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34 Cards in this Set

  • Front
  • Back
Allen Lumber Company had earnings after taxes of $750,000 in the year 2009 with 300,000 shares outstanding on December 31, 2009. On January 1, 2010, the firm issued 50,000 new shares. Because of the proceeds from these new shares and other operating improvements, 2010 earnings after taxes were 25 percent higher than in 2009. Earnings per share for the year 2010 were.

a. $2.14
b. $2.68
c. $3.13
d. None of the above
B
Elgin Battery Manufacturers had sales of $1,000,000 in 2009 and their cost of goods sold represented 70 percent of sales. Selling and administrative expenses were 10 percent of sales. Depreciation expense was $100,000 and interest expense for the year was $10,000. The firm's tax rate is 30 percent. What is the dollar amount of taxes paid?

a. $30,000
b. $117,000
c. $27,000
d. None of the above
C
Given the following, what is free cash flow?

Cash flow from operating activities $200,000
Capital Expenditures $50,000
Dividends $20,000

a. $270,000
b. $150,000
c. $130,000
d. $180,000
C
Assuming a tax rate of 40%, depreciation expenses of $500,000 will?

a. Reduce income by $200,000
b. Reduce taxes by $200,000
c. Reduce taxes by $500,000
c. Have no effect on income or taxes, since depreciation is not a cash expense.
B
The Bubba Corp. had earnings before taxes of $198,000 and sales of $1,980,000. If it is in the 51% tax bracket its after-tax profit margin is

a. 7.90%
b. 7.40%
c. 4.90%
d. 6.90%
C
ABC Co. has an average collection period of 50 days. Total credit sales for the year were $2,400,000. What is the balance in accounts receivable at year-end? (Use 360 days in a year. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

a. $333,333
b. $2,400,000
c. $343,333
d. $1,200,000
A
ABC Co. has an average collection period of 90 days. Total credit sales for the year were $6,000,000. What is the balance in accounts receivable at year-end?


a. $40,000
b. $2,250,000
c. $1,500,000
d. $150,000
C
A firm's long term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000.

a. current ratio = 1.5; quick ratio = 1.25
b. current ratio = 0.5; quick ratio = 1.25
c. current ratio = 2.5; quick ratio = 2.0
d. current ratio = 1.0; quick ratio = 2.0
A
A firm has operating profit of $210,000 after deducting lease payments of $30,000. Interest expense is $50,000. What is the firm's fixed charge coverage?

a, 2.33x
b. 3.00x
c. 6.00x
d. 2.00x
B
Depending upon the state of the economy, Ables Manufacturing Corp. expects to sell the following number of prefabricated buildings. The probability of each state is indicated. What is the expected value of the total sales projection?

Outcome Probability Units Price
A - Bad 0.15 75 $20
B - Normal 0.60 150 $35
C - Great 0.25 200 $45

a. $5,625
b. $4,540
c. $12,800
d. None of these
A
XYZ Co. has forecasted June sales of 400 units and July sales of 700 units. The company maintains ending inventory equal to 125% of next month's sales. June beginning inventory reflects this policy. What is June's required production?

a. 775 units
b. 750 units
c. 425 units
d. -0- units
A
A firm has beginning inventory of 450 units at a cost of $10 each. Production during the period was 500 units at $12 each. If sales were 700 units, what is the cost of goods sold (assume FIFO)?

a. $8,000
b. $7,500
c. $8,100
d. $7,900
B
MG Lighting had sales of 500 units at $100 per unit last year. The marketing manager projects a 15 percent decrease in unit volume this year because a 10 percent price increase is needed to pass rising costs through to customers. Returned merchandise will represent 3.2 percent of total sales. What is your net dollar sales projection for this year?

a. $26,976
b. $69,344
c. $72,800
d. None of these
D
To save for her newborn son's college education, Lea Wilson will invest $1,000 at the beginning of each year for the next 18 years. The interest rate is 12 percent. What is the future value? Use Appendix C.

a. $7,690.
b. $62,440.
c. $34,931.
d. $63,440
B
Mr. Nailor invests $5,000 in a money market account at his local bank. He receives annual interest of 8% for 7 years. How much return will his investment earn during this time period? Use Appendix A.

a. $3,570
b. $6,254
c. $8,570
d. $2,915
A
Pedro Gonzalez will invest $5,000 at the beginning of each year for the next 9 years. The interest rate is 8 percent. What is the future value? Use Appendix C.

a. $67,435.
b. $58,471.
c. $62,440.
d. $72,435.
A
Ambrin Corp. expects to receive $2,000 per year for 10 years and $3,500 per year for the next 10 years. What is the present value of this 20 year cash flow? Use an 11% discount rate. Use Appendix B and Appendix D.

a. $19,034
b. $27,870
c. $32,389
d. none of these
A
Mr. Darden is selling his house for $200,000. He bought it for $164,000 ten years ago. What is the annual return on his investment? Use Appendix B.

a. 2%
b. Between 3% and 5%
c. 10%
d. None of these
A
Joe Nautilus has $210,000 and wants to retire. What return must his money earn so he may receive annual benefits of $30,000 for the next 10 years. Use Appendix D.

a. 12%
b. Greater than 15%
c. Between 12% and 13%
d. About 7%
D
Sydney saved $10,000 during her first year of work after college and plans to invest it for her retirement in 50 years. How much will she have available for retirement if she can make 8% on her investment? Use Appendix A.

a. $596,250
b. $2,953,000
c. $1,345,100
d. $469,020
D
If Gerry makes a deposit of $1,500 at the end of each quarter for 5 years, how much will he have at the end of the 5 years assuming a 12% annual return and quarterly compounding? Use Appendix C.

a. $30,000
b. $161,220
c. $108,078
d. $40,305
D
An issue of common stock's most recent dividend is $1.75. Its growth rate is 5.7%. What is its price if the market's rate of return is 7.7%?

a. $24.63
b. $87.50
c. $92.50
d. None of these
C
An issue of preferred stock is paying an annual dividend of $1.50. The growth rate for the firm's common stock is 5%. What is the preferred stock price if the required rate of return is 7%?

a. $21.43
b. $30.00
c. $22.50
d. None of these
A
An issue of common stock is expected to pay a dividend of $3 at the end of the year. Its growth rate is equal to 3%, and the current share price is $40. What is the required rate of return on the stock?

a. Between 14% and 17%
b. Between 10% and 12%
c. Between 12% and 14%
d. Between 7% and 10%
B
Debreu Beverages has an optimal capital structure that is 70% common equity, 20% debt, and 10% preferred stock. Debreu's pretax cost of equity is 9%. Its pretax cost of preferred equity is 7%, and its pretax cost of debt is also 5%. If the corporate tax rate is 35%, what is the weighed average cost of capital?

a. Between 7% and 8%
b. Between 10% and 12%
c. Between 9% and 10%
d. Between 8% and 9%
A
Expected cash dividends are $3.00, the dividend yield is 4%, flotation costs are 4% of price, and the growth rate is 3%. Compute cost of new common stock.

a. 7.2%
b. 7.00%
c. 4.2%
d. 6.9%
A
A firm's stock is selling for $65. The dividend yield is 6%. A 7% growth rate is expected for the common stock. The firm's tax rate is 40%. What is the firm's cost of retained earnings?

a. 8.16%
b. 13.00%
c. 12.35%
d. can not be determined.
B
Stone Inc. is evaluating a project with an initial cost of $9,500. Cash inflows are expected to be $1,500, $1,500 and $10,000 in the three years over which the project will produce cash flows. If the discount rate is 9%, what is the net present value of the project?

a. More than $800
b. Between $0 and $400
c. Less than $0
d. Between $400 and $800
A
A project's coefficient of variation is 0.55. The project has a positive coefficient of correlation of 0.20. The expected value is $1,200. What is one standard deviation?

a. $400.00
b. $1,200.00
c. $660.00
d. $220.00
C
A project's cash flows have a beta of 1.2, a standard deviation of $340, and a coefficient of variation of 0.40. What is the expected cash flow?

a. $500
b. $167
c. $850
d. $2,400
C
A $1,000 par value bond with a conversion price of $50 has a conversion ratio of

a. $20
b. 40 shares
c. $40
d. 20 shares
D
Vickrey Technology has had net income of $1,500,000 in the current fiscal year. There are 1,000,000 shares of common stock outstanding along with convertible bonds, which have a total face value of $8 million. The $8 million is represented by 5,000 different $1,000 bonds. Each $1,000 bond pays 4 percent interest. The conversion ratio is 30. The firm is in a 30 percent tax bracket. What is Vickrey's diluted earnings per share?

a. $1.43
b. $1.81
c. $2.00
d. None of these
A
acobs and Company has warrants outstanding, which are selling at a $2.50 premium above intrinsic value. Each warrant allows its owner to purchase one share of common stock at $26. If the common stock currently sells for $30, what is the warrant price?

a. $6.40
b. $7.25
c. $6.75
d. $6.50
D
The Rocky Scholes Swimwear's warrant is trading for $10.00. The warrant carries the option to purchase a half share of common stock for $50. What is the speculative premium if the stock price is $65?

a. $1.00
b. $2.50
c. $5.00
d. None of these.
B