lesson 11. Which of the following would result in a decrease in cash flow and a use of cash?A. A decrease in notes payableB. An increase in long-term debtC. A decrease in inventoryD. A decrease in common stock2. In the United States for the 2007 tax year federal corporateincome tax rates never exceeded an average rate ofA. 15%. C. 39%.B. 35%. D. 34%.3. A firm has assets of $60 000 and owners equity of $33 000.Which of the following is the correct balance of the firm sliabilities?A. $33 000 C. $93 000B. $27 000 D. $60 0004. Which of the following would result in an increase in cash flow and a source of cash?A. A decrease in notes payableB. A decrease in long-term debtC. An increase in inventoryD. An increase in common stock5. A firm has current assets of $10 000 and current liabilities of $7 000. Which of thefollowing is the correct net working capital for the firm?A. $10 000 C. $3 000B. $7 000 D. $13 0006. If a firm has an accounts receivable balance of $18 800 at the end of 2007 and$16 500 at the end of 2008 which of the following statements about accountsreceivable is correct?A. Accounts receivable decreased by $2 300 and represented a use of cash.B. Accounts receivable increased by $2 300 and represented a source of cash.C. Accounts receivable decreased by $2 300 and represented a source of cash.D. Accounts receivable increased by $2 300 and represented a use of cash.7. If a firm has revenues of $15 090 and expenses of $8 850 what is the firm s taxableincome?A. $15 090 C. $6 240B. $8 850 D. $23 9408. Which of the following statements about the issuance of an initial public offering (IPO)is correct?A. IPOs may be either underpriced or overpriced.B. IPOs are never overpriced.C. IPOs are never underpriced.D. IPOs are always correctly priced.9. If a firm has revenues of $15 090 operating expenses of $8 850 and a tax expenseof $2 120 what is the firm s net income?A. $8 850 C. $6 240B. $4 120 D. $8 36010. When you re preparing a common-sized balance sheet which of the followingmeasures is set to equal 100 percent?A. Total liabilities C. Total owners equityb total assets d cash11. Suppose that a corporation has a taxable income of $200 000. What is the firm scorporate income tax for the current tax year? (You can use the following table tocalculate the firm s U.S. federal corporate tax.)Taxable IncomeMore ThanTaxable IncomeLess ThanTaxRate$0 $50 000 15%$50 001 $75 000 25%$75 001 $100 000 34%$100 001 $335 000 39%$335 001 $10 000 000 34%$10 000 001 $15 000 000 35%$15 000 001 $183 333 334 38%$18 333 334 35%A. $78 000 C. $39 000B. $6 250 D. $61 25012. Using the same table and information provided in Question 11 what is the firm saverage tax rate?A. 39% C. 34%B. 30.625% D. 31.625 . Using the same table and information provided in Question 11 what is the firm smarginal tax rate?A. 39% C. 34%B. 30.625% D. 31.625 . Dilution refers to the loss of shareholder value and may be represented by all of thefollowing except dilution ofA. ownership percentage.B. market value.C. the firm s current ratio.D. book value per share.15. If a firm has $6 940 in earnings before interest and taxes $650 in depreciationexpense and $2 120 in taxes what is the firm s operating cash flow?A. $4 120 C. $6 240B. $5 470 D. $9 71016. The type of financial statement that summarizes the sources and uses of cashover a specified period of time is called theA. statement of cash flows.B. income statement.C. balance sheet.D. inventory ratio statement.17. The current ratio falls within which of the following classifications of financial ratios?A. Long-term solvency measuresB. Asset management or turnover measuresC. Short-term solvency or liquidity measuresD. Profitability measures18. If a firm has an accounts payable balance of $34 400 at the end of 2007 and $31 200at the end of 2008 which of the following statements about accounts payable iscorrect?A. Accounts payable decreased by $3 200 and represented a use of cashB. Accounts payable increased by $3 200 and represented a source of cashC. Accounts payable decreased by $3 200 and represented a source of cashD. Accounts payable increased by $3 200 and represented a use of cash19. Which of the following is not one of the six costs of issuing securities?A. Rights offering C. Green Shoe optionB. Abnormal returns D. Gross spread20. In the United States for the 2007 tax year federal corporate income tax rates neverexceeded a marginal rate ofA. 15%. C. 39%.B. 35%. D. 34%.lesson 21. What is the present value of $3 000 discounted at 8 percentinterest per period for two periods? (Round your answer tothe nearest cent.)A. $2 777.78 C. $3 499.20B. $2 572.02 D. $3 240.002. The stated interest payment made on a bond is called theA. yield to maturity. C. face value.B. maturity. D. coupon.3. An ordinary annuity of $500 per period discounted at a rateof 8 percent per period for 3 periods has a present value of$1 288.55. If this same annuity was an annuity due whatwould its present value be? (Round your answer to thenearest cent.)A. $1 288.55 C. $1 391.63B. $1 500.00 D. $1 788.554. The relationship between real returns nominal returns and inflation is commonlyreferred to as theA. dirty price. C. Treasury yield curve.B. Fisher effect. D. bid-ask spread.5. On an investment of $2 000 you ll earn 10 percent interest per year compoundedsemiannually. What is the future value of this investment after one year?A. $2 205 C. $2 420B. $2 100 D. $4 5006. What is the future value of a $10 000 investment earning 12 percent interestper period after three periods? (Round your answer to the nearest cent.)A. $7 117.80 C. $12 544.00B. $11 200.00 D. $14 049.287. Where does most bond trading occur?A. At the corporate headquarters of Moody sB. In the New York Stock Exchange (NYSE)C. Electronically over the counterD. At the corporate headquarters of Standard8. Suppose that you buy a $5 000 bond with a 12 percent annual coupon payablesemiannually on January 1 and July 1. On both January 1 and July 1 the bondholderwill receive $300 for a total annual interest payment of $600 ($300 $300).Based on the principal and accrued interest only how much would you expectto pay to purchase this bond on May 1?A. $5 200 C. $5 300B. $5 000 D. $5 6009. Today you deposit $1 000 into an account that pays 12 percent interest annually.How much will you have in the account after 4 years? (Round your answer to thenearest cent.)A. $635.52 C. $1 120.00B. $1 254.40 D. $1 573.5210. A type of loan that s paid off by making regular principal reductions usually accordingto a specified schedule is called a(n)A. annuity due. C. amortizing loan.B. debenture. D. corporate bond.11. What is the present value of the right to receive four equal payments (ordinaryannuity) of $500 per period discounted at a rate of 10 percent per period? (Roundyour answer to the nearest cent.)A. $341.51 C. $1 584.94B. $454.55 D. $732.0512. On an initial investment of $1 000 you can earn 12 percent interest per yearcompounded annually or 12 percent interest per year compounded semiannually.Which of the following statements is correct?A. 12 percent per year compounded annually is the better interest rate forthe investment.B. 12 percent per year compounded semiannually is the better interest ratefor the investment.C. There s no difference between the two interest rates; both rates will producethe same future value.D. It isn t possible to determine the future value of this investment based onthe information provided.13. The payments made by a corporation to shareholders either in cash or in stock are calledA. dividends. C. cash flows.B. capital gains. D. bond yields13. The payments made by a corporation to shareholders either in cash or in stock are calledA. dividends. C. cash flows.B. capital gains. D. bond yields.14. What is the future value of a $1 500 investment earning 10 percent interestper period after two periods? (Round your answer to the nearest cent.)A. $1 650.00 C. $1 815.00B. $1 363.63 D. $1 239.6715. A stock s expected cash dividend divided by its current price is called theA. dividend yield. C. constant growth.B. capital gains yield. D. ask price.16. Today you deposit $6 000 into an account that pays 10 percent annually. In oneyear you ll deposit another $4 000 in the account. How much will you have in theaccount after two years?A. $10 600 C. $10 000B. $11 660 D. $11 00017. What is the present value of $2 200 discounted at 10 percent interest per period for one period? (Round your answer to the nearest cent.)A. $2 420.00 C. $1 818.18B. $2 000.00 D. $1 980.0018. Which of the following statements about stock trading is correct?A. The NASDAQ is a computer network with no physical location for trading.B. The number of NYSE exchange members is unlimited.C. The NASDAQ uses a specialist system for actively traded stocks.D. The NYSE does not have a physical location for stock trading activities.19. You want to invest money for 3 years in an account that pays 7 percent interestannually. How much would you need to invest today to reach a future goal of $5 000?(Round your answer to the nearest cent.)A. $4 650.00 C. $4 762.90B. $6 125.22 D. $4 081.4920. What is the present value of the right to receive four equal payments (annuity due)of $1 000 per period discounted at a rate of 10 percent per period? (Round youranswer to the nearest cent.)A. $1 909.09 C. $1 464.10B. $3 486.85 D. $2 486.85leson 31. The amount of time required for an investment to generatecash flows sufficient to recover its initial cost is called theA. net present value.B. average accounting return.C. internal rate of return.D. payback period.2. To calculate a firm s break-even point you need toA. divide fixed costs by variable costs.B. add fixed costs to variable costs and divide the totalby the unit contribution margin.C. divide fixed costs by the unit contribution margin.D. divide the unit contribution margin by variable costs.3. The present value of an investment s future cash flowsdivided by its initial cost is called theA. profitability index.B. average accounting return.C. net present value.D. discounted payback4. Assume that a firm has an average net income of $125 000 and an average bookvalue of $500 000. What is the firm s average accounting return?A. 25 percent C. 40 percentB. 65 percent D. 12.5 percent5. A cost that has already been incurred and that should therefore not be consideredin an investment decision is called a(n)A. pro forma. C. erosion.B. sunk cost. D. opportunity cost.6. A situation in which a company can t raise financing for a project under anycircumstances is calledA. simulation analysis. C. operating leverage.B. hard rationing. D. forecasting risk.7. A project requires an initial investment of $75 000 today. The present value of thecash inflows likely to result from this initial investment is $98 293. What is the netpresent value of this investment?A. $23 293 C. $51 707B. $75 000 D. $23 2938. The discount rate that makes the net present value of an investment zero is called theA. average accounting return. C. project cash flow.B. internal rate of return. D. crossover rate.9. Assume that an item costs $4 per unit to manufacture and sells for $19 per unit.What is the unit contribution margin?A. $23 C. $15B. 21 percent D. 4.75 percent10. The difference between an investment s market value and its cost is called theA. discounted cash flow. C. net present value.B. average accounting return. D. probability index.11. When making capital budgeting decisions for a firm the average net income dividedby the average book value equals theA. average accounting return. C. net present value.B. internal rate of return. D. project cash flow12. A situation in which the taking of one investment will prevent the taking of anotheris called a(n)A. stand-alone investment.B. opportunity cost.C. marginal revenue investment.D. mutually exclusive investment decision.13. When you re discussing operating cash flow the tax saving that results from thedepreciation deduction calculated as the depreciation multiplied by the corporatetax rate is called theA. discounted cash flow.B. accelerated cost recovery system.C. depreciation tax shield.D. net working capital.14. Under U.S. tax law the depreciation method that allows for the accelerated write-offof property under certain classifications is called theA. modified depreciation allowance.B. accelerated cost recovery system.C. bottom-up approach.D. depreciation tax shield.15. A type of financial statement that provides projections for future years is called aA. pro forma statement.B. modified depreciation statement.C. discounted cash flow analysis.D. project cash flow statement.16. A company manufactures an item that has a unit contribution margin of $9. The firmhas fixed costs of $3 600 per year. What is the break-even point in units?A. 27 units C. 32 400 unitsB. 400 units D. 200 units17. The sales level that results in zero project net income is called theA. operating cash flow. C. opportunity cost.B. accounting break-even point. D. internal rate of return.18. Which of the following statements about operating leverage is not correct?A. Operating leverage is a measure of risk.B. Operating leverage increases as fixed costs increase.C. Operating leverage decreases as variable costs decrease.D. Operating leverage is a combination of scenario and sensitivity analysis.19. The degree to which a firm or project is committed to fixed production costs is calledA. operating leverage. C. capital rationing.B. accelerated cost recovery. D. sunk cost.20. When a firm introduces a new product it can have a negative effect on the cash flowsfrom existing products. This negative effect is known asA. opportunity cost. C. erosion.B. incremental cash flow. D. MACRS depreciation.
