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