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8. Six months ago, you purchased 1,200 shares of ABC stock for $21.20
a share and have received total dividend payments of $.60 a share.
Today, you sold all of your shares for $22.20 a share. What is your total
dollar return on this investment?

9.Six months ago, you purchased 100 shares of stock in ABC Co. at a
price of $43.89 a share. ABC stock pays a quarterly dividend of $.10 a
share. Today, you sold all of your shares for $45.13 per share. What is
the total amount of your capital gains on this investment?

10.Which one of these accounts is classified as a current asset on the

balance sheet?

11.Shelton, Inc., has sales of $395,000, costs of $183,000, depreciation

expense of $48,000, interest expense of $29,000, and a tax rate of 40
percent. (Do not round intermediate calculations.)

What is the net income for the firm?

12.On a balance sheet, deferred taxes are classified as:

13. Which one of these equations is an accurate expression of the

balance sheet?
14.Galaxy United, Inc.
2009 Income Statement

15. The Purple Martin has annual sales of $4,600, total debt of $1,230,
total equity of $2,500, and a profit margin of 6 percent. What is the return
on assets?

16.Galaxy United, Inc.

2009 Income Statement

17.Reliable Cars has sales of $3,850, total assets of $3,350, and a

profit margin of 5 percent. The firm has a total debt ratio of 41 percent.
What is the return on equity?

18. A firm has net working capital of $344, net fixed assets of $2,292,
sales of $6,000, and current liabilities of $800. How many dollars worth
of sales are generated from every $1 in total assets?

19.One of the primary weaknesses of many financial planning models is

that they:
ignore the goals and objectives of senior management.
ignore the size, risk, and timing of cash flows.
are iterative in nature.
rely too much on financial relationships and too little on accounting
relationships.
ignore cash payouts to stockholders.

20.The external funds needed (EFN) equation projects the addition to

retained earnings as:

21.Which account is least apt to vary directly with sales?

accounts payable
inventory
accounts receivable
notes payable
cost of goods sold

22. The Wintergrass Company has an ROE of 15.1 percent and a

payout ratio of 40 percent.
Within a span of five years; he opened more stores and he number
increased to 24 stores across Arkansas. The incorporation of Wal-Mart
Stores Incorporated was done in 1969. Wal-Mart grew in the United
States of America by opening of more stores in to the country.

What is the companys sustainable growth rate? (Do not round

intermediate calculations and enter your answer as a percent rounded to
2 decimal places, e.g., 32.16.)

23. If the Hunter Corp. has an ROE of 7 and a payout ratio of 15

percent, what is its sustainable growth rate?(Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)

24.The length of time between the acquisition of inventory and its sale is
called the:
operating cycle.
accounts receivable period.
inventory period.
accounts payable period.
cash cycle.

25.The most common means of financing a temporary cash deficit is a:

long-term secured bank loan.
long-term unsecured bank loan.
short-term secured bank loan.
short-term issue of corporate bonds.
short-term unsecured bank loan.

26. Consider the following financial statement information for the Rivers
Corporation:

27.Here are the most recent balance sheets for Country Kettles, Inc.
Excluding accumulated depreciation, determine whether each item is a
source or a use of cash, and the amount. (Do not round intermediate
calculations and round your answers to the nearest whole number, e.g.,
32. Input all amounts as positive values):

Ancient Industries just paid a dividend of $1.03 a share. The company

announced today that it expects to pay $.90 a share next year and a
final liquidating dividend of $18.44 in two years. What is one share of this
stock worth today if the required rate of return is 16 percent?

28.The relationship between nominal rates, real rates, and inflation is

known as the:
Gordon growth model.
term structure of interest rates.
Miller and Modigliani theorem.
interest rate risk premium.
Fisher effect.

29.What would be the maximum an investor should pay for the common
stock of a firm that has no growth opportunities but pays a dividend of
$1.36 per year? The required rate of return is 12.5 percent.

31.A newspaper listing of bond prices has an "Asked yield" column. This
yield is based on the asked price and represents the:
coupon rate.
difference between the current yield and the yield to maturity.

32.Mullineaux Corporation has a target capital structure of 65 percent

common stock and 35 percent debt. Its cost of equity is 14 percent, and
the cost of debt is 8 percent. The relevant tax rate is 30 percent.

What is the companys WACC? (Do not round intermediate calculations

and enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)

33.Filer Manufacturing has 8 million shares of common stock

outstanding. The current share price is $50, and the book value per
share is $5. The company also has two bond issues outstanding. The
first bond issue has a face value of $69.4 million and a coupon rate of
6.7 percent and sells for 108.6 percent of par. The second issue has a
face value of $59.4 million and a coupon rate of 7.2 percent and sells for
108.3 percent of par. The first issue matures in 9 years, the second in 26
years.

Suppose the companys stock has a beta of 1.3. The risk-free rate is 2.8
percent, and the market risk premium is 6.7 percent. Assume that the
overall cost of debt is the weighted average implied by the two
outstanding debt issues. Both bonds make semiannual payments. The
tax rate is 40 percent. What is the companys WACC? (Do not round
intermediate calculations and enter your answer as a percent rounded to
2 decimal places, e.g., 32.16.)

34.A firms WACC can be correctly used to discount the expected cash
flows of a new project when that project:
will be financed with the same proportions of debt and equity as those
currently used by the overall firm.
will be financed solely with internal equity.

35.The cost of preferred stock:

is set equal to the pretax cost of debt since it is a fixed income security.
is ignored by all firms when computing WACC.
is generally calculated using the overall firms beta.
is equal to the stocks dividend yield.
should be adjusted for taxes when computing WACC.

36.When computing WACC, you should use the:

pretax cost of debt because most corporations pay taxes at the same tax
rate.
aftertax cost of debt because interest is tax deductible.
pretax cost of debt because it is the actual rate the firm is paying
bondholders.
current yield because it is based on the current market price of debt.
pretax yield to maturity because it considers the current market price of
debt.

37.All else constant, the net present value of a typical investment project
increases when:
all cash inflows occur during the last year instead of periodically
throughout a projects life.
each cash inflow is delayed by one year.
the initial cost of a project increases.
the discount rate increases.
the rate of return decreases.

38.Graham and Harvey (2001) found that _____ were the two most
popular capital budgeting methods.
IRR and payback
IRR and NPV
discounted payback and NPV
IRR and modified IRR
NPV and PI
 39.The primary reason that company projects with positive net present
values are considered acceptable is that:
they return the initial cash outlay within three years or less.
the investment's cost exceeds the present value of the cash inflows.
they create value for the owners of the firm.
the project's rate of return exceeds the rate of inflation.
the required cash inflows exceed the actual cash inflows.

40.fitability index of an investment project is the ratio of the:

net present value of the projects cash outflows divided by the net
present value of its inflows.
net present value of every project cash flow to the initial cost.
present value of the Time 1 and subsequent cash flows to the initial cost.
internal rate of return to the current market rate of interest.
average net income to the average investment.

41.No matter how many forms of investment analysis you employ:

the internal rate of return will always produce the most reliable results.
only the first three years of a project ever affect its final outcome.
the actual results from a project may vary significantly from the expected
results.
the initial costs will generally vary considerably from the estimated costs.
a project will never be accepted unless the payback period is met.

42.Wilsons Market is considering two mutually exclusive projects that

will not be repeated. The required rate of return is 13.9 percent for
Project A and 12.5 percent for Project B. Project A has an initial cost of
$54,500, and should produce cash inflows of $16,400, $28,900, and
$31,700 for Years 1 to 3, respectively. Project B has an initial cost of
$69,400, and should produce cash inflows of $0, $48,300, and $42,100,
for Years 1 to 3, respectively. Which project, or projects, if either, should
be accepted and why?
Project B; because it has the largest total cash inflow
Project A; because its NPV is positive while Project Bs NPV is negative
Project B; because it has a negative NPV which indicates acceptance
neither project; because neither has an NPV equal to or greater than its
initial cost
Project A; because it has the higher required rate of return
43.Flatte Restaurant is considering the purchase of a $11,000 souffl
maker. The souffl maker has an economic life of four years and will be
fully depreciated by the straight-line method. The machine will produce
2,500 souffls per year, with each costing $2.90 to make and priced at
$5.75. Assume that the discount rate is 16 percent and the tax rate is 34
percent.

What is the NPV of the project? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)

NPV $

Should the company make the purchase?

No

Yes

44.Down Under Boomerang, Inc., is considering a new three-year

expansion project that requires an initial fixed asset investment of $2.64
million. The fixed asset will be depreciated straight-line to zero over its
three-year tax life, after which it will be worthless. The project is
estimated to generate $2,060,000 in annual sales, with costs of
$755,000. The tax rate is 35 percent and the required return is 13
percent.

What is the projects NPV? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)

NPV $

45.What is the net present value of a project with an initial cost of

$36,900 and cash inflows of $13,400, $21,600, and $10,000 for Years 1
to 3, respectively? The discount rate is 13 percent.