Ashworth C09 Full Course (All Exams and Assignments)

Ashworth C09 Full Course (All Exams and Assignments) in $97 only

Exam1

Part 1 of 1 – 100.0/ 100.0 Points

Question 1 of 20

5.0/ 5.0 Points

Bonds are bought and sold in __________ markets.

A. equity

B. debt

C. derivatives

D. foreign exchange

Question 2 of 20

5.0/ 5.0 Points

Of the following, which group would be considered INTERNAL PLAYERS of the firm?

A. the finance manager

B. the shop foreman

C. the human resources manager

D. all of the above

Question 3 of 20

Question 17 of 20

5.0/ 5.0 Points

Of the following activities, which is MOST likely to be an interaction between the financial manager and the information systems manager?

A. developing a system to bill customers, pay suppliers, and track inventory

B. costing of products

C. setting credit policies

D. determining the appropriate pricing of products

Question 18 of 20

5.0/ 5.0 Points

__________ is the name given to the processes surrounding recognition of the principal-agent problem and ways to align agents with the interests of the principals.

A. Principal theory

B. Interested party theory

C. Agency theory

D. Compensation process theory

Question 19 of 20

5.0/ 5.0 Points

Which of the following is NOT an activity of a financial institution or market?

A. bringing together buyers and sellers of financial assets

B. providing a market for the transaction of financial assets

C. providing information to buyers and/or sellers of financial assets

D. all are activities of financial institutions.

Question 20 of 20

5.0/ 5.0 Points

Financial institutions and markets __________ .

A. are the organized financial intermediaries and the forums that promote the cycle of money.

B. compose the set of financial activities that support the operations of a business.

C. are centered on the purchase and sale of financial assets.

D. are concerned only with the addition of a multinational element to all finance activities.

Exam 2

Part 1 of 1 – 90.0/ 100.0 Points

Question 1 of 20 5.0/ 5.0 Points

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 2 of 20 5.0/ 5.0 Points

A current ratio greater than one can tell us that the company __________.

A. should be able to cover the current liabilities

B. should be able to keep away from short-term cash problems

C. may have too much capital tied up in current assets

D. all of these

Question 3 of 20 5.0/ 5.0 Points

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 4 of 20 5.0/ 5.0 Points

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 5 of 20 5.0/ 5.0 Points

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 6 of 20 5.0/ 5.0 Points

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 7 of 20 5.0/ 5.0 Points

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 8 of 20 0.0/ 5.0 Points

Which of the statements below is FALSE?

A. The purpose of studying financial statements is to understand those portions of the statements that have relevance for financial decision making.

B. We need to understand how to interpret and use the information presented in financial statements to form a picture of the financial profile of the firm.

C. Accounting, it has been said, looks back to where a company has been — somewhat like looking through a rear view mirror.

D. Accounting and finance view the numbers in the same way.

Question 9 of 20 5.0/ 5.0 Points

Because financial ratios can vary across industries, it is __________ these ratios by industry. ?

A. not necessary to study

B. unimportant to benchmark

C. important to benchmark

D. futile to examine

Question 10 of 20 5.0/ 5.0 Points

Which of the following are liquidity ratios?

A. current ratio

B. the quick ratio

C. the cash ratio

D. all of the above

Question 11 of 20 0.0/ 5.0 Points

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 12 of 20 5.0/ 5.0 Points

__________ break(s. down the return-on-equity into three components. ?

A. The DuPont Model

B. Market value ratios

C. Profitability ratios

D. Asset management ratios

Question 13 of 20 5.0/ 5.0 Points

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 14 of 20 5.0/ 5.0 Points

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 __________ for the period.

A. EBIT

B. after-tax income

C. net income

D. taxable income

Question 15 of 20 5.0/ 5.0 Points

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 16 of 20 5.0/ 5.0 Points

__________ 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 17 of 20 5.0/ 5.0 Points

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

A. accounting identity

B. computing identity

C. investing identity

D. financing identity

Question 18 of 20 5.0/ 5.0 Points

Which of the statements below is FALSE?

A. When the current ratio is greater than one, we are also saying that net working capital is positive as current assets are greater than current liabilities.

B. Financial leverage ratios deal with long-term solvency and the use of debt as a financing tool.

C. The debt ratio is total assets minus total equity divided by equity.

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

Question 19 of 20 5.0/ 5.0 Points

Which of the statements below is TRUE?

A. DuPont analysis shows that ROE is

X X

B. DuPont analysis shows that ROE is

X X

C. DuPont analysis shows that ROE is

X X

D. DuPont analysis shows that ROE is

X X

Question 20 of 20 5.0/ 5.0 Points

The purpose of studying financial statements is__________.

A. to mechanically build portfolio analysis

B. to understand those portions of the statements that have relevance for financial decision making

C. to primarily investigate all portions of the statements that have relevance for dividend policy

D. to mechanically learn how to read and understand footnotes

Exam 3

Part 1 of 1 – 95.0/ 100.0 Points

Question 1 of 20

5.0/ 5.0 Points

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 2 of 20

5.0/ 5.0 Points

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 3 of 20

5.0/ 5.0 Points

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 4 of 20

5.0/ 5.0 Points

Your grandparents leave on their dream vacation to Antarctica in two years. The cruise vacation will cost them $25,000. If they have already saved $23,500 and are investing it at a rate of 2.75% per year, will they have saved enough money for their trip?

A. No, because they forgot to factor in long underwear expenses.

B. Yes, to have enough money they would have already needed to save $23,375.

C. Yes, to have enough money they would have already needed to save $23,680.

D. No, to have enough money they would have already needed to save $23,680.

Question 5 of 20

5.0/ 5.0 Points

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 6 of 20

5.0/ 5.0 Points

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 7 of 20

5.0/ 5.0 Points

To determine the present value of a future amount, one should _________ the future cash flows.

A. annuitize

B. compound

C. discount

D. multiply

Question 8 of 20

5.0/ 5.0 Points

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 9 of 20

5.0/ 5.0 Points

Your trust fund will pay you $100,000 in six years when you turn 25. A shady financial institution has encouraged you to sign away the rights to your trust fund in exchange for cash today. Would you prefer that the financial institution use a discount rate of 8% or 10% to determine the value of your lump sum payment? Why?

A. Use 8% because the lump sum payment of $62,741 is greater than the 10% discounted value of $55,839.

B. Use 10% because the lump sum payment of $62,741 is greater than the 10% discounted value of $55,839.

C. Use 8% because the lump sum payment of $63,017 is greater than the 10% discounted value of $56,447.

D. Use 10% because the lump sum payment of $63,017 is greater than the 10% discounted value of $56,447.

Question 10 of 20

5.0/ 5.0 Points

A never-ending stream of equal periodic, end-of-the-period cash flows is called a/an__________.

A. annuity

B. annuity due

C. perpetuity

D. amortization

Question 11 of 20

5.0/ 5.0 Points

An investment promises a payoff of $195 two and one-half years from today. At a discount rate of 7.5% per year, what is the present value of this investment?

A. $162.03

B. $162.75

C. $169.47

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

Question 12 of 20

5.0/ 5.0 Points

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 13 of 20

5.0/ 5.0 Points

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 14 of 20

5.0/ 5.0 Points

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 interest earned in year two is $12.00 and year one is $12.72.

B. The interest earned in year one is $12.00 and year two is $12.72.

C. The FV is $224.00.

D. The future value would be greater if the interest rate were lower.

Question 15 of 20

5.0/ 5.0 Points

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 ×

Question 16 of 20

0.0/ 5.0 Points

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 17 of 20

5.0/ 5.0 Points

A series of equal periodic finite cash flows that occur at the beginning of the period are known as a/an__________.

A. ordinary annuity

B. annuity due

C. perpetuity

D. amortization

Question 18 of 20

5.0/ 5.0 Points

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 19 of 20

5.0/ 5.0 Points

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 20 of 20

5.0/ 5.0 Points

You have purchased a Treasury bond that will pay $10,000 to your newborn child in 15 years. If this bond is discounted at a rate of 3.875% per year, what is today’s price (present value. for this bond?

A. $8,417

B. $8,500

C. $5,654

D. $10,000

Exam 5

Part 1 of 2 – Lesson 4 Questions42.5/ 50.0 Points

Question 1 of 40

2.5/ 2.5 Points

Which of the statements below is FALSE?

A. It is common for companies to issue preferred stock with the right to convert to common shares after a specific waiting period.

B. Preferred stock does not have a maturity date.

C. Preferred stock cannot be converted into common stock.

D. Preferred shareholders’ dividend claims take precedence over common shareholders’ dividend claims.

Question 2 of 40

0.0/ 2.5 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 3 of 40

2.5/ 2.5 Points

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

A. Return

B. Diversification

C. Uncertainty

D. Certainty

Question 4 of 40

2.5/ 2.5 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 5 of 40

2.5/ 2.5 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 6 of 40

2.5/ 2.5 Points

Preferred stock __________.

A. reflects residual ownership of a company

B. represents a preferential claim on dividends

C. will be “paid” before the bondholders

D. always has a legal and specific claim to a fixed amount (listed as a liability.

Question 7 of 40

2.5/ 2.5 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 8 of 40

2.5/ 2.5 Points

The Security Market Line has __________ .

A. a positive slope

B. a negative slope

C. no slope

D. a beta of 1.0

Question 9 of 40

2.5/ 2.5 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 10 of 40

2.5/ 2.5 Points

The __________ is the annual coupon payment divided by the current price of the bond, and is not always an accurate indicator.

A. current yield

B. yield to maturity

C. bond discount rate

D. coupon rate

Question 11 of 40

2.5/ 2.5 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 12 of 40

2.5/ 2.5 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 13 of 40

2.5/ 2.5 Points

Which of the following investments is considered to be default risk-free?

A. currency options

B. AAA rated corporate bonds

C. common stock

D. Treasury bills

Question 14 of 40

0.0/ 2.5 Points

Which of the following statements is TRUE?

A. Preferred stock usually has a stated or par value and, like bonds, this par value is not repaid at maturity because preferred stocks do not have a maturity date.

B. The par value for preferred stock, unlike bonds, is never paid back.

C. A preferred stock’s cash dividend due each year is based on the stated dividend rate times the market value of the stock.

D. Some preferred stocks are cumulative in dividends, meaning that if a company skips a cash dividend, it must pay it at some point in the future.

Question 15 of 40

2.5/ 2.5 Points

Which of the following are issued with the shortest time to maturity?

A. Treasury bills

B. Treasury notes

C. Treasury bonds

D. Treasury stocks

Question 16 of 40

2.5/ 2.5 Points

 

Question 28 of 40

2.5/ 2.5 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

Question 29 of 40

0.0/ 2.5 Points

In the NPV Model, all cash flows are stated __________ .

A. in future value dollars, and the total inflow is “netted” against the outflow to see if the net amount is positive or negative

B. in present value or current dollars, and the outflow is “netted” against the total inflow to see if the gross amount is positive or negative

C. in present value or current dollars, and the total inflow is “netted” against the initial outflow to see if the net amount is positive or negative

D. in future dollars, and the initial outflow is “netted” against the total inflow to see if the net amount is positive

Question 30 of 40

2.5/ 2.5 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 31 of 40

2.5/ 2.5 Points

Consider the following 10-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows each year for years one through 10 are $200,000 per year. What is the payback period without discounting cash flows?

A. 10 years

B. 5 years

C. 2.5 years

D. 0.5 years

Question 32 of 40

2.5/ 2.5 Points

The __________Model provides a single measure (return. but must apply risk outside the model, thus allowing for errors in rankings of projects.

A. Payback Period

B. Internal Rate of Return (IRR)

C. Net Present Value (NPV)

D. Profitability Index (PI)

Question 33 of 40

2.5/ 2.5 Points

Project A has an NPV of $20,000 and a PI of 1.2. Project B has an NPV of $10,000 and a PI of 1.3. Both projects have equal lives. Which project should be preferred if we are NOT concerned with capital rationing (that is, we are NOT concerned with being short of funds)?

A. We should prefer Project B since it has a higher PI.

B. We should compute the EAA before we make any decision.

C. We should prefer Project A since it has a higher NPV.

D. We should prefer Project B if it has a higher IRR.

Question 34 of 40

2.5/ 2.5 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 35 of 40

2.5/ 2.5 Points

The most popular alternative to NPV for capital budgeting decisions is the __________ method. ?

A. Internal Rate of Return (IRR)

B. Payback Period

C. Discounted Payback Period

D. Profitability Index (PI)

Question 36 of 40

2.5/ 2.5 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 40

2.5/ 2.5 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 38 of 40

2.5/ 2.5 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 39 of 40

2.5/ 2.5 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 40 of 40

2.5/ 2.5 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.

EXAM 7

Part 1 of 2 – Lesson 6 Questions45.0/ 50.0 Points

Question 1 of 40

2.5/ 2.5 Points

Richard works for a firm that is expanding into a completely new line of business. He has been asked to determine an appropriate Weighted Average Cost of Capital (WACC) for an average-risk project in the expansion division. Richard finds two publicly traded stand alone firms that produce the same products as his new division. The average of the two firms’ betas is 1.25. Further, he determines that the expected return on the market portfolio is 13.00% and the risk-free rate of return is 4.00%. Richard’s firm finances 50% of its projects with equity and 50% with debt, and has a before-tax cost of debt of 9% and a corporate tax rate of 30%. What is the WACC for the new line of business?

A. about 12.64%

B. about 13.00%

C. about 10.78%

D. about 11.29%

Question 2 of 40

2.5/ 2.5 Points

In capital budgeting, the __________ is the appropriate discount rate to use when calculating the Net Present Value (NPV) of an average-risk project. ?

A. Weighted Average Cost of Capital (WACC)

B. Internal Rate of Return (IRR)

C. cost of debt

D. cost of Equity

Question 3 of 40

2.5/ 2.5 Points

Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt?

A. Rd ÷ (1 + Tc)

B. Rd ÷ (1 – Tc)

C. Rd × (1 – Tc)

D. Rd × (1 + Tc)

Question 4 of 40

2.5/ 2.5 Points

If all projects are assigned the same discount rate for purposes of evaluation, which of the following could occur?

A. Low-risk projects could be rejected when in fact they are good investment choices.

B. High-risk projects could be accepted when in fact they are poor investment choices.

C. High-risk projects could be accepted when in fact they are good investment choices.

D. All of the choices could occur when using a single discount rate for all projects.

Question 5 of 40

2.5/ 2.5 Points

The __________ is the return that the bank or bondholder demands on new borrowing.

A. Internal Rate of Return (IRR.

B. Weighted Average Cost of Capital (WACC)

C. cost of equity

D. cost of debt

Question 6 of 40

0.0/ 2.5 Points

Use the security market line to determine the required rate of return for the following firm’s stock. The firm has a beta of 1.25, the required return in the market place is 10.50%, the standard deviation of returns for the market portfolio is 25.00%, and the standard deviation of returns for your firm is also 25.00%. ?

A. 13.13%

B. 10.50%

C. 31.25%

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

Question 7 of 40

2.5/ 2.5 Points

Which of the statements below is NOT true?

A. Preferred stock is a form of hybrid equity financing.

B. Retained earnings are a form of hybrid equity financing.

C. Common stock is a form of equity financing.

D. Corporate bonds are a form of debt financing.

Question 8 of 40

2.5/ 2.5 Points

Red Rider Custom Built Bikes (RRB. Inc. has a new project that will require the company to borrow $1,000,000. RRB has made an agreement with three lenders for the needed financing. Valley Bank will give $500,000 and wants 9% interest on the loan. Mountain View Bank will give $300,000 and wants 11% interest on the loan. Desert Bank will give $200,000 and wants 12% interest on the loan. What is the Weighted Average Cost of Capital (WACC) for this $1,000,000?

A. 10.67%

B. 10.20%

C. 10.00%

D. 9.67%

Question 9 of 40

2.5/ 2.5 Points

The cost of capital is __________ .

A. the cost of debt in a firm that finances with both debt and equity

B. the cost of each financing component multiplied by that component’s percent of the total borrowed

C. another name for the Internal Rate of Return (IRR)

D. all of the above

Question 10 of 40

2.5/ 2.5 Points

Your firm has issued a 20-year $1,000.00 par value semiannual 10% coupon bond that sells for $1,000 in the market place. The proceeds from the sale of the bond issue are $975.00 per bond. What is your firm’s yield to maturity on this new bond issue? Use a financial calculator to determine your answer.

A. 5.15%

B. 10.16%

C. 10.30%

D. 10.00%

Question 11 of 40

2.5/ 2.5 Points

It is necessary to assign the appropriate cost of capital for each individual project that reflects that project’s __________ when doing capital budgeting.

A. life

B. cash flows

C. riskiness

D. managers

Question 12 of 40

2.5/ 2.5 Points

__________ refers to the way a company finances itself through some combination of loans, bond sales, preferred stock sales, common stock sales, and retention of earnings.

A. Capital structure

B. Cost of capital

C. Working capital management

D. Net Present Value (NPV)

Question 13 of 40

2.5/ 2.5 Points

Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm’s existing capital structure. If the cost of debt is 11.00%, the cost of preferred stock is 12.00%, the cost of common stock is 17.00%, and the Weighted Average Cost of Capital (WACC) adjusted for taxes is 15.00%, what is the Internal Rate of Return (IRR) of the project, given the expected cash flows listed here? Use a financial calculator to determine your answer.

Category

T0

T1

T2

T3

Investment

-$3,000,000

Net Working Capital (NWC.

-$350,000

$350,000

Operating Cash Flow

$1,200,000

$1,200,000

$1,200,000

Salvage

$50,000

Total Incremental Cash Flow

-$3,350,000

$1,200,000

$1,200,000

$1,600,000

A. About 13.11%

B. About 12.02%

C. About 11.16%

D. About 8.94%

Question 14 of 40

2.5/ 2.5 Points

Which of the following would be classified as debt lenders for a firm?

A. preferred shareholders, banks, and nonbank lenders

B. nonbank lenders, common shareholders, and commercial banks

C. preferred shareholders, common shareholders, and suppliers

D. suppliers, nonbank lenders, and commercial banks

Question 15 of 40

2.5/ 2.5 Points

The following information comes from the Galaxy Construction balance sheet. The value of common stock is $10,000, retained earnings equal $7,000, total common equity equals $17,000, preferred stock has a value of $3,000, and long-term debt totals $15,000. If the cost of debt is 8.00%, preferred stock has a cost of 10.00%, common stock has a cost of 12.00%, and the firm has a corporate tax rate of 30%, calculate the firm’s Weighted Average Cost of Capital (WACC) adjusted for taxes.

A. 10.11%

B. 10.00%

C. 9.09%

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

Question 16 of 40

2.5/ 2.5 Points

The cost of debt could be which of the following?

A. the required return on money borrowed as a long-term loan from a bank

B. the required return on money borrowed from a venture capitalist

C. the yield-to-maturity on money raised by selling bonds

D. All of the choices above could be considered the cost of debt.

Question 17 of 40

0.0/ 2.5 Points

The following market information was gathered for the ACME corporation. The common stock is selling for $40.00 per share and there are 100,000 shares outstanding. Retained earnings equal $400,000, preferred stock has 1,000 shares outstanding, selling at $120.00 per share, and 500 outstanding long-term bonds selling for $1,035.00 each. For purposes of estimating the firm’s Weighted Average Cost of Capital (WACC) what are the market value weights of long-term debt, preferred stock, and equity?

A. D/V = 11.16%, PS/V = 2.59%, and E/V = 86.25%

B. D/V = 10.27%, PS/V = 2.38%, and E/V = 87.34%

C. D/V = 10.78%, PS/V = 3.08%, and E/V = 86.14%

D. D/V = 33.33%, PS/V = 33.33%, and E/V = 33.33%

Question 18 of 40

2.5/ 2.5 Points

Red Rider Bike Shop (RRBS) has an adjusted Weighted Average Cost of Capital (WACC) of 8.56%. The company has a capital structure consisting of 60% equity and 40% debt, a cost of equity of 11.00%, a before-tax cost of debt of 7.00%, and a tax rate of 30%. RRBS is considering expanding by building a new shop in a distant city and considers the project to be riskier than the current operation. RRBS has an existing beta of 1.0, the required return on the market portfolio to be 11.00%, the risk-free rate to be 3.00%, and the beta for the new project to be 1.30. Given this information, and assuming the cost of debt will not change if RRBS undertakes the new project, what adjusted WACC should be used in decision-making?

 

Question 29 of 40

2.5/ 2.5 Points

Lipscomb is set to establish a reorder policy for his remote snack bar located on Vacation Island. He sells 10 cases of soda per day and has a lead-time for delivery of one week. Occasionally, bad weather or mechanical difficulty can delay his delivery by up to three days. At what point should Lipscomb reorder (how many cases on hand) if he wants to also compensate for unexpected order delays?

A. 30 cases

B. 70 cases

C. 100 cases

D. There is not enough information to answer this question

Question 30 of 40

2.5/ 2.5 Points

Using the information provided, what is the inventory turnover for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2009

Cash Sales $1,500,000

Credit Sales $7,500,000

Total Sales $9,000,000

COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts

12/31/2009 12/31/2008 Change

Accounts Receivable $270,000 $240,000 $30,000

Inventory $125,000 $100,000 $25,000

Accounts Payable $110,000 $90,000 $20,000

A. 23.53 times

B. 53.33 times

C. 48.00 times

D. 60.00 times

Question 31 of 40

2.5/ 2.5 Points

Travel and Tow Trailers Inc. makes small trailers for light-duty towing behind SUVs and small pickup trucks. Its trailers typically sell for $2,500. Many of its customers have asked for credit terms to aid in purchasing the trailers. The firm’s finance department has estimated the following profile for its light-duty trailers and customer base:

Annual sales: 10,000 trailers

Annual production costs per trailer: $1,500

Lost sales if credit is not provided for customers: 2,000 trailers

Default rate if all customers purchase on credit: 3.00%

What is the change in the profit margin if the firm moves from a cash-only policy to a credit policy?

A. $1,250,000

B. $8,000,000

C. $9,250,000

D. $15,000,000

Question 32 of 40

2.5/ 2.5 Points

Using the information provided, what is the accounts payable cycle for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2009

Cash Sales $1,500,000

Credit Sales $7,500,000

Total Sales $9,000,000

COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts

12/31/2009 12/31/2008 Change

Accounts Receivable $270,000 $240,000 $30,000

Inventory $125,000 $100,000 $25,000

Accounts Payable $110,000 $90,000 $20,000

A. 4.06 days

B. 4.87 days

C. 6.08 days

D. 24.33 days

Question 33 of 40

2.5/ 2.5 Points

Using the information provided, what is the length of the production cycle for the firm?

Perfect Purchase Electronics

Selected Income Statement Items, 2009

Cash Sales $1,500,000

Credit Sales $7,500,000

Total Sales $9,000,000

COGS $6,000,000

Perfect Purchase Electronics

Selected Balance Sheet Accounts

12/31/2009 12/31/2008 Change

Accounts Receivable $270,000 $240,000 $30,000

Inventory $125,000 $100,000 $25,000

Accounts Payable $110,000 $90,000 $20,000

A. 6.08 days

B. 7.60 days

C. 53.33 days

D. 6.84 days

Question 34 of 40

2.5/ 2.5 Points

Which of the following is NOT true of the cash conversion cycle?

A. It is the net 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.

B. Cash Conversion Cycle = Production Cycle + Collection Cycle – Payment Cycle

C. Cash Conversion Cycle = Production Cycle + Collection Cycle + Payment Cycle

D. The cash conversion cycle essentially measures how quickly a company can convert its products or services into cash.

Question 35 of 40

2.5/ 2.5 Points

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. accounts receivable cycle

C. current ratio

D. business operating cycle

Question 36 of 40

0.0/ 2.5 Points

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

A. accounts receivable cycle

B. business operating cycle

C. cash conversion cycle

D. production cycle

Question 37 of 40

2.5/ 2.5 Points

Ready Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer. Ready Tees plans on ordering t-shirts 12 times over the next year. Ready Tees 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. $6,000

C. $10,000

D. $12,000

Question 38 of 40

0.0/ 2.5 Points

Travel and Tow Trailers Inc. makes small trailers for light-duty towing behind SUVs and small pickup trucks. Its trailers typically sell for $2,500. Many of its customers have asked for credit terms to aid in purchasing the trailers. The firm’s finance department has estimated the following profile for its light-duty trailers and customer base:

Annual sales: 10,000 trailers

Annual production costs per trailer: $1,500

Lost sales if credit is not provided for customers: 2,000 trailers

Default rate if all customers purchase on credit: 3.00%

What is the profit if the firm has a credit policy?<o:p></o:p>

A. $25,000,000

B. $9,250,000

C. $450,000

D. $8,000,000

Question 39 of 40

2.5/ 2.5 Points

A __________ inventory item is an item that is not used in current operations but is serving a back-up role in case the current item fails during operation.

A. type C

B. redundant

C. reticent

D. beta generation

Question 40 of 40

2.5/ 2.5 Points

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 paying commissions on sales, and a policy for collecting overdue bills

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 accounting for depreciation, and a policy on paying commissions on sales

Exam 8

Part 1 of 1 – 90.0/ 100.0 Points

Question 1 of 20

5.0/ 5.0 Points

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 2 of 20

5.0/ 5.0 Points

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 3 of 20

5.0/ 5.0 Points

According to the text, which of the following four cash flows should be LAST in order of priority for a firm?

A. cash to pay off debts in a timely fashion

B. cash to maintain operations

C. cash dividends

D. cash for reinvesting

Question 4 of 20

5.0/ 5.0 Points

_________ arise(s. from differences in customs, social norms, attitudes, assumptions, and expectations of the local society in a host country.

A. Cultural risk

B. Political risk

C. Social fads

D. Similarities in business beliefs

Question 5 of 20

5.0/ 5.0 Points

Financial leverage is the degree to which a firm or individual utilizes __________ .

A. borrowed money to pay wages

B. borrowed money to pay dividends

C. borrowed money to magnify equity earnings

D. borrowed money to diminish equity earnings

Question 6 of 20

5.0/ 5.0 Points

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 7 of 20

5.0/ 5.0 Points

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 8 of 20

5.0/ 5.0 Points

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 9 of 20

5.0/ 5.0 Points

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 10 of 20

5.0/ 5.0 Points

Which of the following is NOT a reason for a high-dividend-payout policy?

A. convenient and direct deposit of cash dividend

B. avoidance of transaction costs for selling shares

C. higher potential future returns for shareholders

D. cash payments today versus uncertain cash payments tomorrow

Question 11 of 20

5.0/ 5.0 Points

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.

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 12 of 20

5.0/ 5.0 Points

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 13 of 20

5.0/ 5.0 Points

A __________ is a separate entity and in that capacity can borrow from banks, bondholders, preferred stockholders, and common shareholders. ?

A. limited partnership

B. sole proprietorship

C. government organization

D. public company

Question 14 of 20

5.0/ 5.0 Points

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

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.”

Grading Rubric

Please refer to the rubric on the next page for the grading criteria for this assignment.

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.

Grading Rubric

Please refer to the rubric below for the grading criteria for this assignment.

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

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

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

4. 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

4. Briefly describe JIT inventory management.

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

6. 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.

Grading Rubric

Please refer to the rubric below for the grading criteria for this assignment.

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