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MGMT 303 Final Exam (Devry)
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MGMT 303 Final Exam (Devry) Page 1 1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4) 2. (TCO 4) There are several disadvantages to the payback method, among them: (Points : 4) payback ignores cash flows beyond the cutoff. 3. (TCO 3 and 4) You can ensure that an investment is expected to create value for (Points : 4) have a PI equal to zero. 4. (TCO 3 and 4) Portman’s is considering adding a new product to its lineup. This product is expected to generate sales for three years, after which time the product will be discontinued. What is the project’s net present value, if the firm wants to earn a 12 percent rate of return? Year 0 1 2 3 5. (TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points : 4) 4.18 years 6. (TCO 4) Ignoring the option to expand: (Points : 4) overestimates the internal rate of return on a project. 7. (TCO 4) ____________, refers to the situation a firm faces when it has positive net present value projects, but cannot obtain financing for those projects. (Points : 4) capital planning. 8. (TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points : 4) The net present value of the project is approximately $1,011 9. (TCO 4) Assume Company X plans to invest $60,000 in new computers. Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the second year depreciation amount under MACRS? (Points : 4) $12,000 10. (TCO 1 and 4) Assume a project has earnings before depreciation and taxes of $120,000, depreciation of $40,000, and that the firm has a 30 percent tax bracket. What are the after-tax cash flows for the project? (Points : 4) $56,000 11. (TCO 8) Which of the following statements is true regarding systematic risk? (Points : 4) is diversifiable 12. (TCO 8) Which statement is true regarding risk? (Points : 4) the expected return is usually the same as the actual return 13. (TCO 8) The stock of Hobby Town has an expected return of 8.8 percent. Given the information below, what is the expected return on this stock if the economy is normal? State of Economy Probability of State of Economy Rate of Return 6.43 percent 14. (TCO 8) You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock D? (Points : 4) 17.68 percent 15. (TCO 8) Stock A has an expected return of 14 percent and a beta of 1.3. Stock B has an expected return of 10 percent and a beta of .9. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? (Points : 4) 1.0 percent Page 2 1. (TCO 8) If the financial markets are strong form efficient, then: (Points : 4) 2. (TCO 5) Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at an after-tax cost of 8 percent and common equity at a cost of 20 percent. Assume debt and common equity each represent 50 percent of the firm’s capital structure. What is the weighted average cost of capital? (Points : 4) between 4% and 10% 3. (TCO 5, 6 and 7) An issue of common stock’s most recent dividend is $3.75. Its growth rate is eight percent. What is its price if the market’s rate of return is 16 percent? (Points : 4) 4. (TCO 5, 6 and 7) Which of the following is true regarding the cost of debt? (Points : 4) It is the return that the firm’s creditors demand on new borrowing. 5. (TCO 5) Which of the following is true regarding the cost of retained earnings? (Points : 4) it is irrelevant to the WACC 6. (TCO 4) A project has the following cash flows. What is the internal rate of return? Year 0 1 2 3 7. (TCO 5, 6 and 7) Which one of the following is a correct statement regarding a firm’s weighted average cost of capital (WACC)? (Points : 4) the WACC can be used as the required return for all new projects. 8. (TCO 5, 6 and 7) The preferred stock of Blue Sky Air pays an annual dividend of $7.25 a share and sells for $54 a share. The tax rate is 35 percent. What is the firm’s cost of preferred stock? (Points : 4) 8.56 percent 9. (TCO 2) Which one of the following statements is true concerning a bankruptcy? (Points : 4) a Chapter 7 bankruptcy is a reorganization proceeding. 10. (TCO 5) Which of the following statements is true regarding the cost of capital? (Points : 4) All other being equal, it is preferable to use market value weights than book value weights 11. (TCO 2) Select any actions that do not affect the cash account. (Points : 4) Goods are sold cash 12. (TCO 2) Which of the following statements is true? (Points : 4) The optimal credit policy minimizes the total cost of granting credit. 13. (TCO 2) All else constant, a decrease in the accounts receivable period will: (Points : 4) lengthen the accounts payable period. 14. (TCO 2) Highland, Inc. has the following estimated quarterly sales for next year. The accounts receivable period is 30 days. How much does the firm expect to collect in the fourth quarter? Assume that each month has 30 days. Q1 Q2 Q3 Q4 15. (TCO 1) Which one of the following actions best matches the primary goal of financial management? (Points : 4) increasing the net, working capital while lowering the long-term asset requirements
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MGMT 303 Final Exam (Devry)
http://www.fres-courses.com/product/mgmt-303-final-exam-devry |
MGMT 303 Final Exam (Devry) Page 1 1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4) 2. (TCO 4) There are several disadvantages to the payback method, among them: (Points : 4) payback ignores cash flows beyond the cutoff. 3. (TCO 3 and 4) You can ensure that an investment is expected to create value for (Points : 4) have a PI equal to zero. 4. (TCO 3 and 4) Portman’s is considering adding a new product to its lineup. This product is expected to generate sales for three years, after which time the product will be discontinued. What is the project’s net present value, if the firm wants to earn a 12 percent rate of return? Year 0 1 2 3 5. (TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points : 4) 4.18 years 6. (TCO 4) Ignoring the option to expand: (Points : 4) overestimates the internal rate of return on a project. 7. (TCO 4) ____________, refers to the situation a firm faces when it has positive net present value projects, but cannot obtain financing for those projects. (Points : 4) capital planning. 8. (TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points : 4) The net present value of the project is approximately $1,011 9. (TCO 4) Assume Company X plans to invest $60,000 in new computers. Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the second year depreciation amount under MACRS? (Points : 4) $12,000 10. (TCO 1 and 4) Assume a project has earnings before depreciation and taxes of $120,000, depreciation of $40,000, and that the firm has a 30 percent tax bracket. What are the after-tax cash flows for the project? (Points : 4) $56,000 11. (TCO 8) Which of the following statements is true regarding systematic risk? (Points : 4) is diversifiable 12. (TCO 8) Which statement is true regarding risk? (Points : 4) the expected return is usually the same as the actual return 13. (TCO 8) The stock of Hobby Town has an expected return of 8.8 percent. Given the information below, what is the expected return on this stock if the economy is normal? State of Economy Probability of State of Economy Rate of Return 6.43 percent 14. (TCO 8) You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock D? (Points : 4) 17.68 percent 15. (TCO 8) Stock A has an expected return of 14 percent and a beta of 1.3. Stock B has an expected return of 10 percent and a beta of .9. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? (Points : 4) 1.0 percent Page 2 1. (TCO 8) If the financial markets are strong form efficient, then: (Points : 4) 2. (TCO 5) Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at an after-tax cost of 8 percent and common equity at a cost of 20 percent. Assume debt and common equity each represent 50 percent of the firm’s capital structure. What is the weighted average cost of capital? (Points : 4) between 4% and 10% 3. (TCO 5, 6 and 7) An issue of common stock’s most recent dividend is $3.75. Its growth rate is eight percent. What is its price if the market’s rate of return is 16 percent? (Points : 4) 4. (TCO 5, 6 and 7) Which of the following is true regarding the cost of debt? (Points : 4) It is the return that the firm’s creditors demand on new borrowing. 5. (TCO 5) Which of the following is true regarding the cost of retained earnings? (Points : 4) it is irrelevant to the WACC 6. (TCO 4) A project has the following cash flows. What is the internal rate of return? Year 0 1 2 3 7. (TCO 5, 6 and 7) Which one of the following is a correct statement regarding a firm’s weighted average cost of capital (WACC)? (Points : 4) the WACC can be used as the required return for all new projects. 8. (TCO 5, 6 and 7) The preferred stock of Blue Sky Air pays an annual dividend of $7.25 a share and sells for $54 a share. The tax rate is 35 percent. What is the firm’s cost of preferred stock? (Points : 4) 8.56 percent 9. (TCO 2) Which one of the following statements is true concerning a bankruptcy? (Points : 4) a Chapter 7 bankruptcy is a reorganization proceeding. 10. (TCO 5) Which of the following statements is true regarding the cost of capital? (Points : 4) All other being equal, it is preferable to use market value weights than book value weights 11. (TCO 2) Select any actions that do not affect the cash account. (Points : 4) Goods are sold cash 12. (TCO 2) Which of the following statements is true? (Points : 4) The optimal credit policy minimizes the total cost of granting credit. 13. (TCO 2) All else constant, a decrease in the accounts receivable period will: (Points : 4) lengthen the accounts payable period. 14. (TCO 2) Highland, Inc. has the following estimated quarterly sales for next year. The accounts receivable period is 30 days. How much does the firm expect to collect in the fourth quarter? Assume that each month has 30 days. Q1 Q2 Q3 Q4 15. (TCO 1) Which one of the following actions best matches the primary goal of financial management? (Points : 4) increasing the net, working capital while lowering the long-term asset requirements
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MGMT 303 Final Exam (Devry)
http://www.fres-courses.com/product/mgmt-303-final-exam-devry |
MGMT 303 Final Exam (Devry) Page 1 1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4) 2. (TCO 4) There are several disadvantages to the payback method, among them: (Points : 4) payback ignores cash flows beyond the cutoff. 3. (TCO 3 and 4) You can ensure that an investment is expected to create value for (Points : 4) have a PI equal to zero. 4. (TCO 3 and 4) Portman’s is considering adding a new product to its lineup. This product is expected to generate sales for three years, after which time the product will be discontinued. What is the project’s net present value, if the firm wants to earn a 12 percent rate of return? Year 0 1 2 3 5. (TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points : 4) 4.18 years 6. (TCO 4) Ignoring the option to expand: (Points : 4) overestimates the internal rate of return on a project. 7. (TCO 4) ____________, refers to the situation a firm faces when it has positive net present value projects, but cannot obtain financing for those projects. (Points : 4) capital planning. 8. (TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points : 4) The net present value of the project is approximately $1,011 9. (TCO 4) Assume Company X plans to invest $60,000 in new computers. Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the second year depreciation amount under MACRS? (Points : 4) $12,000 10. (TCO 1 and 4) Assume a project has earnings before depreciation and taxes of $120,000, depreciation of $40,000, and that the firm has a 30 percent tax bracket. What are the after-tax cash flows for the project? (Points : 4) $56,000 11. (TCO 8) Which of the following statements is true regarding systematic risk? (Points : 4) is diversifiable 12. (TCO 8) Which statement is true regarding risk? (Points : 4) the expected return is usually the same as the actual return 13. (TCO 8) The stock of Hobby Town has an expected return of 8.8 percent. Given the information below, what is the expected return on this stock if the economy is normal? State of Economy Probability of State of Economy Rate of Return 6.43 percent 14. (TCO 8) You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock D? (Points : 4) 17.68 percent 15. (TCO 8) Stock A has an expected return of 14 percent and a beta of 1.3. Stock B has an expected return of 10 percent and a beta of .9. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? (Points : 4) 1.0 percent Page 2 1. (TCO 8) If the financial markets are strong form efficient, then: (Points : 4) 2. (TCO 5) Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at an after-tax cost of 8 percent and common equity at a cost of 20 percent. Assume debt and common equity each represent 50 percent of the firm’s capital structure. What is the weighted average cost of capital? (Points : 4) between 4% and 10% 3. (TCO 5, 6 and 7) An issue of common stock’s most recent dividend is $3.75. Its growth rate is eight percent. What is its price if the market’s rate of return is 16 percent? (Points : 4) 4. (TCO 5, 6 and 7) Which of the following is true regarding the cost of debt? (Points : 4) It is the return that the firm’s creditors demand on new borrowing. 5. (TCO 5) Which of the following is true regarding the cost of retained earnings? (Points : 4) it is irrelevant to the WACC 6. (TCO 4) A project has the following cash flows. What is the internal rate of return? Year 0 1 2 3 7. (TCO 5, 6 and 7) Which one of the following is a correct statement regarding a firm’s weighted average cost of capital (WACC)? (Points : 4) the WACC can be used as the required return for all new projects. 8. (TCO 5, 6 and 7) The preferred stock of Blue Sky Air pays an annual dividend of $7.25 a share and sells for $54 a share. The tax rate is 35 percent. What is the firm’s cost of preferred stock? (Points : 4) 8.56 percent 9. (TCO 2) Which one of the following statements is true concerning a bankruptcy? (Points : 4) a Chapter 7 bankruptcy is a reorganization proceeding. 10. (TCO 5) Which of the following statements is true regarding the cost of capital? (Points : 4) All other being equal, it is preferable to use market value weights than book value weights 11. (TCO 2) Select any actions that do not affect the cash account. (Points : 4) Goods are sold cash 12. (TCO 2) Which of the following statements is true? (Points : 4) The optimal credit policy minimizes the total cost of granting credit. 13. (TCO 2) All else constant, a decrease in the accounts receivable period will: (Points : 4) lengthen the accounts payable period. 14. (TCO 2) Highland, Inc. has the following estimated quarterly sales for next year. The accounts receivable period is 30 days. How much does the firm expect to collect in the fourth quarter? Assume that each month has 30 days. Q1 Q2 Q3 Q4 15. (TCO 1) Which one of the following actions best matches the primary goal of financial management? (Points : 4) increasing the net, working capital while lowering the long-term asset requirements
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