Finance Packet
10) Prime-grade commercial paper will most likely have a higher annual return than
A. a prefe
ed stock.
B. an investment-grade bond.
C. a Treasury bill.
D. a common stock.
13) The Public Company Accounting Oversight Board (PCAOB)
A. is a for-profit corporation that oversees managers of public corporations.
B. is a not-for-profit corporation that oversees managers of public corporations.
C. is a for-profit corporation that oversees auditors of public corporations.
D. is a not-for-profit corporation that oversees auditors of public corporations.
14) An ADR is
A. a claim issued by a U.S. bank representing ownership of shares of a U.S. company's stock
held on deposit by the U.S. bank and is issued in dollars to U.S. investors.
B. a claim issued by a foreign bank representing ownership of shares of a foreign company's
stock held on deposit by the foreign bank and is issued in dollars to U.S. investors.
C. a claim issued by a U.S. bank representing ownership of shares of a foreign company's
stock held on deposit by the U.S. bank and is issued in dollars to U.S. investors.
D. none of the above.
17) After satisfying obligations to creditors, the government, and prefe
ed stockholders, any
emaining earnings will most likely be allocated to any of the following EXCEPT
A. common shareholders as stock dividends.
B. a combination of retained earnings and cash dividends.
C. retained by the firm for future investment.
D. common shareholders as cash dividends.
22) The credit applicant's character includes all of the following EXCEPT
A. moral commitment to pay.
B. level of liquid assets.
C. past payment history.
D. pending legal judgments.
29) A decrease in the average age of inventory will result in ________ in the cash conversion
cycle.
A. an increase
B. an undetermined change
C. a decrease
D. no change
Table 11.1​ A firm has determined its optimal capital structure which is composed of the
following sources and target market value proportions.
Debt:​ The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost of
2 percent of the face value would be required in addition to the discount of $40.
Prefe
ed Stock:​ The firm has determined it can issue prefe
ed stock at $75 per share par
value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $3
per share.
Common Stock:​ A firm's common stock is cu
ently selling for $18 per share. The dividend
expected to be paid at the end of the coming year is $1.74. Its dividend payments have been
growing at a constant rate for the last four years. Four years ago, the dividend was $1.50. It is
expected that to sell, a new common stock issue must be underpriced $1 per share in floatation
costs. Additionally, the firm's marginal tax rate is 40 percent.
30) The firm's cost of retained earnings is (See Table 11.1.)
A. 13.9 percent.
B. 12.4 percent.
C. 10.2 percent.
D. 13.6 percent.
31) The firm's cost of prefe
ed stock is (See Table 11.1.)
A. 8.3 percent.
B. 13.9 percent.
C. 7.2 percent.
D. 13.3 percent.
35) Indicate which formula is co
ect to determine the future value of an annuity due.
A. FVAs = PMT × + 1
B. FVAs = PMT ×
C. FVAs = PMT × × (1 + i)]
D. FVAs = PMT × /(1 + i)]
Table 11.2 ​A firm has determined its optimal structure which is composed of the following
sources and target market value proportions.
Debt:​ The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,050. A flotation cost
of 2 percent of the face value would be required in addition to the premium of $50.
Common Stock:​ A firm's common stock is cu
ently selling for $75 per share. The dividend
expected to be paid at the end of the coming year is $5. Its dividend payments have been
growing at a constant rate for the last five years. Five years ago, the dividend was $3.10. It is
expected that to sell, a new common stock issue must be underpriced $2 per share and the firm
must pay $1 per share in flotation costs. Additionally, the firm has a marginal tax rate of 40
percent.
39) The firm's cost of a new issue of common stock is (See Table 11.2.)
A. 10.2 percent.
B. 16.7 percent.
C. 14.3 percent.
D. 17.0 percent.
Table 5.2
You are going to invest $20,000 in a portfolio consisting of assets X, Y, and Z, as follows:
48) Given the information in Table 5.2, what is the expected annual return of this portfolio?
A. 10.0%
B. 11.4%
C. 11.7%
D. 11.0%
59) What annual rate of return would you need to earn if you deposit $20,000 per year into an
account beginning one year from today in order to have a total of $1,000,000 in 30 years?
A. 2.3%
B. 1.3%
C. 3.3%
D. 4.3%
62) The cash flows of any project having a conventional pattern include all of the basic
components EXCEPT
A. operating cash outflows.
B. operating cash inflows.
C. terminal cash flow.
D. initial investment.
66) The first step in the collection of overdue accounts is
A. contacting a collection agency.
B. a personal visit.
C. a letter.
D. legal actions.
References
Lincoln, A., & Seward, H. (1863). ​The emancipation proclamation​. US: Applewood Books.
Retrieved from
http:
eadingwritenow.com/yahoo_site_admin/assets/docs/019_A
aham_Lincolns_Emancipati
on_Proclamation XXXXXXXXXXpdf
Wa
er, A. L., Ouyang, Y., & Waterman, R. W XXXXXXXXXXLandmark Executive Orders:
Presidential Leadership through Unilateral Action. ​Presidential Studies Quarterly​, ​48​(1),
XXXXXXXXXXRetrieved from https:
onlineli
ary.wiley.com/doi/pdf/10.1111/psq.12434
References