FIN419T Week 5 Apply Assessment - SCORE 100 PERCENT

Question 1

Which one of the following best describes an agreement you make today to exchange U.S. dollars for British pounds three months from now?

Multiple Choice

    Forward trade

    Spot trade

    Arbitrage transaction

    Cross-rate exchange

    Eurocurrency transaction

 

Question 2

Eurobonds are best defined as international bonds issued in _____ and denominated in ____.

Multiple Choice

    a single country; multiple currencies

    a single country; a single currency

    multiple countries; multiple currencies

    multiple countries; a single currency

    Euroland; euros

 

Question 3

Assume you can exchange $1 for either €.8031 euro or £.6390. What is the cross-rate between the pound and the euro?

Multiple Choice

    £.7519/€1

    £.8356/€1

    £.7957/€1

    £1.0852/€1

    £1.5577/€1

 

Question 4

Which one of the following is an example of the political risks associated with foreign operations?

Multiple Choice

    Technological changes

    Exchange rate fluctuations

    Translation exposure to exchange rate risk

    Changes in foreign tax laws

    Changes in relative wage rates between the home country and the foreign country

 

Question 5

An American Depositary Receipt is defined as a security:

Multiple Choice

    that has been deposited in an interest-bearing account at a U.S. bank.

    issued outside the U.S. that represents shares of a U.S. stock.

    issued in the U.S. that represents shares of a foreign stock.

    that has a guarantee of payment from a U.S. bank.

    issued in multiple countries but denominated in U.S. currency.

 

Question 6

Which statement is correct?

Multiple Choice

    Exchange rates are adjusted each morning and held constant until the following morning.

    The four most commonly traded currencies in the foreign exchange markets are the U.S. dollar, French franc, European euro, and Brazilian real.

    All South American countries use the peso as their currency.

    New Zealand uses the same currency as Australia and that is the A$.

    The foreign exchange market is the largest financial market in the world.

 

Question 7

Short-run exposure to exchange rate risk is best illustrated by which one of the following?

Multiple Choice

    Change in book value when the market value of an asset remains constant

    Daily fluctuations in the spot rate

      Increases in the forward rate as the time to settlement increases

    Changes in relative economic conditions between two countries

    Unrealized foreign exchange gains

 

Question 8

Which one of the following terms is used to identify the concept that exchange rates vary to keep purchasing power constant among currencies?

Multiple Choice

    Exchange rate equilibrium

    Exchange rate parity

    Universal parity

    Market equilibrium

    Purchasing power parity

 

Question 9

Suppose a U.S. firm builds a factory in China, staffs it with Chinese workers, uses materials supplied by Chinese companies, and finances the entire operation with a loan from a Chinese bank located in the same town as the factory. This firm is most likely trying to greatly reduce, or eliminate, which one of the following?

Multiple Choice

    Interest rate disparities

    Short-run exposure to exchange rate risk

    Long-run exposure to exchange rate risk

    Political risk associated with the foreign operations

    Translation exposure to exchange rate risk

 

Question 10

The market where euros, pesos, dollars, and pounds are traded is referred to as the:

Multiple Choice

    ADR market.

    LIBOR market.

    gilt market.

    euromarket.

    foreign exchange market.

 

Question 11

Which country is correctly matched with its currency?

Multiple Choice

    Canada—pound

    China—yuan

    Mexico—real

    Japan—lira

    United Kingdom—euro

 

Question 12

A trader in Switzerland just agreed to trade Swiss francs for British pounds based on today's exchange rate. The trade is expected to settle tomorrow. What term best describes this exchange?

Multiple Choice

    Arbitrage transaction

    Forward trade

    Spot trade

    Purchasing power parity

    Interest rate parity

 

Question 13

An agreement to exchange currencies sometime in the future is referred to as which one of the following?

Multiple Choice

    Forward trade

    Hedge

    Gilt

    Forward exchange rate

    Spot trade

 

Question 14

Which one of the following is the rate that most international banks charge when they loan Eurodollars to other banks?

Multiple Choice

    ADR

    LIBOR

    Cross-rate

    Gilt rate

    Swap rate

 

Question 15

You are given the exchange rate between the U.S. dollar and the Canadian dollar. You are also given the exchange rate between the U.S. dollar and the Mexican peso. What is the name given to the Canadian dollar per Mexican peso exchange rate derived from the information that was provided?

Multiple Choice

    Swap rate

    Depositary rate

    Forward rate

    London Interbank rate

    Cross-rate

Question 16

Assume the exchange rates in New York for $1 are C$1.1382 and £.6387 while in Toronto, C$1 will buy £.5612. How much profit can you earn on $10,000 using triangle arbitrage?

Multiple Choice

    $.91

    $1.08

    $.97

    $1.03

    $1.11

 

Question 17

Assume the exchange rate is 1.05 Swiss francs per U.S. dollar. How many U.S. dollars are needed to purchase 1,250 Swiss francs?

Multiple Choice

    $1,315.79

    $1,190.48

    $1,128.80

    $1,140.00

    $1,318.46

 

Question 18

Which of these is defined as an agreement to exchange two securities or two currencies?

Multiple Choice

    Hedge

    Swap

    SWIFT

    Gilt

    Arbitrage

 

Question 19

Assume the SEC approved the registration statement for a new securities issue this morning. Which one of the following statements must be true about this issue?

Multiple Choice

    The red herrings can finally be distributed as their distribution was awaiting SEC approval.

    The waiting period started when the approval was received this morning.

    The SEC believes the issue will be a profitable investment for all purchases made at the offer price.

    The issuer is following all the required rules and regulations in regard to this issue.

    The final prospectuses have all been delivered or the SEC would not have approved the issue.

 

Question 20

Which one of the following is probably the most effective means of increasing investors' interest in an IPO?

Multiple Choice

    Extending the lockup period

    Issuing the IPO through a rights offering

    Underpricing the IPO

   Eliminating the quiet period

 Eliminating the Green Shoe option

 

Question 21

An initial public offering refers to:

Multiple Choice

    the shares held by a firm's founder.

    the most recently issued shares that were offered to the firm's existing shareholders.

   any shares issued to the public on a cash basis.

   the first sale of equity shares to the general public.

   all shares issued prior to the firm going public.

 

Question 22

Currently, you own 1.2 percent of the outstanding shares of Home Security. The firm has decided to issue additional shares of stock and has given you the first option to purchase 1.2 percent of those additional shares. What type of offer is this?

Multiple Choice

    Rights offer

     Red herring offer

   Private placement

    IPO

    General cash offer

 

Question 23

What is the legal document called that is provided to potential investors and describes a new security offering?

Multiple Choice

    Security agreement

    Prospectus

    Public statement

    Registration statement

    Formal filing

 

Question 24

GW Underwriters retains the difference between its buying price and its offering price on new securities. What is this amount called?

Multiple Choice

    Markup

    Commission

    Rights price

    Spread

    Offer

 

Question 25

What is the group of underwriters called who share both the risks and the marketing responsibilities for a securities offering?

Multiple Choice

    Syndicate

    Underwriting cartel

   Firm commitment group

    Dutch auction group

    Venture capitalists

 

   

 

 

FIN419T Week 4 Apply Assessment SCORE 90 PERCENT

Question 1

Part 1

 

Peter Johnson, the CFO of Homer Industries, Inc is trying to determine the Weighted Cost of Capital (WACC) based on two different capital structures under consideration to fund a new project. Assume the company's tax rate is 30%.

 

Component	Scenario 1	Scenario 2	Cost of Capital	Tax Rate
Debt	$4,000,000.00	$1,000,000.00	8%	30%
Preferred Stock	1,200,000.00	1,500,000.00	10%
Common Stock	1,000,000.00	3,700,000.00	13%
Total	$6,200,000.00	$6,200,000.00

 

1-a. Complete the table below to determine the WACC for each of the two capital structure scenarios. (Enter your answer as a whole percentage rounded to 2 decimal places (e.g. .3555 should be entered as 35.55).)

 

	Scenario 1 Weight %	Scenario 2 Weight %	Scenario 1 Weighted Cost	Scenario 2 Weighted Cost	Cost of Capital	Tax Rate
Debt
Preferred Stock
Common Stock
Total

 

1-b. Which capital structure shall Mr. Johnson choose to fund the new project?

 

multiple choice 1

• Scenario 1
• Scenario 2

 

Part 2

 

Assume the new project's operating cash flows for the upcoming 5 years are as follows:

 

	Project A
Initial Outlay	$ -6,200,000.00
Inflow year 1	1,270,000.00
Inflow year 2	1,750,000.00
Inflow year 3	1,980,000.00
Inflow year 4	2,160,000.00
Inflow year 5	2,450,000.00
WACC	?

 

2-a. What are the WACC (restated from Part 1), NPV, IRR, and payback years of this project? (Negative values should be entered with a minus sign. All answers should be entered rounded to 2 decimal places. Your answers for WACC and IRR should be whole percentages (e.g. .3555 should be entered as 35.55).)

WACC (from Part 1)
NPV
IRR
Payback Method

 

2-b. Shall the company accept or reject this project based on the outcome using the net present value (NPV) method?

 

 

FIN419T Week 3 Assessment

  Question 1
When are funds generally transferred into zero-balance accounts?
Multiple Choice
    Monthly
    Weekly
    Daily
    As needed
    Never

Question 2
Taylor's Market received five checks today and went to the bank to deposit all of them. Unfortunately, the bank was closed for the day due to a robbery. How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?
Multiple Choice
    Collection float increased
    Collection float decreased
    Disbursement float increased
    Disbursement float decreased
    Net float remained unchanged

Question 3
The primary purpose of a cash discount is to:
Multiple Choice
    compensate customers for an out-of-stock item.
    compensate customers for faulty goods or services.
    offset the interest charges on an account receivable.
    induce customers to pay promptly.
    induce customers to purchase specialty items.

Question 4
The terms of sale are best defined as the:
Multiple Choice
    total invoice amount including all shipping costs and taxes.
    period of time during which a sale price applies.
    legal documents related to the credit sale of either goods or services.
    conditions under which a firm sells its goods or services for either cash or credit.
    process used to determine which customers will be granted credit and which will not.

Question 5
Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding. What is the name given to this listing?
Multiple Choice
    Aging schedule
    Collection report
    Credit evaluation report
    Invoice schedule
    Terms of credit

Question 6
How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?
Multiple Choice
    Immediately
    In one day
    Between one and two days
    In two days
    Between two and three days

Question 7
The optimal credit policy of any firm will:
Multiple Choice
    maximize sales.
    minimize bad debts.
    maximize units sold.
    minimize the total costs of granting credit.
    minimize carrying costs.

Question 8
The primary goal of inventory management is to minimize the:
Multiple Choice
    number of orders per year.
    average inventory level.
    total costs of holding inventory.
    level of inventory for the most expensive items.
    total opportunity costs.

Question 9
The process of determining the probability that potential customers will not pay is called:
Multiple Choice
    credit analysis.
    collection policy.
    account aging.
    credit terms.
    customer invoicing.

Question 10
A bill given to a customer for goods he or she purchased is called a(n):
Multiple Choice
    account reconciliation.
    invoice.
    docket.
    remittance advice.
    shipping receipt.

Question 11
A firm grants credit with terms of 2/10, net 30. The firm's customers have ___ days to pay in order to receive a _____ percent discount.
Multiple Choice
    2; 10
    10; 2
    15; 2
    20; 2
    30; 20

Question 12
Which statement is correct?
Multiple Choice
    Firms cannot use lockboxes if they use cash concentration accounts.
    Firms prefer to increase processing delay on disbursements.
    Firms prefer to eliminate all types of float.
    Firms open regional offices so their employees can pick up lockbox payments throughout the day.
    The Check Clearing Act for the 21st Century is designed to reduce total collection time to one day.

Question 13
Which one of the following will tend to increase the length of the credit period?
Multiple Choice
    Decrease in product cost
    Decrease in consumer demand
    Decrease in collateral value
    Increase in credit risk
    Increase in product standardization

Question 14
Float is defined as the difference between the:
Multiple Choice
    beginning and ending cash balances as shown on a cash budget.
    ledger balance and the available balance.
    book balance and the ledger balance.
    collections and disbursements for any given period of time.
    available balance and the collected balance.

Question 15
Collection policy refers to the:
Multiple Choice
    process of determining which customers will be granted credit.
    process of determining the probability that customers will not pay.
    set of guidelines used by a firm to determine the cost of offering credit to its customers.
    daily process of handling cash inflows and outflows of cash.
    set of procedures a firm follows in collecting accounts receivable.

Question 16
Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?
Multiple Choice
    Cash budget
    5 C's of credit
    Credit analysis
    Aging schedule
    Credit scoring report

Question 17
Credit scoring is the:
Multiple Choice
    categorizing of customers into groups based on the length of time it takes each customer to pay for purchases.
    compiling of a list of accounts receivables segregated by the length of time each receivable has been outstanding.
    evaluation of the opportunity costs of a credit policy.
    process of quantifying the probability of default when granting credit to customers.
    tracking of both the number and the size of customer orders over a period of time.

Question 18
Which of these is a speculative motive for holding cash?
Multiple Choice
    Buying extra inventory because a key supplier offered a special one-time discount
    Paying a $100 bonus to all employees at year-end
    Paying the annual insurance premium on the firm's assets
    Needing to purchase a new delivery truck because the old one was totally destroyed in an accident
    Contributing $1,000 to help fund medical care for an uninsured neighbor

Question 19
The basic factors that are reviewed when evaluating the creditworthiness of a potential customer are called the:
Multiple Choice
    terms of sale.
    receivables factors.
    five Cs of credit.
    collection policy determinants.
    credit scores.

Question 20
BJ's just reconciled its bank account and has $10,800 in outstanding deposits, $26,300 in checks outstanding, and a positive checkbook balance. The firm sells on a cash-only basis and deposits its receipts at the bank daily. The deposited funds are available to the firm the following day. The firm writes and mails checks on a daily basis also. These checks generally clear the bank in three days. What do you know about the firm's float given this information?
Multiple Choice
    The firm has disbursements float but no collection float.
    The collection float generally exceeds the disbursement float.
    The firm has a net collection float.
    The disbursement float generally exceeds the collection float.
    Since transactions occur daily, the firm has no float.

FIN419T Week 2 Apply Assessment SCORE 95 PERCENT

Question 1

Bethesda Mining Company reports the following balance sheet information for 2018 and 2019.

Prepare the 2018 and 2019 common-size balance sheets for Bethesda Mining. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

 

 

Question 2

Bethesda Mining Company reports the following balance sheet information for 2018 and 2019.

 

BETHESDA MINING COMPANY Balance Sheets as of December 31, 2018 and 2019
		2018			2019				2018			2019
Assets							Liabilities and Owners' Equity
Current assets							Current liabilities
Cash	$	26,530		$	34,778		Accounts payable	$	194,422		$	202,111
Accounts receivable		57,781			78,139		Notes payable		89,520			141,088
Inventory		134,324			201,260
							Total	$	283,942		$	343,199
Total	$	218,635		$	314,177
							Long-term debt	$	246,000		$	182,750
							Owners' equity
							Common stock and paid-in surplus	$	209,000		$	209,000
							Accumulated retained earnings		136,940			168,456
Fixed assets
Net plant and equipment	$	657,247		$	589,228		Total	$	345,940		$	377,456
Total assets	$	875,882		$	903,405		Total liabilities and owners' equity	$	875,882		$	903,405

 Calculate the following financial ratios for each year:

             

a.         Current ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b.         Quick ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

c.         Cash ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

d.         Debt-equity ratio and equity multiplier. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

e.         Total debt ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Question 3 Assume the total cost of a college education will be $340,000 when your child enters college in 18 years. You presently have $54,000 to invest.   What annual rate of interest must you earn on your investment to cover the cost of your child's college education? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)     Question 4 Assume that in 2018, a copper penny struck at the Philadelphia mint in 1796 was sold for $495,000.   What was the rate of return on this investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)     Question 5 Which one of the following is a measure of long-term solvency? Multiple Choice     Price-earnings ratio     Profit margin     Cash coverage ratio    Receivables turnover     Quick ratio    Question 6 Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0. Multiple Choice     Cash purchase of inventory     Cash payment on an account receivable     Cash payment of an account payable     Credit sale of inventory at cost     Cash sale of inventory at a loss   Question 7 The interest rate used to compute the present value of a future cash flow is called the: Multiple Choice       prime rate.     current rate.     discount rate.     compound rate.     simple rate.   Question 8     Tomas earned $89 in interest on his savings account last year and has decided to leave the $89 in his account this coming year so it will earn interest. This process of earning interest on prior interest earnings is called: Multiple Choice       discounting.     compounding.        duplicating.     multiplying.     indexing.     Question 9 The cash ratio is used to evaluate the: Multiple Choice       liquidity of a firm.     speed at which a firm generates cash.     length of time that a firm can pay its bills if no additional cash becomes available.     ability of a firm to pay the interest on its debt.     relationship between the firm's cash balance and its current liabilities.   Question 10 If a firm has an inventory turnover of 15, the firm: Multiple Choice       sells its entire inventory every 15 days.     stocks its inventory only once every 15 days.     delivers inventory to its customers every 15 days.     sells its inventory by granting customers 15 days' of free credit.     sells its entire inventory an average of 15 times each year. Question 11
By definition, a bank that pays simple interest on a savings account will pay interest: Multiple Choice       only at the beginning of the investment period.     on interest.     only on the principal amount originally invested.     on both the principal amount and the reinvested interest.     only if all previous interest payments are reinvested.   Question 12
Financial statement analysis: Multiple Choice       is primarily used to identify account values that meet the normal standards.     is limited to internal use by a firm's managers.     provides useful information that can serve as a basis for forecasting future performance.     provides useful information to shareholders but not to debt holders.     is enhanced by comparing results to those of a firm's peers but not by comparing results to prior periods.     Question 13
Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing? Multiple Choice       DuPont rate     External growth rate     Sustainable growth rate     Internal growth rate     Cash flow rate   Question 14
Which one of the following will increase the profit margin of a firm, all else held constant? Multiple Choice       Increase in interest paid     Increase in fixed costs     Increase in depreciation expense     Decrease in the tax rate     Decrease in sales   Question 15

Katlyn needs to invest $5,318 today in order for her savings account to be worth $8,000 six years from now. Which one of the following terms refers to the $5,318?

Multiple Choice

    Present value

    Compound value

    Future value

    Complex value

    Factor value

 

Question 16

Given an interest rate of zero percent, the future value of a lump sum invested today will always:

Multiple Choice

    remain constant, regardless of the investment time period.

    decrease if the investment time period is shortened.

    decrease if the investment time period is lengthened.

    be equal to $0.

    be infinite in value.

 

Question 17

You need to have $32,000 in 14 in years. You can earn an annual interest rate of 3 percent for the first 4 years, 3.6 percent for the next 3 years, and 4.3 percent for the final 7 years. How much do you have to deposit today?

Multiple Choice

 

    $16,732.56

    $18,032.49

    $21,155.77

    $19,042.84

    $18,889.81

 

Question 18

You have just deposited $8,500 into an account that promises to pay you an annual interest rate of 6 percent each year for the next 6 years. You will leave the money invested in the account and 10 years from today, you need to have $19,320 in the account. What annual interest rate must you earn over the last 4 years to accomplish this goal?

Multiple Choice

    12.51%

    11.55%

    11.37%

    14.07%

    10.01%

 

Question 19

A firm has total debt of $1,370 and a debt–equity ratio of .22. What is the value of the total assets?

Multiple Choice

    $3,014.00

    $6,227.27

    $7,597.27

    $2,200.00

    $1,671.40

 

Question 20

Lee Sun's has sales of $4,100, total assets of $3,800, and a profit margin of 6 percent. The firm has a total debt ratio of 42 percent. What is the return on equity?

Multiple Choice

    11.16 percent

    8.96 percent

    6.00 percent

    5.86 percent

    6.47 percent