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Finance 3200 Midterm
Finance 3200 Midterm
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1
Net working capital is defined as
total assets minus total liablities
fixed assets minus long term liablities
current assets minus current liabilities
total liabilities minus sharesholders' equity
2
Cash flow from assets is also known as the firm's
equity structure
free cash flow
hidden cash flow
capital structure
3
answer the question below
Project B, because it has the largest cash inflow in Year 1.
Project A, because it has the higher required rate of return.
Project A, because it has the larger NPV.
Project B, because it has the larger NPV
4
The decision to issue additional shares of stock is an example of
Net working capital decision
capital structure decision
capital budgeting
working capital management
5
12 years ago $8,000 set aside, now the fund is valued $23,902. What rate of interest is being earned on this account
9.42%
9.55%
8.99%
9.67%
6
The book value of a firm is
more of a financial than an accounting valuation
generally greater than the market value when fixed assets are included
Equivalent to the firm's market value if the firm has fixed assets
based on historical cost
7
answer the question below
−$11,208.62
−$10,457.09
−$11,748.69
−$10,933.52
8
Pension liability of $327 million must be paid in 16 years. What is the PV at a discount rate of 6.24%?
$134,519,484.14
$111,438,907.11
$129,803,162.22
$124,147,723.50
9
Quoted APR of 18.9 percent. What is the actual rate of interest you are paying if interest is computed monthly?
19.57 percent
19.21 percent
18.90 percent
20.63 percent
10
answer the question below
$311,406
$409,613
$316,172
$416,667
11
answer the question below
Reduction in the cash outflow at Time 0
Cash inflow for the year following the final year of the project
Cash inflow prorated over the life of the project
Cash inflow in the final year of the project
12
What is the APR on a loan with a stated rate of 2.35 percent per quarter?
8.38 percent
8.69 percent
9.40 percent
8.90 percent
13
$680 inventory, $2,140 fixed asset, $210 accounts receivable, $250 account payable, $80 cash. Net working capital?
$720
$2,860
$970
$640
14
Which one of the followign terms is defined as the mixture of a firm's debt and equity financing?
Cost Budgeting
Working capital management
Cash Management
Capital Structure
15
A project's average net income divided by its average book value is referred to as the project's average:
accounting return.
internal rate of return.
net present value.
profitability index.
16
answer the question below
6,660.00
6,289.74
7,414.59
6,890.89
17
answer the question below
2.67 years
2.82 years
1.82 years
1.67 years
18
answer the question below
10,609.50
10,583.82
10,381.25
11,526.50
19
Receive $15,000 in 2 years. Invest this at an annual interest rate of 6.5%. How much money in 8 years from now?
$21,887.13
$19,381.16
$23,209.19
$24,824.94
20
answer the question below
1,172,373
1,033,545
947,509
935,334
21
answer the question below
Accept B at 11.7 percent and neither at 13.5 percent
Accept B at both discount rates
Accept both at 11.7 percent and neither at 13.5 percent
Accept A at 11.7 percent and neither at 13.5 percent
22
Ratios that measure how efficiently a firm manages it assets and operations to generate net income is refered to as
short-term solvency
profitability
asset management ratios
long-term solvency
23
Receive $4,000 3 years from now. Invest at 5% annual interest until $50,000 is reached. How many years from today
51.42
49.08
48.42
54.77
24
annual rate of 24 percent and compounds interest weekly. What is the actual rate being charged on the loan?
27.05 percent
27.56 percent
26.49 percent
25.16 percent
25
According to the rule of 72, which is valid
Double your money in 7.2 years at 8 percent interest
Triple your money in 7.2 years at 7.2 percent interest
Approximately double your money in five years at 7.24 percent interest
Approximately double your money in 11 years at 6.55 percent interest
26
$8,000 in an account that pays 4% simple interest. How much more would compounded annually interest pay over 7 years
$291.41
$302.16
$266.67
$287.45
27
An example of capital budgeting decision is deciding:
whether or not to purchase a new machine for the production line
how to refinance a debt issue that is maturing
how many shares of stock to issue
how much inventory to keep on hand
28
answer the question below
258,803.02
325,837.81
280,894.67
314,011.33
29
The length of time a firm must wait to recoup the money it has invested in a project is called the:
discounted cash period.
profitability period.
payback period.
internal return period.
30
The internal rate of return is defined as the:
rate of return a project will generate if financed with internal funds.
discount rate that equates the net cash inflows of a project to zero.
maximum rate of return a firm expects to earn on a project.
discount rate which causes the net present value of a project to equal zero
31
In actual practice, managers most frequently use which two types of investment criteria?
Internal rate of return and payback
Internal rate of return and net present value
Net present value and payback
Net present value and profitability index
32
agency problems are most associated with
limited partnerships
general partnerships
corporations
sole proprietorships
33
You want $100,000 in 25 years. How much money to set aside if you can earn 7.5% on your investments?
$16,817.67
$16,397.91
$15,388.19
$15,911.13
34
salary of $31,000. What will be your annual salary ten years from now if you receive annual raises of 2.2 percent?
$38,235.24
$38,536.36
$37,122.08
$37,414.06
35
Which one of the following is the financial statement that summarizes a firm's revenue and expenses over time
balance sheet
income statement
statement of cash flows
market value report
36
Which of the following is the most liquid asset
$100 of inventory that is sold today for $100 cash
$100 of inventory that is discounted and sold for $97 cash today
$100 of inventory that is sold today on credit for $103
$100 account receivable that is discounted and collected for $96 today
37
Which of the following ratios measure a firm's liquidity?
debt-equity ratio
cash coverage ratio
quick ratio
profit margin
38
Your credit card company charges you 1.15 percent interest per month. What is the APR?
17.25 percent
18.92 percent
13.80 percent
15.95 percent
39
answer the question below
20,333.33
21,338.40
18,411.06
21,629.93
40
invested $49,000. how much more will this be worth in 40 years with a return of 7.6% than 7.1%
$155,986.7
$98,509.16
$59,818.92
$140,423.33
41
answer the question below
accept Project B and reject Project A.
accept Project A and reject Project B.
accept both projects.
reject both projects.
42
answer the question below
Accept both projects
Reject both projects
Accept Project A and reject Project B
Reject Project A and accept Project B
43
Set aside $125,000 and now the account is worth $278,592. What rate of interest is the firm earning money?
8.34%
8.01%
7.75%
8.8%
44
Initial cost $107,400, cash inflows from 1-3 years of $37,200, $54,600, and $46,900. What is the IRR?
13.22%
14.48%
12.62%
13.41%
45
answer the question below
$5.84
$6.17
$5.93
$6.10
46
answer the question below
14.98 percent
13.97 percent
15.61 percent
15.75 percent
47
answer the question below
13.96; accept
14.67; reject
18.46; reject
14.67; accept
48
At 5 percent interest, how long would it take to triple your money?
25.64 years
24.87 years
26.55 years
22.52 years
49
Which of the following is a current liability
note payable to a supplier in 13 months
account payable to a supplier that is due next week
amount due from a customer in two weeks
loan payable to the bank in 18 months
50
answer the question below
accept the $200,000 since the payments are only worth $189,311 to you today
You should accept the payments because they are worth $201,846 to you today
You should accept the payments because they are worth $201,210 to you today
accept the $200,000 because the payments are only worth $195,413 today
51
Firm's short-term assets and its short-term liabilities are referred to as the firm's
investment capital
debt
net capital
working capital
52
What is the future value of $8,500 a year for 40 years at 10.8 percent interest, compounded annually?
$4,681,062.12
$3,989,476.67
$3,278,406.16
$2,711,414.14
53
answer the question below
neither
both
project a only
project b only
54
What is the EAR of 18.9 percent compounded continuously?
19.43 percent
20.80 percent
19.06 percent
19.89 percent
55
answer the question below
6.82 percent
6.91 percent
6.25 percent
6.46 percent
56
answer the question below
21,319.47
19,891.11
17,414.14
20,468.85
57
What is the EAR if a bank charges you an APR of 7.65 percent, compounded quarterly?
8.38 percent
8.02 percent
7.87 percent
7.91 percent
58
answer the question below
–$108.19
$219.41
$186.95
$229.09
59
Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction
took place in the primary market
was facilitated in the secondary market
occurred in a dealer market
was a private placement
60
answer the question below
No; The IRR exceeds the required return.
Yes; The IRR exceeds the required return.
No; The IRR is less than the required return.
Yes; The IRR equals the required return.
61
A project has a net present value of zero. Which one of the following best describes this project?
The project's cash inflows equal its cash outflows in current dollar terms.
The project has no cash flows.
The summation of all of the project's cash flows is zero.
The project has a zero percent rate of return.
62
Which one of the following statements concerning corporate income taxes is correct for 2021
all corporations are exempt from federal taxation
federal income tax on corporations: flat rate applied to all income levels
corporations pay no tax on their first $50,000 of income
first 25 percent of corporate income is exempt from taxation
63
Which one of the following best states the primary goal of financial management
minimize operational costs while maximizing firm efficiency
maximize the current value per share
maximize current dividends per share
Increase cash flow and avoid financial distress
64
One disadvantage of the corporate form of business ownership is the
limited liability of its shareholders for the firm's debts
firm's potential for an unlimited life
firm's greater ability to raise capital than other forms of ownership
double taxation
65
answer the question below
Discounted cash flow valuation
Constant dividend growth model
Average accounting return
Expected earnings model
66
relationships determined from a company's financialinformation and used for comparison purposes is known as
scenario analysis
identities
dimensional analsis
financial ratios
67
costs $41,750 and the finance office has quoted you an APR of 7.7 compounded monthly, for 36 months. What is the EAR?
8.13 percent
8.02 percent
7.94 percent
7.98 percent
68
If a project has a net present value equal to zero, then:
the project's PI must also be equal to zero.
decrease in project's initial cost will cause a negative NPV
the project earns a return exactly equal to the discount rate.
the total of the cash inflows must equal the initial cost of the project.
