' l:crrer Corporationis attcFptirrgto estilnatethc linrr's cost of equity capiral.Assrrnring
z',!)<frlanagenrettt
lhat thc flnn hasa constailtgrowth rateof'fo4. d fbrccasted dividendof P 2. I l. and a stockprice of l, 23,12,.
rvhatis tlreestimaterlcostof comnrirnequilirsing the tlivirJend,y,ield-plus-growtfr upproo.l,?
a. 9.1% c. 15.60/o p.r, r . /
' l4.lo/o ,. d. 12.3%
,A:
X ll. On ,fanuaryl, Roger Crorporationreccivcd n p JOO.OOO line of credir ot o{',n[r"st rats of' l2yo tiorn
'l
Winrbledon.[lanf<. lir: lirre of credit agrecrnentrequircsthat an anlount cqual to | 5% o1'thc loan be
^
{r, dcpositedinto a compettsatingbalanceaccount. What is the el'f'cctivcan$ualcosl ol'creclitf|r this loan
arrangement?
a. 12.00% c. 14.12%

t:. n"t?,rn
],i'l"atll'4.5vor
assers
turn'ver;
? tirncs;
#r r,rlfrllKir,:
ctetermine
rhcrcrurn
onequity.
a. 73% c. 15.09/,,, e,/.-
7|' Ge/
y'1. 11,25% tl. 11.5,)u
l3 yi>'{f(Co. is rcplacirrg a grinderpurchased 5 yearsago firr P 15.000rr irh a nr:\' onc costingI' l-s.fiiO.'lhc
grinrJeris being depreciatedon a strfiight-lincbasisovcr l5
-."'origintrl -r'earstu a zt;ro snlragc valrrc;Boncs
will sell this old equipmentto a third party lbr P fi.000cash. The new cquipmcntwill bc ilepreciarccl on a
straight-lincbasis ovcr l0 years to a zero salvagevalue. Assunringa 10%tmargirraltilx rate. what is
Novak's net cashinvestment.a!the limc ol'purchaseil'tlre old grinderis sokJand the new onc purchasccl'i
a. P 2-5,000 .E P 17.400
b, P tg.(xxl d. P 15.000
? yl'4. Andy Prodrrctshas receivedproposalsfrom sevEralbanks to establisha'lbckbox systornto specd up
receipts, Spiderreceivesan averageof 700 checksper dey avcragingP 1.800each.and its cost of sho(-
I

, tsnn fundsis 7ohperyear.Assumingthatall proposalswill producc.equivalentprocessingresultsantl using

a 360-dayyear. which one of the fbllowing propo*alsis optitnal-fbrAndyi,
a. A P 0.50 fec per chcck lz;Or:\j ,*: A fee 6f'0.0J04ol'the alnountcollectctl f?t cti'
,b:-A llat f'ccof P l:5.000 peryear ' ,,J. A compcnsatingbatanceof'P 1,750.00() 'r?z 6c'
-
)S.-l'l"rc current market price ol'David Llompanystocl is P E0 pcr shareaicl its price-earningsratio is S to l . A
P 4 anmraldividendwasjust paid tu currentshareholderslf cliriclcn<Ji ani c'arningsarr;cxpecte(ltp sr,rw
i1ta constdntrateof_12pqrcent,what is DavidCompany'scost ol'retaineclearnings'l. , ,
ljt,..i
a. 5A% ' '- c . 17,AoA i'':
ll: '''-
)r1 l7.6nt, d. p.5,7n
I
|.6. Shrypdva Clontpanyis reviewingthe following datarelatingto an energ)'savinginveslnrentpropcrsal:
Cost
Resiclual valueat the endof'5 ycars lO.0{}0 " { .
5scars
l:::ill;;|il:li",llill'?il,il;l,'il:n"" l l?,
Wlra|wcru{dbetlreanltualsavitt1tsnccdedtrrllrakcthcittvcstmentrca|izcu|2ohgi"t.l.:
a. P 8.189 tx P ll.306 i .
b..Pil.ttl d. P t3.tt89
l7-5(fcna Company's budgeteclsales and hudgetedcost ol'sales are P 212,000.000ancl t, 112,500.000.
.'' respcctively. Short-term inlsrest rates are expect.ccl to irvetagc 5'%,. lf Serenacoqlcl incrcaseinvcntury
turnoverliorn its current11.0tinrcst(; | ().0times,then its expecicdl,ost.savingsin tirecurrentt,earwoulcl trc
a. P0 c . P 8 2 8 .215
y- P 165.62-5. .i: l) 3,112,.500
,lp'{tirnt maintains ratieiof !0. 'l'heelebtconsists
a debt-equity of'hondswith a betirretax,costof'{)%. "t'he
'['lrc
//'' equityconsistsol'ordinarvshart's
with a costol'l80%. taxrateis 40%. Whatis theWAC(]?
c. 10.89'0
- >--sf% r'aa fi.1%
lfissuming P 20,000net annualcash irrflowsliofir a;Lycar P 60,492-capitalinvestmentproject.thcrbrcak-
.,,' evenrate of return (lRR) {'clrthe proiccl is closestto ',
o/.o'."' yl/t
a. 14.4o/o lz.Z%'
,y
h. 13.3% , d. |.lo/o
20. Venu.1[k5fiipany has a paybackgoal u{.tr/..o.r firr a new sorler hcing evaluaredrharcosts t, 450.000and
|g;45-yearlifb. Straight-lirtcdcpre,:iationwill bcused:nosalragcvalucisanricipatccl.'l'arrateis -100a
rneetthe paybackgoal. how nruchnrustthc soflergenerateaspre-tt$ cashsavingsll
az1'o !\'
- ;t. P60,000 .c. ptS0.000 *t'
b. P t00.000 P 1q0,000