Subject  Business 
Due By (Pacific Time)  12/10/2016 12:00 am 
Question #1
Which of the following individuals have unlimited liability based on their ownership interest?
I. general partner
II. sole proprietor
III. stockholder
IV. limited partner
II only
I and II only
II and IV only
I, II, and III only
I, II, and IV only
Question #2
Which of the following contribute to a corporation's ability to build large pools of capital?
I. limited liability
II. ease of transferring ownership
III. separation between the life of the business and the life of the owner
IV. double taxation of profits
V. agency costs
I only
I and III only
I, III, and IV only
I, II, and III only
I, II, III, and V only
Question #3
A company paid $1,300 in dividends and $920 in interest this past year. Common stock increased by $1,200 and retained earnings decreased by $310. What is the net income for the year?
$210
$990
$1,610
$1,910
$2,190
Question #4
The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the:
operating cash flow.
net capital spending.
net working capital.
cash flow from assets.
cash flow to stockholders.
Question #5
Which one of the following accurately describes the three parts of the DuPont identity?
operating efficiency, equity multiplier, and profitability ratio
financial leverage, operating efficiency, and profitability ratio
equity multiplier, profit margin, and total asset turnover
debtequity ratio, capital intensity ratio, and profit margin
return on assets, profit margin, and equity multiplier
Question #6
A company had the following current account values. What effect did the change in net working capital have on the firm's cash flows for the year? 


Beginning of Year 

End of Year 

Cash 


$179 



$164 


Accounts receivable 


415 



480 


Inventory 


987 



923 


Accounts payable 


562 



649 


net use of cash of $73
net use of cash of $88
net source of cash of $86
net source of cash of $101
net source of cash of $135
Question #7
A woman opened a savings account this morning. Her money will earn 3.5% interest, compounded annually. After four years, her savings account will be worth $5,000. Assume she will not make any withdrawals. Given this, which one of the following statements is true?
She deposited more than $5,000 this morning.
She is earning simple interest on her savings.
She could have deposited less money today and still had $5,000 in four years if she could have earned a higher rate of interest.
The present value of her account is $5,000.
She could earn more interest on this account if she withdrew her interest earnings each year.
Question #8
Your grandmother has promised to give you $10,000 when you graduate from college. She is expecting you to graduate three years from now. What happens to the present value of this gift if you speed up your graduation by one year and graduate two years from now?
remains constant
increases
decreases
becomes negative
cannot be determined from the information provided
Question #9
You want to have $1 million in your savings account when you retire. You plan on investing a single lump sum today to fund this goal. You are planning on investing in an account which will pay 7.5% annual interest. Which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire?
I. Invest in a different account paying a higher rate of interest.
II. Invest in a different account paying a lower rate of interest.
III. Retire later.
IV. Retire sooner.
I only
II only
I and III only
I and IV only
II and III only
Question #10
Assume the total cost of a college education will be $220,000 when your child enters college in 17 years. You presently have $60,000 to invest. What rate of interest must you earn on your investment to cover the cost of your child's college education?
9.22%
8.50%
7.94%
8.25%
6.81%
Question #11
You just purchased an annuity that will pay you $24,000 a year for 25 years, starting today. What was the purchase price if the discount rate is 8.5% compounded annually?
$241,309
$245,621
$251,409
$258,319
$266,498
Question #12
You are comparing two annuities with equal present values. The applicable discount rate is 7.25%. One annuity pays $2,500 on the first day of each year for 15 years. How much does the second annuity pay each year for 15 years if it pays at the end of each year? (Hint: You are dealing with an annuity due and an ordinary annuity where their present values are equal to each other.)
$2,331.00
$2,266.67
$2,500.00
$2,390.50
$2,681.25
Question #13
A woman plans on saving $2,000 a year and expects to earn an annual rate of 8.8%. How much will she have in her account at the end of 43 years?
$806,429
$838,369
$997,407
$831,532
$908,316
Question #14
A bond has a market price that exceeds its face value. Which one of these features currently applies to this bond?
discount bond
yield to maturity equal to the coupon rate
currently selling at par
yield to maturity greater than coupon rate
yield to maturity less than the coupon rate
Question #15
A company offers 6.5% coupon bonds with semiannual payments and a yield to maturity of 6.94%. The bonds mature in seven years. What is the market price per bond if the face value is $1,000?
$989.70
$975.93
$996.48
$902.60
$913.48
Question #16
Company A currently pays an annual dividend of $1.46 a share and plans on increasing that amount by 2.75% annually. Company B currently pays an annual dividend of $1.42 a share and plans on increasing its dividend by 3.10% annually. Assume that both stocks are valued using a constant dividend growth model. Given this information, you know for certain that the stock of Company B has a higher ______ than the stock of Company A.
rev: 07_30_2013_QC_33164
market price
dividend yield
capital gains yield
total return
real return
Question #17
A company made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.94 a share. Secondly, all dividends after that will decrease by 1.25% annually. What is the value of this stock at a discount rate of 14.5%?
$12.32
$12.10
$14.82
$14.51
$14.21
Question #18
Which one of the following is the most likely reason why a stock price might not react at all on the day that new information related to the stock's issuer is released? Assume the market is semistrong form efficient.
Company insiders were aware of the information prior to the announcement.
Investors do not pay attention to daily news.
Investors tend to overreact.
The news was positive.
The information was expected.
Question #19
A stock had returns of 6%, 22%, 18%, 12%, and 2% over the past five years. What is the standard deviation of these returns?
18.74%
10.21%
11.68%
15.52%
13.49%
Question #20
Which one of the following is defined as a risk that affects most securities in a market?
unsystemic
diversifiable
systemic
assetspecific
total
Question #21
What is the expected return on a portfolio that is invested 25% in stock A, 55% in stock B, and the remainder in stock C? 
State of 
Probability of 
Rate of Return 



Stock A 
Stock B 
Stock C 
Boom 
5% 
19% 
9% 
6% 
Normal 
45 
11 
8 
13 
Recession 
50 
23 
5 
25 
rev: 12_10_2015_QC_CS35939
1.06%
2.38%
2.99%
5.93%
6.10%
Question #22
A company has preferred stock outstanding that pays a $7 fixed dividend and is currently selling for $49 a share. The market rate of return is 14% and the firm's tax rate is 37%. What is the firm's cost of preferred stock?
13.77%
13.29%
13.67%
14.29%
14.54%
Question #23
A company has a pretax cost of debt of 7.6%, a cost of equity of 16.8%, and a cost of preferred stock of 9.1%. The firm has 220,000 shares of common stock outstanding at a market price of $27 a share. There are 25,000 shares of preferred stock outstanding at a market price of $41 a share. The bond issue has a face value of $550,000 and is priced at 101.2% of face value. The company's tax rate is 34%. What is the firm's weighted average cost of capital?
15.18%
10.84%
11.32%
12.60%
14.88%
Question #24
The internal rate of return is defined as the:
maximum rate of return a firm expects to earn on a project.
rate of return a project will generate if the project is financed solely with internal funds.
discount rate that equates the net cash inflows of a project to zero.
discount rate which causes the net present value of a project to equal zero.
discount rate that causes the profitability index for a project to equal zero.
Question #25
A project will produce cash inflows of $3,100 a year for three years with a final cash inflow of $4,400 in Year 4. The project's initial cost is $10,400. What is the net present value if the required rate of return is 16%?
$311.02
$1,007.66
$1,650.11
$2,188.98
$1,168.02
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