Mathematics
Which of the following cannot be engaged in managing the business?
Question 1 options:
a limited partner
a general partner
a sole proprietor
none of these
Question 2 (1 point)
One reason for the existence of agency problems between managers and share holders is that:
Question 2 options:
managers know how to manage the firm better than shareholders.
there is a separation of ownership and control of the firm.
shareholders have unreasonable expectations about managerial performance.
none of these.
Question 3 (1 point)
On June 23, 2008, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation, with the
payment to be made in 90 days on September 20. The goods were shipped to Rynex on July 2. The firm’s
accountants should recognize the sale on
Question 3 options:
June 23, 2008.
July 2, 2008.
September 20, 2008.
none of the above
Question 4 (1 point)
During the last year, Sigma Co had Net Income of $159, paid $15 in dividends, and sold new stock for $34.
Beginning equity for the year was $610. Ending equity was
Your Answer:
Question 5 (1 point)
The following items are components of a traditional balance sheet. How much are the total assets of the
firm?
Plant and equipment
$43,200
Common stock
15,000
Cash
8,000
Inventory
22,400
Bad debt reserve
6,000
Paid in excess
6,000
Accumulated depreciation
28,700
Accounts receivable
22,000
Your Answer:
Question 6 (1 point)
Brighton Corp. bought an oil rig exactly 6 years ago for $106,000,000. Brighton depreciates oil rigs
straight line over 10 years assuming no salvage value. The rig was just sold to British Petroleum for
$26,000,000. What Capital Gain/Loss will Brighton report on this transaction?
Your Answer:
Question 7 (1 point)
Walker Corporation conducted the following activities during 2001: (1) they sold 10,000 shares of their own
stock for $19.00 per share; (2) they issued bonds for which they received $495,000; (3) they paid dividends
to their stockholders totaling $81,000; (4) they sold a piece of equipment for $50,000 that they were
carrying on their books for $20,000; (5) they earned net income of $140,000. What would be shown on the
Statement of Cash Flows for “Cash from financing activities” based on the information above?
Your Answer:
Question 8 (1 point)
Given the following selected information on Cicalese’s Chocolate, Inc., calculate Cash Flow from Operating
Activities for 2001.
Last Year
This Year
EAT
$ 600,000
$ 720,000
Depreciation Exp.
100,000
140,000
Dividends
400,000
550,000
Accounts Receivable
1,500,000
2,000,000
Inventory
3,500,000
2,000,000
Accts. Payable/Accr.
350,000
500,000
Long-Term Debt
2,300,000
3,000,000
Common Stock
2,200,000
2,500,000
Retained Earnings
6,150,000
6,350,000
Your Answer:
Question 9 (1 point)
Cameron Balance Sheet
Accounts Payable
25
Accounts Receivable
64
Accruals
27
Accumulated Depreciation
(175)
Cash
30
Common Stock
120
Fixed Assets (gross)
390
Inventory
134
Long-Term Debt
200
Retained Earnings
65
What is Cameron Inc.’s Net Working Capital?
Your Answer:
Question 10 (1 point)
A firm’s current ratio is 1.1, and its quick ratio is 1.0. If its current liabilities are $13,100, what are
its inventories?
Your Answer:
Question 11 (1 point)
Iris Income Statement
Cost of Goods Sold
320
Depreciation Expense
35
Interest Expense
20
Operating Expense (excluding depreciation)
115
Sales
790
What was Iris Inc.’s earnings before interest and
taxes (EBIT)?
Your Answer:
Question 12 (1 point)
Iris Balance Sheet
Accounts Payable
35
Accounts Receivable
54
Accruals
30
Accumulated Depreciation
(175)
Cash
33
Common Stock
120
Fixed Assets (gross)
390
Inventory
135
Long-Term Debt
200
Retained Earnings
65
What is Iris Inc.’s Total Assets?
Your Answer:
Question 13 (1 point)
If firm A has a higher debt-to-equity ratio than firm B, then
Question 13 options:
firm A has a lower equity multiplier than firm B.
firm B has lower financial leverage than firm A.
firm B has a lower equity multiplier than firm A.
none of the above
Question 14 (1 point)
Flying Tigers, Inc., has net sales of $793,000 and accounts receivables of $150,000. What is the firm’s
accounts receivables turnover?
Your Answer:
Question 15 (1 point)
Reagan Corp. has reported a net income of $828,600 for the year. The company’s share price is $13.26, and
the company has 304,600 shares outstanding. Compute the firm’s price-earnings ratio.
Your Answer:
Question 16 (1 point)
You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the
annual rate of return on your investment?
Question 16 options:
9%
10%
11%
12%
Question 17 (1 point)
The First National Bank has agreed to lend you
$30,000 today, but you must repay $42,135 in 3 years. What rate is the bank is charging you?
Question 17 options:
13%
12%
11%
10%
Question 18 (1 point)
The Florida lottery agrees to pay the winner $271,000 at the end of each year for the next 20 years. What is
the future value of this prize if each payment is put in an account earning 0.09?
Your Answer:
Question 19 (1 point)
What is the future value of $1,500, placed in a saving account for four years if the account pays 0.07,
compounded quarterly?
Your Answer:
Question 20 (1 point)
Your brother, who is 6 years old, just received a trust fund that will be worth $24,000 when he is 21 years
old. If the fund earns 0.11 interest compounded annually, what is the value of the fund today?
Your Answer:
Question 21 (1 point)
If you were to borrow $8,800 over five years at 0.12 compounded monthly, what would be your monthly payment?
Your Answer:
Question 22 (1 point)
Your uncle promises to give you $700 per quarter for the next five years. How much is his promise worth
right now if the interest rate is 0.09 compounded quarterly?
Your Answer:
Question 23 (1 point)
A stock has an expected return of 0.08 and a variance of 0.23. What is Its coefficient of variation?
Your Answer:
Question 24 (1 point)
Use the following information to calculate your company’s expected return.
State
Probability
Return
Boom
20%
0.22
Normal
60%
0.12
Recession
20%
-0.16
Your Answer:
Question 25 (1 point)
You have invested in stocks J and M. From the following information, determine the beta for your portfolio.
Expected
Amount of
Return
Investment
Beta
Stock J
0.08
$100,000
1.34
Stock M
0.09
$300,000
0.64
Your Answer:
Question 26 (1 point)
Frazier Manufacturing paid a dividend last year of
$2, which is expected to grow at a constant rate of 5%. Frazier has a beta of
1.3. If the market is returning 11% and the risk-free rate is 4%, calculate the
value of Frazier’s stock.
Question 26 options:
$25.93
$31.33
$38.53
$41.63
Question 27 (1 point)
You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent in Bella Co., and 30 percent in
Edward Resources. What is the expected return of your portfolio if Jacob, Bella, and Edward have expected
returns of 0.09, 0.13, and 0.01, respectfully?
Your Answer:
Question 28 (1 point)
The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0700. The variance of Willow
is 0.2460, and the variance of Sky Diamond is 0.1430. What is the correlation coefficient between the
returns of the two stocks?
Your Answer:
Question 29 (1 point)
A project has the following cash flows:
0
1
2
3
($500)
$120.00
$200
$310.00
What is the project’s NPV if the interest rate is $6%?
Your Answer:
Question 30 (1 point)
Assume the following facts about a firm’s financing in the next year. Calculate the weighted cost of the
capital of this project:
Proportion of Capital Projected funded by debt = 45%
Proportion of Capital Projects Funded by equity = 55%
Return Received by Bondholders = 0.09
Return Received by Stockholders = 0.14
Your Answer:
Question 31 (1 point)
A project requires an initial outlay of $100,000, and is expected to generate annual net cash inflows of
$28,000 for the next 5 years. Determine the payback period for the project
Question 31 options:
.28 years
1.4 years
3.57 years
17.86 years
Question 32 (1 point)
An investment project requires an initial outlay of $100,000, and is expected to generate annual cash
inflows of $28,000 for the next 5 years. (round to the nearest tenth of the percentage) Determine the
(Internal Rate of Return) IRR for the project using a financial calculator
Question 32 options:
12.0%
3.6%
12.6%
12.4%
Question 33 (1 point)
Capital budgeting analysis of mutually exclusive projects A and B yields the following:
Project A
Project B
IRR
18%
22%
NPV
$270,000
$255,000
Payback Period
2.5 yrs
2.0 yrs
Management should choose:
Question 33 options:
Project B because most executives prefer the IRR method
Project B because two out of three methods choose it
Project A because NPV is the best method
either project because the results aren’t consistent
Question 34 (1 point)
Christopher Electronics bought new machinery for $5,075,000 million. This is expected to result in
additional cash flows of $1,230,000 million over the next 7 years. What is the payback period for this
project? Their acceptance period is five years.
Your Answer:
Question 35 (1 point)
AMP, Inc., has invested $2,165,800 on equipment. The firm uses payback period criteria of not accepting any
project that takes more than four years to recover costs. The company anticipates cash flows of $430,386,
$512,178, $562,255, $764,997, $816,500, and $825,375 over the next six years. What is the payback period?
Your Answer:
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