1.Regatta, Inc., has six-year bonds
outstanding that pay a 8.25 percent coupon rate. Investors buying the bond
today can expect to earn a yield to maturity of 6.875 percent. What should the
companyâ€™s bonds be priced at today? Assume annual coupon payments. (Round to
the nearest dollar.)
2. A cost which remains constant per unit at various levels of activity is a:
â€¢ manufacturing cost
â€¢ mixed cost
â€¢ fixed cost
â€¢ variable cost
3. External financing needed: Jockey
Company has total assets worth $4,417,665. At year-end it will have net income
of $2,771,342 and pay out 60 percent as dividends. If the firm wants no
external financing, what is the growth rate it can support?
4. What decision criteria should
managers use in selecting projects when there is not enough capital to invest
in all available positive NPV projects?
â€¢ the discounted payback
â€¢ the profitability index
â€¢ the internal rate of return
â€¢ the modified internal rate of return
5. Jayadev Athreya has started his
first job. He will invest $5,000 at the end of each year for the next 45 years
in a fund that will earn a return of 10 percent. How much will Jayadev have at
the end of 45 years?
6. In a process cost system, product
costs are summarized:
â€¢ after each unit is produced.
â€¢ when the products are sold.
â€¢ on production cost
â€¢ on job cost sheets.
7. Gateway, Corp. has an inventory turnover of 5.6. What is the firmâ€™s daysâ€™s
sales in inventory?
8. Which of the following financial
statements is concerned with the company at a point in time?
â€¢ balance sheet
â€¢ retained earnings statement
â€¢ income statement
â€¢ statement of cash flows
9. Your firm has an equity multiplier
of 2.47. What is the debt-to-equity ratio?
10. Jack Robbins is saving for a new
car. He needs to have $21,000 for the car in three years. How much will he have
to invest today in an account paying 8 percent annually to achieve his target?
(Round to nearest dollar)
11. TuleTime Comics is considering a new show that will generate annual cash
flows of $100,000 into the infinite future. If the initial outlay for such a
production is $1,500,000 and the appropriate discount rate is 6 percent for the
cash flows, then what is the profitability index for the project?
12. Variance reports are:
â€¢ SEC financial reports
â€¢ external financial reports
â€¢ internal reports for
â€¢ all of these
13. The cash conversion cycle?
â€¢ shows how long the firm keeps its inventory before selling it.
â€¢ begins when the firm invests cash to purchase the raw materials that would be
used to produce the goods that the firm manufactures.
â€¢ estimates how long it takes on average for the firm to collect its
outstanding accounts receivables balance.
â€¢ begins when the firm
uses its cash to purchase raw materials and ends when the firm collects cash
payments on its credit sales.
14. Internal reports that review the
actual impact of decisions are prepared by:
â€¢ factory workers
â€¢ the controller
â€¢ management accountants
â€¢ department heads
15. Which of the following presents a
summary of changes in a firmâ€™s balance sheet from the beginning of an
accounting period to the end of that accounting period?
â€¢ the statement of
â€¢ the statement of working capital
â€¢ the statement of net worth
â€¢ the statement of cash flows
16. Next year Jenkins Traders will pay
a dividend of $3.00. It expects to increase its dividend by $0.25 in each of
the following three years. If their required rate of return if 14 percent, what
is the present value of their dividends over the next four years?
17. Process costing is used when:
â€¢ the production process
â€¢ costs are to be assigned to specific jobs.
â€¢ dissimilar products are involved
â€¢ production is aimed at fulfilling a specific customer order.
18. The break-even point is where:
â€¢ total variable costs equal total fixed costs.
â€¢ total sales equal total fixed costs.
â€¢ contribution margin
equals total fixed costs.
â€¢ total sales equal total variable costs.
19. Horizontal analysis is also known as:
â€¢ linear analysis
â€¢ common size analysis
â€¢ vertical analysis
â€¢ trend analysis
20. The accumulation of accounting data
on the basis of the individual manager who has the authority to make day-to-day
decisions about activities in an area is called:
â€¢ flexible accounting
â€¢ static reporting
â€¢ master budgeting
â€¢ responsibility accounting
21. The convention of consistency
refers to consistent use of accounting principles:
â€¢ among accounting periods
â€¢ within industries
â€¢ throughout the accounting period
â€¢ among firms
22. Which of the following is
considered a hybrid organizational form?
23. The process of evaluating financial
data that change under alternative courses of action is called:
contribution margin analysis
double entry analysis
24. Turnbull Corp. had an EBIT of $247
million in the last fiscal year. Its depreciation and amortization expenses
amounted to $84 million. The firm has 135 million shares outstanding and a
share price of $12.80. A competing firm that is very similar to Turnbull has an
enterprise value/EBITDA multiple of 5.40.
What is the enterprise value of
Turnbull Corp.? Round to the nearest million dollars.
25. Which of the following is an
advantage of corporations relative to partnerships and sole proprietorships?
legal liability for investors
harder to transfer ownership
most common form of organization
26. Teakap, Inc. has current assets of $1,456,312
and total assets of $4,812,369 for the year ending September 30, 2006. It also
has current liabilities of $1,041,012, common equity of $1,500,000 and retained
earnings of $1,468,347. How much long-term debt does the firm have?
27. Horizontal analysis is a technique
for evaluating a series of financial statement data over a period of time:
determine the amount and/or percentage increase or decrease that has taken
to determine which items are in error.
that has been arranged from the lowest
number to the highest number.
that has been arranged from the highest
number to the lowest number.
28. M&M Proposition 1: Dynamo Corp.
produces annual cash flows of $150 and is expected to exist forever. The
company is currently financed with 75 percent equity and 25 percent debt. Your
analysis tells you that the appropriate discount rates are 10 percent for the
cash flows, and 7 percent for the debt. You currently own 10 percent of the
If Dynamo wishes to change its capital
structure from 75 percent equity to 60 percent equity and use the debt proceeds
to pay a special dividend to shareholders, how much debt should they use?
29. An activity that has a direct
cause-effect relationship with the resources consumed is a(n):
30. The group of users of accounting
information charged with achieving the goals of the business is its:
31. The major element in budgetary
the valuation of inventories
comparison of actual results with planned objectives.
the preparation of long-term plans
the approval of the budget by the
32. The most important information
needed to determine if companies can pay their current obligations is the:
relationship between short-term and
net income for this year
between current assets and current liabilities
projected net income for next year
33. An unrealistic budget is more
likely to result when it:
has been developed by all levels of
is developed with performance appraisal
usages in mind.
has been developed in a bottom up
been developed in a top down fashion.
34. When a company assigns the costs of
direct materials, direct labor, and both variable and fixed manufacturing
overhead to products, that company is using:
35. Firms that achieve higher growth
rates without seeking external financing:
less equity and/or are able to generate high net income leading to a high ROE.
are highly leveraged
Have a low plowback ratio
None of these
36. Ajax Corp. is expecting the
following cash flows – $79,000, $112,000, $164,000, $84,000, and $242,000 â€“
over the next five years. If the companyâ€™s opportunity cost is 15 percent, what
is the present value of these cash flows? (Round to the nearest dollar.)
37. Serox stock was selling for $20 two
years ago. The stock sold for $25 one year ago, and it is currently selling for
$28. Serox pays a $1.10 dividend per year. What was the rate of return for
owning Serox in the most recent year? (Round to the nearest percent.)
38. If a companyâ€™s weighted average
cost of capital is less than the required return on equity, then the firm:
debt in its capital structure
is perceived to be safe
is financed with more than 50% debt
39. How firms estimate their cost of
capital: The WACC for a firm is 13.00 percent. You know that the firmâ€™s cost of
debt capital is 10 percent and the cost of equity capital is 20% What
proportion of the firm is financed with debt?