C09 Critical Analysis - federal Reserve

In a 1-page paper highlight the role played by the Federal Reserve Bank in the U.S. economy. What is the role of the Board of Governors and the Federal Open Market Committee? How does it impact the way all of the banks run? Give concrete examples from the text, lecture and other readings. Discuss your personal opinion in how it is governed. Do you agree or disagree? Why or why not?

    

C09 Module 6 Quiz SCORE 90 PERCENT

Module 6 Quiz
Question 1 1 / 1 point
You have just purchased a 10-year, $1,000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each 6 months. If you expect to earn a 10 percent simple rate of return on this bond, how much did you pay for it?
Question options:

a) $1,122.87


b) $1,003.42


c) $875.38


d) $950.75


e) $812.15

 
Question 2 1 / 1 point
You are holding a stock which has a beta of 2.0 and is currently in equilibrium. The required return on the stock is 15 percent, and the return on an average stock is 10 percent. What would be the percentage change in the return on the stock if the return on an average stock increased by 30 percent while the risk-free rate remained unchanged?
Question options:

a) +20%


b) +30%


c) +40%


d) +50%


e) +60%

 
Question 3 1 / 1 point
The process of discounting or finding the present value of a cash flow to be received in the future is really the reverse of compounding.
Question options:

True

False
Question 4 1 / 1 point
You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your simple annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?
Question options:

a) $826.31


b) $1,086.15


c) $957.50


d) $1,431.49


e) $1,124.62

 
Question 5 1 / 1 point
Cash flow time lines are used primarily for decisions involving paying off debt or investing in financial securities. They cannot be used when making decisions about investments in physical assets.
Question options:

True

False
Question 6 0 / 1 point
Which of the following statements is most correct?
Question options:

a) The SML relates required returns to firms' systematic (or market) risk. The slope and intercept of this line cannot be controlled by the financial manager.


b) The slope of the SML is determined by the value of beta.


c) If you plotted the returns of a given stock against those of the market, and you found that the slope of the regression line was negative, the CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor, assuming that the observed relationship is expected to continue on into the future.


d) If investors become less risk averse, the slope of the Security Market Line will increase.


e) Statements a and c are both true.

Question 7 1 / 1 point
 One of the potential benefits of investing early for retirement is that an investor can receive greater benefits from the compounding of interest.
Question options:

True

False
Question 8 1 / 1 point
Other things held constant, (1) if the expected inflation rate decreases, and (2) investors become more risk averse, the Security Market Line would shift
Question options:

a) Down and have steeper slope.


b) Up and have less steep slope.


c) Up and keep same slope.


d) Down and keep same slope.


e) Down and have less steep slope.

Question 9 1 / 1 point
The greater the number of compounding periods within a year, the greater the future value of a lump sum invested initially, and the greater the present value of a given lump sum to be received at maturity.
Question options:

True

False
Question 10 1 / 1 point
Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10 percent simple yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Question options:

a) $619


b) $674


c) $761


d) $828


e) $902

    

C09 Module 5 Quiz SCORE 100 PERCENT

Question 1 1 / 1 point
 All else equal, excess capacity means that more external financing is required to support increases in sales than would be needed if the firm previously operated full capacity.
Question options:

True

False
Question 2 1 / 1 point
A good control system helps to ensure that plans are executed properly and to facilitate a timely modification of plans if the assumptions upon which the initial plans are based turn out to be inaccurate.
Question options:

True

False
Question 3 1 / 1 point
 The inventory turnover and current ratios are related. The combination of a high current ratio and a low inventory turnover ratio relative to the industry norm might indicate that the firm is maintaining too high an inventory level or that part of the inventory is obsolete or damaged.
Question options:

True

False
Question 4 1 / 1 point
Refer to Trident Food Corporation. What is the degree of total leverage for Trident Foods?
Question options:

a) 42.86


b) 10.71


c) 71.43


d) 17.86


e) 6.43

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Question 5 1 / 1 point
The ____ shows the investments made by the firm in the form of assets and the means by which the assets were financed.
Question options:

a) income statement


b) balance sheet


c) statement of cash flows


d) statement of retained earnings

Question 6 1 / 1 point
Hensley Corporation uses breakeven analysis to study the effects of expansion projects it considers. Currently, the firm's plastic bag business segment has fixed operating costs of $120,000, while its unit price per carton is $1.20 and its variable unit cost is $0.60. The firm is considering a new bag machine and an automatic carton folder as modifications to its existing production lines. With the expansion, fixed costs would rise to $240,000, but variable cost would drop to $0.41 per unit. One key benefit is that Hensley can lower its wholesale price to its distributors to $1.05 per carton (i.e., its selling price), and this would likely more than double its market share, as it will become the lowest cost producer. What is the change in the operating breakeven volume with the proposed project?
Question options:

a) 100,000 units


b) 175,000 units


c) 75,000 units


d) 200,000 units


e) 0 units

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Question 7 1 / 1 point
Potential changes in sales prices, fixed operating costs and/or variable costs should be taken into account when using breakeven analysis.
Question options:

True

False
Question 8 1 / 1 point
Compuvac Company has just completed its first pass forecast using the projected balance sheet method. The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon. Additionally, the firm will sell 500,000 shares of new common equity at $18.10 per share. Next year's expected dividend is $0.48 per share. The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate. Given this information, what is the incremental change in AFN for Compuvac going from the first pass to the second pass?
Question options:

a) $240,000


b) $0


c) $480,000


d) $160,000


e) $640,000

 

Question 9 1 / 1 point
In the event of a firm's liquidation, the order in which claimholders are paid off is
Question options:

a) debtholders, common stockholders, preferred stockholders


b) common stockholders, preferred stockholders, debtholders


c) debtholders, preferred stockholders, common stockholders


d) common stockholders, debtholders, preferred stockholders

Question 10 1 / 1 point
With lumpy assets, a small projected increase in sales could potentially mandate a significant increase in plant and equipment, which would lead to a very large financial requirement.
Question options:

True

False

   

C09 Mid Term Exam (2019)- SCORE 100 PERCENT

Question 1 1 / 1 point
The major areas included in the study of finance are financial markets, investments, financial services, and managerial finance.
Question options:

True

False
Question 2 1 / 1 point
Coordination of the finance function and the marketing function is critical to the success of newly formed companies which must generate enough cash to survive
Question options:

True

False
Question 3 1 / 1 point
 The well-developed financial markets that exist in the United States have allowed us to achieve a higher standard of living than would otherwise be possible.
Question options:

True

False
Question 4 1 / 1 point
Companies can issue different classes of common stock. Which of the following statements concerning stock classes is correct?
Question options:

a) All common stocks fall into one of three classes: A, B, and C.


b) Most firms have several classes of common stock outstanding.


c) All common stock, regardless of class, must have voting rights.


d) All common stock, regardless of class, must have the same dividend privileges.


e) None of the above statements is necessarily true.

Question 5 1 / 1 point
Of the following provisions that might be found in a bond indenture, which would tend to reduce the coupon interest rate on the bond in question?
Question options:

a) A subordination clause in a debenture.


b) A call provision.


c) A convertible feature.


d) Having relatively few restrictive covenants.


e) All of the above.

Question 6 1 / 1 point
 What major factor(s) led to the U.S. economic woes which started in 2007?
Question options:

a) U.S. overseas military engagements.


b) A decline in real estate values which resulted in increased mortgage defaults and foreclosures and a decline in financial markets.


c) The European economic crisis.


d) Inflation and manufacturing outsourcing.


e) None of the above.

Question 7 1 / 1 point
An American Depository Receipt (ADR) represents
Question options:

a) Debt sold by a foreign borrower that is denominated in the currency of the country where it is sold.


b) Stock of foreign companies that is sold directly to investors in the United States.


c) Equity instruments of one country that are sold in another country.


d) The certificates that represent ownership in foreign companies that are sold in the United States.


e) Certificates representing ownership in stocks of foreign companies that are held in trust by a bank located in the country the stock is traded.

Question 8 1 / 1 point
A basic knowledge of finance will help you with your personal investments by helping you understand
Question options:

a) how to accurately predict changes in the short term interest rates.


b) how to determine the optimal dividend policy for each firm.


c) how to determine which technology is most likely to be accepted by consumers.


d) how to review companies and industries to determine their prospects for future growth and the risk inherent in those companies and industries.


e) how to predict the growth in sales for the firm.

Question 9 1 / 1 point
Assume the securities are all issued by the same firm. From the investor's standpoint, rank the following securities in order of increasing risk (the number of the least risky security is placed first, or to the left, in the answer set).
(1) Preferred stock.
(2) Income bonds.
(3) Convertible preferred stock.
(4) Mortgage bonds.
Question options:

a) 1, 2, 3, 4


b) 4, 1, 2, 3


c) 4, 1, 3, 2


d) 4, 2, 1, 3


e) 4, 2, 3, 1

Question 10 1 / 1 point
The average American is knowledgeable about personal finance and tends to manage their retirement needs and debt levels responsibly.
Question options:

True

False
Question 11 1 / 1 point
 In general, the role of the financial manager is to plan for the acquisition and use of funds in order to maximize the value of the firm.
Question options:

True

False
Question 12 1 / 1 point
Which of the following are NOT factors that have made the trend toward globalization mandatory for many businesses?
Question options:

a) Lower trade barriers


b) Demand for high-quality, low-cost products


c) Increased volatility of exchange rates for foreign currency


d) Increased development costs


e) Improvements in transportation and communications.

Question 13 1 / 1 point
In the early 1900s the emphasis of managerial finance was on the legal aspects of mergers, the formation of new firms, and the various types of securities firms could issue to raise funds.
Question options:

True

False
Question 14 1 / 1 point
Why is it important for persons in marketing, accounting, production, and other areas in the firm to understand finance?
Question options:

a) Funds availability affects the firm's ability to increase inventory, change plant capacity, and so forth.


b) Financial decisions are based on data provided by other functional areas of the firm; thus, it is in the best interests of such areas to provide the most optimistic information possible so that their projects seem most favorable.


c) There is a good chance persons in marketing, accounting, production, and other areas will have to work in the finance area someday if they want to move up the corporate ladder.


d) Payments of salaries and other expenses always pass through the finance area of the firm.


e) All of the above are correct answers.

Question 15 1 / 1 point
At the beginning of the twentieth century, for the most part, the only investments available to individual investors were corporate stocks and bonds; but, today, there are a significantly greater number of investment choices because investors' demands have changed.
Question options:

True

False
Question 16 1 / 1 point
 The study of finance consists of three areas⎯financial markets, investments, and managerial finance⎯that are basically independent of each other, because you can be an expert in one area without having knowledge of the other two.
Question options:

True

False
Question 17 1 / 1 point
An option which gives the holder the right to sell a stock at a specified price at some time in the future is called a(n)
Question options:

a) Call option.


b) Put option.


c) Out-of-the-money option.


d) Naked option.


e) Covered option.

Question 18 1 / 1 point
During the 1930s, investment experts suggested that stock value should be determined by computing the present value of the future cash flows associated with the stock.
Question options:

True

False
Question 19 1 / 1 point
Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?
Question options:

a) reduction in market interest rates.


b) The company's bonds are downgraded.


c) An increase in the call premium.


d) Answers a and b are both correct.

Question 20 1 / 1 point
The history of banking in the United States is one of continuous regulation to ensure the safety of our banking institution. For this reason, little deregulation has taken place.
Question options:

True

False

    

Ashworth Semester Exam- C09S Principles of Finance

C09S : Principles of Finance

Of the following, which is NOT one of the four main areas of finance?

International finance

Corporate finance

Investments

All are considered main areas of finance.

________ is a major disadvantage of the corporate form of business.

Double taxation

Unlimited liability

Lack of ability to raise capital

Transfer of ownership

Everything else equal, an industry with more leverage will have a:

higher return on assets.

higher return on equity.

lower return on equity.

Both A & B

If you can earn 5.25% per year on your investments, how long will it take to double your money?

6.31 years

19.05 years

13.55 years

There is not enough information to answer this question.

Travis bought a share of stock for $31.50 that paid a dividend of $.85 and sold six months later for $27.65. What was his dollar profit or loss and holding period return?

-$3.00, -9.52%

-$3.85, -12.22%

-$.85, -2.70%

-$3.85, -9.52%

If you were required to estimate the average return for one category of securities for the coming year, history tells us that you should have the greatest degree of confidence estimating which of the following?

Long-term government bonds

3-month U.S. Treasury bills

Small-company stocks

Large-company stocks

Which of the following are not considered a part of the firm's capital structure?

Long-term debt

Retained earnings

Inventory

Preferred stock

Which of the following choices lists the least to most aggressive actions in the pursuit of overdue debt?

1) a collection agency, 2) court action, 3) a letter requesting overdue payment

1) court action, 2) a collection agency, 3) a letter requesting overdue payment

1) a letter requesting overdue payment, 2) court action, 3) a collection agency

1) a letter requesting overdue payment, 2) a collection agency, 3) court action

John is in a high income-tax bracket and wishes to minimize current taxes payable. He also has a sizeable current income and prefers high growth rates to significant annual cash flow from his equity investments. Which of the following dividend polices would John most likely prefer if we assume that the dividend policy has no impact on the value of the firm and that the capital gains tax rate is lower than the ordinary tax rate?

High-dividend-payout policy

No-dividend-payout policy

Low-dividend-payout policy

John would be indifferent to all of the dividend policies.

Which of the following would NOT be considered a cost of debt financing?

The required return on a bank loan

The required return on preferred stock

The yield-to-maturity of a bond issue

The required return on money borrowed from a venture capitalist

   

C09 Week 6 Threaded Discussion

Discuss the primary difference between an annual bond and a semiannual bond.  Why do changes need to be made in finding the price of a  semiannual bond versus an annual bond?

(190 words)

 

C09 Online Exam 8_11 SCORE 90 PERCENT

Question 1 

In regard to the cultural risks related to nepotism and corrupt practices, which of the statements below is TRUE?

 A.  The Foreign Corrupt Practices Act, passed during the administration of President Carter, makes it illegal for U. S. citizens to pay bribes to foreign officials or leaders in order to facilitate business operations. 

 B.  If a firm does not have a competitive advantage so that it can overcome the bribery situation and still make a profit, it may be best to look somewhere else to extend business operations. (Incorrect)

  C.  Companies can be forced by a local government official to hire specific individuals and place them in positions of control. 

  D.  All of these statements are true.

Question 2 

Low-dividend clientele are preferred by firms because _________.

  A.  they pay more money per share of comparable stock than other types of investors 

  B.  high-dividend clientele are more active shareholders 

  C.  they are less critical of management decisions 

  D.  none of the above. Low dividend clientele are no more preferred than high-dividend clientele.

Question 3 

Which of the following are not legitimate constraints on the dividends a firm will pay to shareholders?

  A.  Dividends must not eat into legal capital. 

  B.  Bondholders may have covenants limiting the amount of the dividend. 

  C.  Dividends may be constrained by the amount of cash a firm has. 

  D.  All are legitimate constraints on the dividends that firms choose to pay to shareholders.

Question 4 

Typically, shares of stock are stored in the vault of the brokerage firm and you, as owner, will not take physical possession. Under these circumstances the brokerage firm is the _________ and you are the ________.

  A.  street owner; settlement owner 

  B.  settlement owner; street owner 

  C.  owner of record; beneficiary owner 

  D.  beneficiary owner; owner of record

Question 5 

When accounts receivable involves a foreign operation, you face the added problem of changing _________ .

  A.  exchange rates 

  B.  forward rates 

  C.  interest rates 

  D.  cash flows

Question 6 

Which of the statements below is FALSE?

 A.  Multinational capital budgeting is a straightforward application of the Net Present Value (NPV. model with one twist: we can do the analysis in either domestic currency or foreign currency. 

 B.  If we are using foreign currency for the NPV decision, all we have to do is restate all the foreign incremental cash flow in terms of future value and use the current exchange rate. 

 C.  In conducting a multinational NPV, one must be careful to avoid differences with rounding of exchange rates, discount rates, and cash flow to produce the exact same value. 

 D.  With the foreign currency approach in NPV analysis, if we know the appropriate discount rate in the home country and the expected inflation rates in the two countries, we can determine the appropriate foreign discount rate.

Question 7 

__________ financial world is one without taxes, bankruptcy, and other imperfections.

  A.  An imperfect 

  B.  A friction-full 

  C.  A perfect 

  D.  A realistic

Question 8 

The _________ is the date when the board of directors announces the next cash dividend to the public.

  A.  declaration date 

  B.  record date 

  C.  payment date 

  D.  ex-dividend date

Question 9 

The federal government bond market is open only to ____________ .

  A.  state government agencies 

  B.  local government agencies 

  C.  the federal government 

  D.  municipal government

Question 10 

Businesses that operate in more than one country are commonly referred to as _________ .

  A.  multi-American firms 

  B.  multinational firms 

  C.  ultranational firms 

  D.  worldwide firms

Question 11 

In regard to the cultural risks related to human resources management, which of the statements below is TRUE?

  A.  In some countries, women are restricted from management positions. 

  B.  The hiring of local citizens instead of bringing in foreign expatriates is often a necessary part of doing business abroad. 

  C.  Foreign expatriates would find it difficult living and working in a community where they are seen as taking away wages and livelihood from local citizens. 

  D.  All of these statements are true.

Question 12 

In regard to the cultural risks related to ownership structure, which of the statements below is FALSE?

 A.  Cultural norms work their way into laws and regulations so that the interests of the host country will take precedence over the interest of the foreign country, the original home of the business. 

  B.  In order to start a business operation in a foreign country, it may be necessary to utilize a joint venture business form. 

  C.  Today, there are practically no industries protected against foreign ownership in host countries. 

 D.  The ownership structure of a business can be restricted once the business ventures overseas and faces the additional constraint of meeting ownership requirements of more than one government. (Incorrect)

Question 13 

The final distribution of cash to shareholders after a company has been sold off or discontinued operations is called a _________ dividend.

  A.  complete 

  B.  liquidating 

  C.  stock 

  D.  optimal

Question 14 

Which of the following is NOT a form of corporate dividend?

  A.  regular cash dividend 

  B.  special cash dividend 

  C.  stock dividend 

  D.  These are all forms of corporate dividends.

Question 15 

George lends $200,000 for each new idea. George's history is that he selects low-risk projects or ideas that hit 80% of the time. What rate of return must each successful project pay George for him to break even?

  A.  20.50% 

  B.  22.00% 

  C.  23.50% 

  D.  25.00%

Question 16 

Which of the statements below is TRUE?

  A.  The investment decision, although minor in comparison to the financing decision, is still an important consideration. 

  B.  The financing decision, although minor in comparison to the investing decision, is still an important consideration. 

  C.  The financing decision is minor in comparison to the investing decision and thus can be ignored. 

  D.  The financing and investing decisions are equally important in terms of determining firm value.

Question 17 

Anticipated cash inflows may fall in value if unexpected movements in the exchange rate hurt your ability to convert the foreign currency into domestic currency. This reduction in the conversion of future payments is called _________ .

  A.  translation exposure 

  B.  transaction exposure 

  C.  conversion exposure 

  D.  operating exposure

Question 18 

The decision to pay a cash dividend is within the jurisdiction of __________ .

  A.  the board of directors of the firm 

  B.  the firm's largest labor union 

  C.  the largest shareholders of the firm

Question 19 

"Individuals living off of their dividends streams do not like reductions in their quarterly payments." This sounds like an argument for what type of dividend policy?  

  A.  residual dividend policy 

  B.  sticky dividend policy 

  C.  constantly declining dividend policy 

  D.  none of the above

Question 20 

If we are using foreign currency for the NPV decision, all we have to do is restate all the ________ in terms of present value and use the current exchange rate.  

  A.  domestic incremental cash flow 

  B.  foreign incremental cash flow 

  C.  salvage value 

  D.  None of these

C09 Online Exam 7_10 SCORE 92.5 PERCENT

Question 1 

When governments change taxes, their transfer payments, and expenditure on goods and service, they influence aggregate demand through __________.

  A.  the world economy 

  B.  consumer expectations 

  C.  monetary policy 

  D.  fiscal policy

Question 2 

What represents the relationship between the quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same?

  A.  aggregate demand 

  B.  aggregate supply 

  C.  the money wage rate 

  D.  the money price index

Question 3 

Expenditures such as investment, government expenditure on goods and services, and exports __________ on real GDP.

  A.  do not depend 

  B.  depend greatly  (Incorrect)

  C.  remain constant based 

  D.  vary in their individual dependence

Question 4 

The __________ is the amount by which a change in autonomous expenditures is multiplied in order to determine the change in equilibrium expenditure that it generates.

  A.  marginal tax rate 

  B.  marginal multiplier 

  C.  expenditure reducer 

  D.  expenditure multiplier

Question 5 

As long as aggregate planned expenditure exceeds real GDP, companies will __________ production in order to restore their inventories to their target level.

  A.  maintain 

  B.  decrease 

  C.  increase 

  D.  not adjust

Question 6 

What is the total amount of final goods and service that firms in a country plan to produce, depending on the labor, capital, technology, natural resources, and entrepreneurial talent in the market?

  A.  the supply-demand model 

  B.  the quantity of real gross domestic product (GDP. supplied 

  C.  the quantity of potential GDP 

  D.  the quantity of real GDP demanded

Question 7 

Which of the following would cause an increase in aggregate demand in the short run?

  A.  an increase in the supply of money 

  B.  a decrease in the price level 

  C.  an increase in taxes 

  D.  a crop failure

Question 8 

If the price level from the GDP price index falls, what happens to the quantity of real GDP supplied?

  A.  it remains constant 

  B.  it increases 

  C.  it decreases 

  D.  it barely changes 

Question 9 

Adjustments in __________ take the economy from the short-run equilibrium to the long-run equilibrium.

  A.  imports and exports 

  B.  interest rates 

  C.  wages and prices 

  D.  the multiplier

Question 10 

When the price level increases, the real interest rate __________.

  A.  is not affected 

  B.  falls 

  C.  rises 

  D.  will rise or fall depending on demand

Question 11 

When the real GDP increases, disposable income and consumption expenditure __________.

  A.  do not change 

  B.  become inverted 

  C.  decrease 

  D.  increase

Question 12 

All other things remaining the same, the lower the price level, the __________ the quantity of real GDP demanded.

  A.  smaller 

  B.  greater 

  C.  more constant 

  D.  less constant

Question 13 

When the Federal Reserve changes the quantity of money and the interest rate, it influences aggregate demand by using __________.

  A.  the world economy 

  B.  consumer expectations 

  C.  monetary policy 

  D.  fiscal policy

Question 14 

When the real wage rate changes, firms change the __________ and the level of production.

  A.  wage rate of employees 

  B.  quality of goods or services produced 

  C.  quantity of labor employed 

  D.  production plans

Question 15 

The change in equilibrium expenditure also equals the change in __________.

  A.  the potential GDP 

  B.  the real GDP 

  C.  income taxes 

  D.  interest rates

Question 16 

A rise in the price level __________ the buying power of money.

  A.  does not affect 

  B.  increases 

  C.  decreases 

  D.  inverts

Question 17 

If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the __________.

  A.  inflation effect 

  B.  wealth effect 

  C.  home equity effect 

  D.  multiplier effect

Question 18 

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must __________.

  A.  be considered separately 

  B.  intersect 

  C.  be disregarded 

  D.  be considered as a multiplier

Question 19 

What are the two main influences that the world economy has on aggregate demand?

  A.  foreign exchange rate and foreign income 

  B.  foreign investments and foreign profit 

  C.  revenues from overseas and foreign exchange rate 

  D.  foreign expenditures and international trade

Question 20 

The __________ curve summarizes the relationship between aggregate planned expenditure and the real GDP.

  A.  AES 

  B.  AE 

  C.  AD 

  D.  APE

Question 21 

Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. The cost of ordering and delivery is $100 per order. If Ready Tees orders 6,667 t-shirts in each order, what are the firm's total annual ordering costs (rounded to the nearest dollar.?

  A.  $1,000 

  B.  $667 

  C.  $1,500 

  D.  $2,000

Question 22 

________ is the collective term used to describe a firm's decisions as to how customers will qualify for credit, what payment plan is allowed to creditors, and how overdue bills will be collected.

  A.  Credit policy 

  B.  Collection policy 

  C.  Credit history 

  D.  Payment policy

Question 23 

Extending credit to a customer has three major components:

  A.  a policy on how customers will qualify for credit, a policy on the payment plan allowed creditors, and a policy for collecting overdue bills. 

  B.  a policy on how customers will qualify for credit, a policy on accounting for depreciation, and a policy on paying commissions on sales. 

  C.  a policy on how customers will qualify for credit, a policy on the payment plan allowed creditors, and a policy on accounting for depreciation. 

  D.  a policy on how customers will qualify for credit, a policy on paying commissions on sales, and a policy for collecting overdue bills.

Question 24 

With energy costs greater than ever, Berwick's Bike Shop is well-placed for an expansion. Its initial capital cost (not including working capital. is $750,000, expected after-tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is $75,000. There is also a $100,000 increase in working capital at the beginning of the project that is recovered in whole at the end of the life of the project in Year 5. If this project has a required rate of return of 15%, what is its IRR? Use a financial calculator to determine your answer.

  A.  12.60% 

  B.  13.60% 

  C.  15.60% (Incorrect)

  D.  14.60%

Question 25 

Float, from the buyer's perspective, is called ________ float and from the seller's perspective, is called ________ float.

  A.  financing; crediting 

  B.  collection; disbursement 

  C.  crediting; financing 

  D.  disbursement; collection

Question 26 

When a company deals only in cash, the cash conversion cycle becomes ________.

  A.  the payable cycle 

  B.  the collection cycle - the payable cycle 

  C.  the production cycle 

  D.  the collection cycle

Question 27 

Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. Ready plans on ordering t-shirts 12 times over the next year. Ready receives the same number of t-shirts each time it orders. The carrying cost is $0.10 per shirt per year. What is the annual carrying cost of the t-shirt inventory (rounded to the nearest dollar.?

  A.  $5,000 

  B.  $834 

  C.  $10,000 

  D.  $417

Question 28 

Total carrying cost equals ________.

  A.  The average carry cost per item times the maximum level of inventory 

  B.  The average carry cost per item times the average level of inventory divided by 2 

  C.  The average carry cost per item times the average level of inventory 

  D.  The average carry cost per item times the minimum level of inventory 

Question 29 

Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. Ready plans on ordering t-shirts 12 times over the next year. Ready receives the same number of t-shirts each time it orders. The carrying cost is $0.10 per shirt per year. The order cost is $500 per order. What is the annual ordering cost of the t-shirt inventory (rounded to the nearest dollar.?

  A.  $5,000 

  B.  $10,000 

  C.  $12,000 

  D.  $6,000

Question 30 

The optimal order quantity as determined by the EOQ occurs when ________.

  A.  ordering costs are exactly 1/2 of carrying costs 

  B.  ordering costs are exactly twice as much as carrying costs 

  C.  ordering costs equal carrying costs 

  D.  None of the answers provided are accurate

Question 31 

The ________ is the period from the start of cash outflow for producing a product or service until the associated cash inflow materializes from the sale of that product or service.

  A.  cash conversion cycle 

  B.  current ratio 

  C.  business operating cycle 

  D.  accounts receivable cycle

Question 32 

Which of the following is NOT an inventory management technique?

  A.  JIT 

  B.  ABC 

  C.  EOQ 

  D.  6 SIGMA

Question 33 

The ________ begins at the time a firm first starts to make a product and lasts until the time the customer buys the product.

  A.  accounts receivable cycle 

  B.  cash conversion cycle 

  C.  production cycle 

  D.  business operating cycle

Question 34 

The Hannibal Homers minor league baseball club is considering an expansion of its stadium to increase capacity by 2,000 seats. Management estimates increased revenue from ticket and concession sales to be $600,000 per year for the next 5 years. The cost of expansion is $750,000, with an additional $50,000 in working capital. The working capital increase is permanent (will not be recovered after 5 years.. Annual costs are expected to increase by $200,000 per year, the club's cost of capital is 14%, and its tax rate is 30%. If the stadium addition is depreciated in a straight line to a value of $0.00 over 5 years, what is the NPV of this project (rounded to the nearest dollar.? (Ignore any revenues or costs associated with a terminal value of the project after five years..

  A.  $365,751 

  B.  $165,751 

  C.  $315,751 

  D.  $1,115,751

Question 35 

With energy costs greater than ever, Berwick's Bike Shop is well-placed for an expansion. Its initial capital cost (not including working capital. is $750,000, expected after-tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is $75,000. If this project has a required rate of return of 15% and the initial cost of working capital is $100,000, should Berwick expand the bike shop? (Assume that the $100,000 of working capital is recovered in Year 5 at the end of the project life. Compute an NPV to support your decision..

  A.  No, because the NPV = -$8,759 

  B.  Yes, because the NPV = $858,759 

  C.  Yes, because the NPV = $8,759 (Incorrect. May be A is correct)

  D.  No, because the NPV = -$850,000

Question 36 

An important objective of cash management is to ________ the disbursement float and ________ the collection float.

  A.  lengthen; lengthen 

  B.  reduce; lengthen 

  C.  reduce; reduce 

  D.  lengthen; reduce 

Question 37 

Of the following items, which would be considered working capital as opposed to a capital asset?

  A.  An addition to the existing building designed to facilitate a new product line 

  B.  A CAD/CAM machine used in the manufacturing process 

  C.  Disposable parts that aid in installation and are shipped with each sale 

  D.  None of the above are working capital assets.

Question 38 

________ is the order quantity that minimizes total cost, and it is the result of trading off carrying costs and ordering costs.

  A.  EOQ 

  B.  Q/2 

  C.  ABC 

  D.  None of the above

Question 39 

Estimating ________ is one part of managing short-term cash needs. The second part is estimating ________.

  A.  accounts receivable, cash inflow 

  B.  accounts receivable, cash outflow 

  C.  cash inflow, cash outflow 

  D.  cash inflow, accounts payable

Question 40 

The ________ starts at the time production begins and ends with the collection of cash from the sale of the product.

  A.  business operating cycle 

  B.  accounts receivable cycle 

  C.  cash conversion cycle 

  D.  production cycle

 

C09 Online Exam 5_08 SCORE 97.5 PERCENT

Question 1 of 405.0 Points

Your firm has issued 10-year, zero-coupon bonds with a $1,000 face value. If the bonds are currently selling for $514.87, what is the yield to maturity?

  A.  6.75% 

  B.  6.86% 

  C.  10.45% 

  D.  This question cannot be answered because there is no coupon payment provided.

Question 2 of 405.0 Points

The ___________ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life.  

  A.  current yield 

  B.  yield to maturity 

  C.  prime rate 

  D.  coupon rate

Question 3 of 405.0 Points

MicroMedia Inc. $1,000 par value bonds are selling for $1,265. Which of the following statements is TRUE?

  A.  The bond market currently requires a rate (yield. less than the coupon rate. 

  B.  The bonds are selling at a premium to the par value. 

  C.  The coupon rate is greater than the yield to maturity. 

  D.  All of the above are true.

Question 4 of 405.0 Points

__________ may be defined as a measure of uncertainty in a set of potential outcomes for an event in which there is a chance for some loss.

  A.  Diversification 

  B.  Risk 

  C.  Uncertainty 

  D.  Collaboration

Question 5 of 405.0 Points

Bonds are different from stocks because__________.

  A.  bonds promise fixed payments for the length of their maturity 

  B.  bonds give payments only after other owners are paid 

  C.  bonds do not have maturity dates 

  D.  bonds promise growth in earnings

Question 6 of 405.0 Points

The four steps to determining the price of a bond are: __________.

  A.  determine the amount and timing of the present cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of the principal and coupons. 

  B.  determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the future value of the lump-sum principal and the annuity stream of coupons, and add the FVs of the principal and coupons. 

  C.  determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and multiply the PVs of the principal and coupons. 

  D.  determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of the principal and coupons.

Question 7 of 405.0 Points

The practice of not putting all of your eggs in one basket is an illustration of ___________.

  A.  variance 

  B.  diversification 

  C.  portion control 

  D.  expected return

Question 8 of 405.0 Points

Which of the statements below is NOT correct?

  A.  If two investments have the same expected return, the investment with the lower risk is preferred. 

  B.  If two investments have the same expected return, the investment with the greater risk is preferred. 

  C.  If two investments have the same expected risk, the investment with the higher expected return is preferred. 

  D.  If one investment has a higher expected return and a greater level of risk than another, it is not clear which investment is the preferred choice.

Question 9 of 405.0 Points

Correlation, a standardized measure of how stocks perform relative to one another in different states of the economy, has a range from __________ .

  A.  0.0 to +10.0 

  B.  0.0 to +1.0 

  C.  -1.0 to +1.0 

  D.  There is no range; correlation is a calculated number that can take on any value.

Question 10 of 405.0 Points

A more risky stock has a higher __________.

  A.  expected return 

  B.  standard deviation 

  C.  variance 

  D.  B and C

Question 11 of 405.0 Points

Stocks differ from bonds because __________ .

  A.  bond cash flows are known while stock cash flows are uncertain 

  B.  firms pay bond cash flows prior to paying taxes while stock cash flows are after tax 

  C.  the ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase 

  D.  all of all of the above

Question 12 of 405.0 Points

Ten years ago, Bacon Signs Inc. issued 25-year, 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the Bacon bonds is now 7%. Given this information, what is the price today for a Bacon Signs, Inc. bond?

  A.  $1,000 

  B.  $1,116.54 

  C.  $1,091.08 

  D.  $914.41

Question 13 of 405.0 Points

Stocks are different from bonds because __________.  

  A.  stocks, unlike bonds, are major sources of funds 

  B.  stocks, unlike bonds, represent residual ownership 

  C.  stocks, unlike bonds, give owners legal claims to payments 

  D.  bonds, unlike stocks, represent voting ownership

Question 14 of 405.0 Points

Which of the statements below is TRUE?

  A.  Investors want to maximize return and maximize risk. 

  B.  Investors want to maximize return and minimize risk. 

  C.  Investors want to minimize return and maximize risk. 

  D.  Investors want to minimize return and minimize risk.

Question 15 of 405.0 Points

The correlation coefficient, a measurement of the comovement between two variables, has what range?

  A.  From 0.0 to +10.0 

  B.  From 0.0 to +1.0 

  C.  From -1.0 to +10.0 

  D.  From =1.0 to -1.0

Question 16 of 405.0 Points

Diversification is __________ .

  A.  not putting all of your eggs in one basket 

  B.  spreading wealth over a variety of investment opportunities 

  C.  a common investment strategy 

  D.  all of the above

Question 17 of 405.0 Points

Shortcomings of the dividend pricing models suggest that we need a pricing model that is more inclusive than the dividend models and that provides expected returns for companies based on aspects besides their historical dividend patterns. Which of these below is NOT one of these aspects?

  A.  the company's risk 

  B.  the premium for taking on risk 

  C.  the reward for waiting 

  D.  stable dividends

Question 18 of 405.0 Points

Joe bought a share of stock for $47.50 that paid a dividend of $0.72 and sold one year later for $51.38. What was Joe's dollar profit or loss and holding period return?

  A.  $0.72, 7.55% 

  B.  $3.88, 8.95% 

  C.  $4.60, 9.68% 

  D.  $3.88, 9.68%

Question 19 of 405.0 Points

__________ is the absence of knowledge of the outcome of an event before it happens.

  A.  Return 

  B.  Diversification 

  C.  Uncertainty 

  D.  Certainty

Question 20 of 405.0 Points

When the __________ is less than the yield to maturity, the bond sells at a/the __________ par value.

  A.  coupon rate, premium over 

  B.  coupon rate, discount to 

  C.  time to maturity, discount to 

  D.  time to maturity, same price as

Question 21 of 405.0 Points

Berra, Inc. is currently considering an eight-year project that has an initial outlay or cost of $120,000. The future cash inflows from its project for years one through eight are the same at $30,000. Berra has a discount rate of 11%. Because of capital rationing (shortage of funds for financing), Berra wants to compute the profitability index (PI) for each project. What is the PI for Berra's current project?

  A.  about 1.29 

  B.  about 1.31 

  C.  about 1.33 

  D.  about 1.39

Question 22 of 405.0 Points

__________ corrects for most, but not all, of the problems of IRR and gives the solution in terms of a return.

  A.  Profitability Index 

  B.  Discounted Payback Period 

  C.  Net Present Value 

  D.  MIRR

Question 23 of 405.0 Points

The net present value of an investment is __________ .

  A.  the present value of all benefits (cash inflows) 

  B.  the present value of all benefits (cash inflows) minus the present value of all costs (cash outflows) of the project 

  C.  the present value of all costs (cash outflows) of the project 

  D.  the present value of all costs (cash outflow) minus the present value of all benefits (cash inflow) of the project

Question 24 of 405.0 Points

In terms of revenues and costs for a project, which of the statements below is FALSE?

  A.  Projected revenues and costs are estimates of future activity. 

  B.  Estimates of revenues and costs begin with operating cash flow of the project. 

  C.  Projected revenues and costs form the basis of the potential for a project's acceptance or rejection. 

  D.  Estimates of revenues and costs begin with sales forecasts and the production costs associated with the sales forecast.

Question 25 of 405.0 Points

The __________ model is usually considered the best of the capital budgeting decision-making models.

  A.  Internal Rate of Return (IRR) 

  B.  Net Present Value (NPV) 

  C.  Profitability Index (PI) 

  D.  Discounted Payback Period

Question 26 of 405.0 Points

Managers typically look at the initial outlay for the project as its capital expenditure and determine __________ from this capital expenditure.

  A.  interest expenses 

  B.  dividends 

  C.  depreciation 

  D.  CEO expenses

Question 27 of 405.0 Points

The capital budgeting decision model that utilizes all the discounted cash flow of a project is the __________ model, which is one of the single most important models in finance.

  A.  Net Present Value (NPV) 

  B.  Internal Rate of Return (IRR) 

  C.  Profitability Index (PI) 

  D.  Discounted Payback Period

Question 28 of 405.0 Points

The initial outlay or cost for a four-year project is $1,000,000. The respective cash inflows for years one, two, three and four are: $500,000, $300,000, $300,000 and $300,000. What is the discounted payback period if the discount rate is 10%?

  A.  about 2.67 years 

  B.  about 3.35 years 

  C.  about 3.67 years 

  D.  about 4.50 years

Question 29 of 405.0 Points

Without a computer and special calculator, __________.

  A.  computing the payback period is much more difficult than computing the IRR 

  B.  finding the IRR will typically be a very easy process 

  C.  finding the IRR may be a very tedious process only if the NPV is negative 

  D.  finding the IRR may be a very tedious process since it is an iterative process

Question 30 of 405.0 Points

Find the Modified Internal Rate of Return (MIRR. for the following annual series of cash flows, given a discount rate of 10.50%: Year 0: -$75,000; Year 1: $15,000; Year 2: $16,000; Year 3: $17,000; Year 4: $17,500; and, Year 5: $18,000.

  A.  about 6.35% 

  B.  about 6.88% 

  C.  about 7.35% 

  D.  about 7.88%

Question 31 of 405.0 Points

The __________ method of capital budgeting is a ratio of the present value of cash inflows divided by the initial investment.

  A.  Payback Period 

  B.  Net Present Value (NPV. 

  C.  Internal Rate of Return (IRR. 

  D.  Profitability Index (PI.

Question 32 of 405.0 Points

__________ involve(s) a cash flow that never occurs, but we need to add it as a cost or outflow of a new project.

  A.  Cost recovery of divested assets 

  B.  Capital expenditures 

  C.  Sunk costs 

  D.  Opportunity costs

Question 33 of 405.0 Points

Which of the following in NOT a potential problem suffered by the IRR method of capital budgeting?

  A.  multiple IRRs 

  B.  disagreement with the NPV as to whether a project with ordinary cash flows is profitable or not. 

  C.  the incorporation of the IRR as the reinvestment rate for the future cash flows 

  D.  the comparison of mutually exclusive projects

Question 34 of 405.0 Points

__________ cash flow is the increase in cash generated by a new project above the current cash flow without the new project.

  A.  Future 

  B.  Current 

  C.  Discounted 

  D.  Incremental

Question 35 of 405.0 Points

The initial outlay or cost is $1,000,000 for a four-year project. The respective future cash inflows for years one, two, three and four are: $500,000, $300,000, $300,000, and $300,000. What is the payback period without discounting cash flows?

  A.  about 2.50 years 

  B.  about 2.67 years 

  C.  about 3.67 years 

  D.  about 4.50 years

Question 36 of 405.0 Points

__________is at the heart of corporate finance because it is concerned with making the best choices about project selection.

  A.  Capital budgeting 

  B.  Capital structure 

  C.  Payback period 

  D.  Short-term budgeting

Question 37 of 405.0 Points

Which of the statements below is FALSE?

  A.  We calculate the equivalent annual annuity by taking the NPV of the project and find the annuity stream that equates to the NPV, using the appropriate discount rate for the project and life of the project. 

  B.  In dealing with mutually exclusive projects of unequal lives, we can compute the EAA for the NPV of the project over the life of the project. 

  C.  One of the advantages of NPV over other decision models is that we can select the appropriate discount rate for each individual project and still compare the resulting NPVs across different projects. INCORRECT

  D.  By using the EAA approach for mutually exclusive projects, we overcome all potential problems.

Question 38 of 405.0 Points

The projected revenues and costs that form the basis of the potential for a project's acceptance or rejection are estimates of __________ .

  A.  future activity 

  B.  past activity 

  C.  known activity 

  D.  current activity

Question 39 of 405.0 Points

In regard to the NPV method, which of the statements below is TRUE?

  A.  In the NPV Model, if two projects are being compared, the one with the highest IRR is selected. 

  B.  In the NPV Model, the present cash flows are discounted at the rate r, the cost of capital. 

  C.  In the NPV Model, most future cash flows are stated in present value or current dollars and the inflow is "netted" against the outflow to see if the net amount is positive or negative. 

  D.  In the NPV Model, the net present value of an investment is the present value of all benefits (cash inflow) minus the present value of all costs (cash outflow) of the project.

Question 40 of 405.0 Points

Consider the following four-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows for years one, two, three and four are: $400,000, $300,000, $200,000 and $200,000, respectively. What is the payback period without discounting cash flows?

  A.  2.5 years 

  B.  3.0 years 

  C.  3.5 years 

  D.  4.0 years

C09 Week-5 Follow-up question

How do annuities differ from perpetuity arrangements?
(93 words)

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C09 Principles of Finance Assignment 08

ASSIGNMENT 08

C09E Principles of Finance

Directions:  Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling and grammar. Sources must be cited in APA format. Your response should be four (4) double-spaced pages; refer to the "Assignment Format" page located on the Course Home page for specific format requirements.

 

Part A

1.      a.   Describe an incremental cash flow for a project.

b.      Describe three (3) concepts we need to examine to help understand how to estimate the incremental cash flow of a project.

2.      Benson Co. purchases an asset for $6,000. This asset qualifies as a seven-year recovery asset under MACRS. Benson has a tax rate of 30%. The seven-year expense percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. If the asset is sold at the end of six years for $2,000, what is the cash flow from disposal? Show your work.

Part B

1.      Briefly describe JIT inventory management.

2.      Describe one (1) type of cost that is minimized with JIT control.

3.      In order to use JIT, is it better to have high ordering costs or low? Provide one (1) supporting fact to justify your answer.

Part C

You are CEO of Acme, Inc. located in the United States. You use the discounted payback period method and accept all projects that payback in three years. You are considering a project that will cost $5,500,000 and will produce one cash flow that occurs in three years. However, the cash flow is in pesos since the project is an overseas project. The current indirect exchange rate is 13.5 pesos per dollar. The cash inflow in pesos is 100,000,000 in three years, and the discount rate is 11.5%. During this time, the anticipated annual inflation rate is 5% in the United States and 4% in Mexico.

Should you accept this project, using the discounted payback period method? Is this a good decision? Provide the six (6) steps you would utilize to determine whether or not this is a good decision.

C09 Online Exam 3_05

Question 1 

A furniture store has a sofa on sale for $399.00, with the payment due one year from today. The store is willing to discount the price at an annual rate of 5% if you pay today. What is the amount if you pay today?

  A.  $380 

  B.  $399 

  C.  $419 

  D.  $394

Question 2 

The school district needs to pass a bond levy for funding to remodel existing schools and to build new schools. Expenditures for the new and remodeled buildings will begin 18 months after passage of the bond. If the school district receives all funding immediately after the passage of the bond and can invest the funds at a rate of 3.75% per year, how large must the bond be for the district to have $45,000,000 at the start of construction?

  A.  $45,000,000 

  B.  $47,554,834 

  C.  $42,556,397 

  D.  $42,582,422

Question 3 

 Which of the following formulas is correct for finding the present value of an investment?

  A.   FV =  

  B.   PV = FV × (1 + r)n 

  C.   PV = FVn × (1 + r) 

  D.   PV = FV ×1/(1+r)n

Question 4 

Johnson has an annuity due that pays $600 per year for 15 years. What is the present value of the cash flows if they are discounted at an annual rate of 7.50%?  

  A.  $5,296.27 

  B.  $5,693.49 

  C.  $9,000.00 

  D.  $9,675.00

Question 5 

A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?

  A.  The PV is $178.00. 

  B.  The FV is $224.00. 

  C.  The FV is $224.72. 

  D.  This question is irrelevant because there are no two-year investments that earn an average of 6% per year.

Question 6 

The one-time payment of money at a future date is often called a__________.

  A.  lump-sum payment 

  B.  present value 

  C.  principal amount 

  D.  perpetuity payment

Question 7 

What is the present value today of an ordinary annuity cash flow of $3,000 per year for 40 years at an interest rate of 6.0% per year?

  A.  $120,000.00 

  B.  $1,327,777.67 

  C.  $45,139.89 

  D.  $32,270.87

Question 8 

 Which of the following is the correct formula for calculating the future value?

  A.   FV =  

  B.   FV = PV × (1 + r)n 

  C.   PV = FV × (1 + r)n 

  D.   PV =

Question 9 

Which of the following will result in a future value greater than $100?

  A.  PV = $50, r = an annual interest rate of 10%, and n = 8 years. 

  B.  PV = $75, r = an annual interest rate of 12%, and n = 3 years. 

  C.  PV = $90, r = an annual interest rate of 14%, and n = 1 year. 

  D.  All of the future values are greater than $100.

Question 10 

Which of the following actions will DECREASE the present value of an investment?

  A.  decrease the interest rate 

  B.  decrease the future value 

  C.  decrease the amount of time 

  D.  All of the above will decrease the present value.

Question 11 

Your company just sold a product with the following payment plan: $50,000 today, $25,000 next year, and $10,000 the following year. If your firm places the payments into an account earning 10% per year, how much money will be in the account after collecting the last payment?

  A.  $99,000 

  B.  $98,000 

  C.  $88,500 

  D.  $85,000

Question 12 

A $100 deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year.

  A.  $100 

  B.  $120 

  C.  $121 

  D.  $122

Question 13 

Which of the following actions will INCREASE the present value of an investment?

  A.  decrease the interest rate 

  B.  decrease the future value 

  C.  increase the amount of time 

  D.  All of the above will increase the present value.

Question 14 

Your university is running a special offer on tuition. This year's tuition cost is $18,000. Next year's tuition cost is scheduled to be $19,080. The university offers to discount next year's tuition at a rate of 6% if you agree to pay both years' tuition in full today. How much is the total tuition bill today if you take the offer?

  A.  $18,000 

  B.  $34,981 

  C.  $37,080 

  D.  $36,000

Question 15 

You have the opportunity to purchase mineral rights to a property in North Dakota with expected annual cash flows of $10,000 per year for eight years. If you discount these cash flows at a rate of 12% per year, what are these cash flows worth today if the cash flows occur at the end of each period?

  A.  $55,637.57 

  B.  $49,676.40 

  C.  $80,000.00 

  D.  $122,996.93

Question 16 

Which is greater, the present value of a five-year ordinary annuity of $300 discounted at 10%, or the present value of a five-year ordinary annuity of $300 discounted at 0% that has its first cash flow six years from today?

  A.  The first annuity because the cash flows occur sooner. 

  B.  The second annuity because the cash flows are discounted at a lower interest rate. 

  C.  The two annuities are of equal value. 

  D.  The answer to this question cannot be determined.

Question 17 

Twelve years ago, you paid for the right to twelve $25,000 annual end-of-the-year cash flows. If discounting the cash flows at an annual rate of 8%, what did you pay for these cash flows back then?

  A.  $474,428.16 

  B.  $300,000.00 

  C.  $203,474.11 

  D.  $188,401.95

Question 18 

A home improvement firm has quoted a price of $9,800 to fix up John's backyard. Five years ago, John put $7,500 into a home improvement account that has earned an average of 5.25% per year. Does John have enough money in his account to pay for the backyard fix-up?

  A.  Yes; John now has exactly $9,800 in his home improvement account. 

  B.  No; John has only $9,687 in his home improvement account. 

  C.  Yes; John now has $10,519 in his home improvement account. 

  D.  There is not enough information to answer this question.

Question 19 

Your aunt places $13,000 into an account earning an interest rate of 7% per year. After five years the account will be valued at $18,233.17. Which of the following statements is correct?

  A.  The present value is $13,000, the time period is seven years, the present value is $18,233.17, and the interest rate is 5%. 

  B.  The future value is $13,000, the time period is five years, the principal is $18,233.17, and the interest rate is 7%. 

  C.  The principal is $13,000, the time period is five years, the future value is $18,233.17, and the interest rate is 7%. 

  D.  The principal is $13,000, the time period is seven years, the future value is $18,233.17, and the interest rate is 5%.

Question 20 

Your neighbor owns a perpetuity of $100 per year that has a discount rate of 6% per year. He offers to sell to you all but the next 20 cash flows (the first to be received one year from today. for $500. In other words, he keeps the first 20 cash flows of his perpetuity and you get all of the rest. Is this a good price for you if the appropriate discount rate is 6%?

  A.  No, because the entire perpetuity is worth only $1,666.67 and your neighbor is taking the best cash flows worth more than $1,200 in present value terms 

  B.  Yes, because the present value of the remaining cash flows is $519.68 and you are buying them for only $500. 

  C.  No, because the cash flows you receive are only worth $482.16 and that is less than the $500 your neighbor is asking for the cash flows. 

  D.  This question cannot be answered.

 

C09.S.6.1 Assignment 04

 

C09E Principles of Finance

Directions:  Be sure to save an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling and grammar. Sources must be cited in APA format. Your response should be four (4) double-spaced pages; refer to the "Assignment Format" page located on the Course Home page for specific format requirements.

Part A

Consider the information below from a firm's balance sheet for 2011 and 2012.

 

Current Assets                           2012                2011             Change

Cash and Equivalents             $1,561             $1,800             -$   239

Short-Term Investments         $1,052             $3,010             -$1,958

Accounts Receivable              $3,616             $3,129               $   487

Inventories                             $1,816             $1,543               $   273

Other Current Assets             $   707             $   601               $   106

Total Current Assets              $8,752           $10,083             -$1,331

Current Liabilities

Accounts Payable                   $5,173             $5,111               $     62

Short-Term Debt                    $   288             $   277               $     11

Other Current Liabilities        $1,401             $1,098               $   303

Total Current Liabilities         $6,862             $6,486               $   376

 

1.   What is the Net Working Capital for 2012?

2.   What is it for 2011?

3.   What is the Change in Net Working Capital (NWC)?

4.   Assuming the Operating Cash Flows (OCF) are $7,155 and the Net Capital Spending (NCS) is $2,372, what is the Cash Flow from Assets?

 

Part B

Assume that you are 23 years old and that you place $3,000 year-end deposits each year into a stock index fund that earns an average of 9.5% per year for the next 17 years.

1.   How much money will be in the account at the end of 17 years?

2.   How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?

3.   How much money would you have at the end of 17 years if you had made the same number of deposits but at the beginning of the year instead of at the end of the year?

4.   How much money will you have in the account 15 years later at age 55 if the account continues to earn 9.5% per year but you discontinued making new contributions?

Part C

1.   a.   What is the possible range for a correlation coefficient?

b.   For purposes of diversification, what type of correlation coefficient among asset returns is preferred by investors? Provide a brief explanation.

2.   a.    Describe the two (2) investment rules identified in the text.

b.   Explain the validity of the following statement and provide one (1) supporting fact to justify your reasoning. "Investors do not like risk and will always choose the investment with the least risk."

 

C09 Week-3 Discussion

Discuss the growth rate and the discount rate.  What is the difference between the two?

 

C09 Week 1 Threaded Discussion

Discuss the concept of the cycle of money?  Analyze who participates in the cycle of money?  Evaluate the objective of the financial transaction.

C09 Online Exam 2_03 SCORE 100 PERCENT

Question 1 

Orange Electronics Inc. has a profitability ratio of 0.14, an asset turnover ratio of 1.7, a debt to equity ratio of 0.60 and a total asset to equity ratio of 1.60. What is the firm's ROE?

  A.  14.28% 

  B.  22.85% 

  C.  38.08% 

  D.  41.76%

Question 2 

Computing liquidity ratios is ________ but interpreting them is ________.

  A.  complex, even more complex 

  B.  complex, more straightforward 

  C.  straightforward, more complex 

  D.  none of these

Question 3 

The DuPont Model measures ROE by multiplying __________.

  A.  the current ratio x total asset turnover x the equity multiplier 

  B.  the profitability ratio x times interest earned x the equity multiplier 

  C.  the profitability ratio x total asset turnover x the equity multiplier 

  D.  the current ratio x times interest earned x the equity multiplier

Question 4 

The fundamental starting point of all the accounting statements is the__________.

  A.  accounting identity 

  B.  computing identity 

  C.  investing identity 

  D.  financing identity

Question 5 

Which of the following statements is TRUE?

  A.  The current ratio is current assets divided by current liabilities. 

  B.  Total asset turnover is net income divided by total assets. 

  C.  The cash coverage ratio equals cash divided by current liabilities. 

  D.  The quick ratio equals current assets - current liabilities divided by current liabilities.

Question 6 

Which of the following address the question of whether a company can meet its obligations over the long term?

  A.  liquidity ratios 

  B.  asset utilization ratios 

  C.  debt ratios 

  D.  financial leverage ratios

Question 7 

Return on equity can increase as a result of an increase in which of the following ratios?

  A.  net income/ sales 

  B.  sales/ total assets 

  C.  total assets/ equity 

  D.  All of the above will have a positive influence on the ROE.

Question 8 

In finance, we separate operating decisions from financing decisions and thus exclude __________ as a part of operating income from the income statement.

  A.  cash flow 

  B.  dividends 

  C.  interest expense 

  D.  earnings

Question 9 

Which of the following address the question of whether a company can meet its obligations over the short term?

  A.  liquidity ratios 

  B.  asset utilization ratios 

  C.  debt ratios 

  D.  financial leverage ratios

Question 10 

Which of the statements below is FALSE?  

  A.  The cash coverage ratio is EBIT plus depreciation divided by interest expense. 

  B.  Times interest earned equals EBIT divided by interest expense. 

  C.  The times interest earned ratio tells us the number of times a company has resorted to debt financing over the year. 

  D.  The debt ratio basically tells us the amount in debt for every dollar of assets.

Question 11 

The income statement begins with revenue and subtracts various operating expenses until arriving at Earnings Before Interest and Taxes. Next, interest expense is subtracted to find the taxable income for the period. Then the appropriate taxes are calculated and subtracted. We finally arrive at the __________, the so-called bottom line of the income statement.  

  A.  after-tax income 

  B.  before-tax income 

  C.  net income 

  D.  EBIT

Question 12 

Which of the statements below is FALSE?

  A.  The acid ratio test equals current assets minus inventories divided by current liabilities. 

  B.  Examples of liquidity ratios include the current ratio, the cash coverage ratio, and the quick ratio. 

  C.  The current ratio is current assets divided by current liabilities. 

  D.  Inventory turnover equals cost of goods sold divided by inventory.

Question 13 

__________ help(s. us analyze whether a company is moving toward financial stress or is using debt to benefit the company and ultimately, the owners of the company.

  A.  Financial leverage ratios 

  B.  Asset management ratios 

  C.  Days' sales in inventory 

  D.  Total asset turnover

Question 14 

Which of the statements below is FALSE?

 A.  Officers of a company or others who have a fiduciary responsibility to the owners can trade on their acquired private information about the company prior to the information being made public. 

 B.  One potential problem in the world of finance can arise when some owners or potential owners have access to more information about a company than do others. 

  C.  Regulation Fair Disclosure (or Reg FD. requires companies to release all material information to all investors at the same time. 

  D.  The 10-K must be filed within sixty days after the end of the company's fiscal year.

Question 15 

__________ can be helpful for managers to understand short-term cash obligations.

  A.  Profitability ratios 

  B.  Asset management ratios 

  C.  Solvency ratios 

  D.  Liquidity ratios

Question 16 

Which of the statements below is FALSE?

  A.  Financial statements are a collection of historical and current activities of the company.  

 B.  The collection of value over time found in financial statements requires us to pay attention to how we construct financial ratios so as to glean information for analysis. 

  C.  All financial statements are constructed with the same accounting principles, so you can always compare different firms based solely on these statements. 

  D.  We want to analyze financial statements so as to compare different companies and their performance relative to our company.

Question 17 

The income statement begins with revenue and subtracts various operating expenses until arriving at__________.

  A.  earnings after taxes 

  B.  net income 

  C.  taxable income 

  D.  EBIT

Question 18 

Which of the statements below is FALSE?  

  A.  The income statement summarizes and categorizes a company's revenues and expenses for that period. 

  B.  Typically, income statements are prepared quarterly and annually for distribution outside the company, but usually monthly for internal managers. 

  C.  The income statement begins with revenue and subtracts various operating expenses until arriving at Earnings Before Interest and Taxes (EBIT.. 

  D.  The balance sheet reports the performance of the firm over the past period. It summarizes and categorizes a company's revenues and expenses for that period.

Question 19 

Which of the statements below is FALSE?

 A.  The textbook uses the framework of the income statement to find the operating income of the company (an accounting measure. and then makes adjustments to find the true cash flow from operations. 

  B.  In accrual-based accounting, revenue is recorded at the time of sale if the revenue has been received in cash. 

  C.  Three fundamental issues separate net income and cash flow: accrual-based accounting, non-cash expense items, and interest expense. 

  D.  Generally Accepted Accounting Principles (GAAP. in the United States allow the use of accrual accounting to record revenue.

Question 20 

There are four primary financial statements that are used to measure the performance of a firm. Which of the choices below are included among these four?

  A.  the balance statement and income statement 

  B.  the income sheet and statement of retained earnings 

  C.  the statement of cash flow and statement of balance 

  D.  the balance sheet and statement of cash flow