Quiz 1

Câu 1: Capital structure decisions include determining:

A. how much inventory will be needed to support a project.
B. which one of two projects to accept.
C. how much debt should be assumed to fund a project.
D. how to allocate investment funds to multiple projects.
E. the amount of funds needed to finance customer purchases of a new
product.

Câu 2: A business formed by two or more individuals who each have

unlimited liability for all of the firm's business debts is called a:
A. sole proprietorship.
B. limited liability company.
C. corporation.
D. limited partnership.
E. general partnership.

Quiz 2
Câu 1: Which one of the following accounts is the most liquid?
A. Land
B. Equipment
C. Inventory
D. Accounts Receivable
E. Building
Câu 2: Depreciation for a tax-paying firm:
A. reduces both the net fixed assets and the costs of a firm.
B. is a noncash expense that increases the net income.
C. increases expenses and lowers taxes.
D. increases the net fixed assets as shown on the balance sheet.
E. decreases net fixed assets, net income, and operating cash flows.
Câu 3: Which one of the following is a correct formula for computing the
return on equity?
A. Profit margin × Total asset turnover × Debt-equity ratio
B. Profit margin × ROA
C. Net income/Total assets
D. ROA × Equity multiplier
E. Debt-equity ratio × ROA
 Quiz 3
Câu 1: You hope to buy your dream car five years from now. Today, that
car costs $62,500. You expect the price to increase by an average of 2.9
percent per year. How much will your dream car cost by the time you are
ready to buy it?
A. $68,666.67
B. $66,818.02
C. $72,103.59 FV = $62,500(1.0295) = $72,103.59
D. $73,340.00
E. $69,023.16

Câu 2: Phillippe invested $1,000 ten years ago and expected to have $1,800
today He has neither added nor withdrawn any money since his initial
investment. All interest was reinvested and compounded annually. As it
turns out, he only has $1,680 in his account today. Which one of the
following must be true?
A. He did not earn any interest on interest as he expected.
B. The future value interest factor turned out to be higher than he expected.
C. He earned a lower interest rate than he expected.
D. He earned simple interest rather than compound interest.
E. He ignored the Rule of 72 which caused his account to decrease in
value.

Câu 3: Southern Tours is considering acquiring Holiday Vacations.

Management believes Holiday Vacations can generate cash flows of
$218,000, $224,000, and $238,000 over the next three years, respectively.
After that time, they feel the business will be worthless. If the desired rate
of return is 14.5 percent, what is the maximum Southern Tours should pay
today to acquire Holiday Vacations?
A. $538,407.71
Β. $595,170.53
C. $519,799.59 PVA = $218,000/1.145 + $224,000/1.1452 +
$238,000/1.1453
= $519,799.59
D. $545,920.61
Ε. $538,615.08
 Quiz 4
Câu 1: Consider the following information on three stocks:

State of Probability of Rate of Return

Economy State of Economy if State Occurs
Stock A Stock B Stock C
Boom .25 .27 .15 .11
Normal .65 .14 .11 .09
Bust .10 -.19 -.04 .05

A portfolio is invested 45 percent each in Stock A and Stock B and 10

percent in Stock C. What is the expected risk premium on the portfolio if
the expected T-bill rate is 3.2 percent?
A. 8.71 percent E(Rp)Boom = 45(.27) + 45(.15) +.10(.11) = .2000
E(Rp)Normal = 45(.14) +.45(.11) +.10(.09) = .1215
E(Rp)Bust = 45(-19) +.45(-.04) +.10(.05) = -.0985

E(Rp) = 0.25(0.2) + 0.65(0.1215) + 0.1(- 0.0985)

E(Rp) = 0.1191 or 11.91%

RPp = 0.1191 - 0.032 = 0.0871 or 8.71%

B. 1.67 percent
C. 12.38 percent
D. 4.29 percent
E. 11.47 percent

Câu 2: Standard deviation measures which type of risk?

A. Non-diversifiable
B. Systematic
C. Total
D. Economic
E. Unsystematic

Câu 3: The systematic risk of the market is measured by a:

A. beta of 0.
B. standard deviation of 0.
C. standard deviation of 1.
D. beta of 1.
E. variance of 1.

Quiz 5
Câu 1: A newly issued bond has a coupon rate of 7 percent and semiannual
interest payments. The bonds are currently priced at par. The effective
annual rate provided by these bonds must be:
A. 3.5 percent.
B. less than 3.5 percent.
C. greater than 7 percent.
D. 7 percent.
E. greater than 3.5 percent but less than 7 percent

Câu 2: Which one of these equations applies to a bond that currently has a
market price that exceeds par value?
A. Current yield > Coupon rate
B. Yield to maturity < Coupon rate
C. Yield to maturity = Current yield
D. Market value = Face value
E. Market value < Face value

Câu 3: Dixie South currently pays an annual dividend of $1.46 a share and
plans on increasing that amount by 2.75 percent annually. Northern Culture
currently pays an annual dividend of $1.42 a share and plans on increasing
its dividend by 3.1 percent annually. Given this information, you know for
certain that the stock of Northern Culture has a higher than the stock of
Dixie South.
A. capital gains yield
B. real return
C. dividend yield
D. total return
E. market price

Quiz 6
Câu 1: Rossiter Restaurants is analyzing a project that requires $180,000 of
fixed assets. When the project ends, those assets are expected to have an
aftertax salvage value of $45,000. How is the $45,000 salvage value
handled when computing the net present value of the project?
A. Reduction in the cash outflow at Time 0.
B. Excluded from the net present value calculation
C. Cash inflow for the year following the final year of the project
D. Cash inflow prorated over the life of the project
E. Cash inflow in the final year of the project

Câu 2: Which one of these statements related to discounted payback is

correct?
A. Discounted payback does not require a cutoff point.
B. Discounted payback is biased towards short-term projects.
C. The discounted payback period increases as the discount rate decreases.
D. Payback is a better method of analysis than discounted payback.

Câu 3: A project has an initial cost of $31,800 and a market value of

$29,600. What is the difference between these two values called?
A. Accounting return
B. Profitability index
C. Net present value
D. Payback value
E. Discounted payback

Quiz 7
Câu 1: Cash management primarily involves:
A. optimizing the collections and disbursements of cash.
B. reconciling a company's book balance with its bank balance.
C. maximizing the income earned on cash reserves.
D. determining the optimal level of liquidity that should be maintained.
E. determining the best method of raising capital.

Câu 2: Which one of these actions represents a use of cash?

A. Paying employee wages
B. Purchasing inventory on credit
C. Collecting a receivable
D. Selling inventory for cash
E. Obtaining a bank loan
Câu 3: The period of time that extends from the day a credit sale is made
until the day the bank credits the seller's account with the payment for that
sale is known as the period.
A. sales
B. discount
C. cash collection
D. accounts receivable
E. float

Quiz 8
Câu 1: Homemade leverage is:
A. the use of personal borrowing to alter an individual's exposure to
financial leverage.
B. the incurrence of debt by a corporation in order to pay dividends to
shareholders.
C. best defined as an increase in a company's debt level.
D. the exclusive use of debt to fund a corporate expansion project.
E. the term used to describe the capital structure of a levered firm.

Câu 2: Holly's is currently an all-equity firm that has 7,200 shares of stock
outstanding at a market price of $41 a share. The firm has decided to
leverage its operations by issuing $60,000 of debt at an interest rate of 7.6
percent. This new debt will be used to repurchase shares of the outstanding
stock. The restructuring is expected to increase the earnings per share.
What is the minimum level of earnings before interest and taxes that the
firm is expecting? Ignore taxes.
A. $22,435 EBIT/7,200 [EBIT - $60,000(.076)]/[7,200 - ($60,000/$41)]
Breakeven EBIT = $22,435
B. $19,516
C. $25,020
D. $26,400
E $17,141

Câu 3: North Side Inc. has no debt outstanding and a total market value of
$168,000. Earnings before interest and taxes, EBIT, are projected to be
$18,000 if economic conditions are normal. If there is strong expansion in
the economy, then EBIT will be 22 percent higher. If there is a recession,
then EBIT will be 35 percent lower. The company is considering a $50,000
debt issue with an interest rate of 7.4 percent. The proceeds will be used to
repurchase shares of stock. There are currently 5,000 shares outstanding
and the tax rate is 21 percent. What will be the percentage change in EPS if
the economy has a strong expansion?
A. 25.45 percent

B. 22.00 percent

C. 27.69 percent Share price = $168,000/5,000 = $33.60

Shares repurchased = $50,000/$33.60 = $1,488.10
Annual interest = $50,000(0.074) = $3,700
EPS Normal= [($18,000 - 3,700)(1 - 0.21)]/(5,000 -
1,488.10) = $3.217
EPS Expansion= {[$18,000(1.22) - $3,700](1 -
0.21)}/(5,000 - 1,488.10) = $4.108
Percentage change = ($4.108 - 3.217)/$3.217
= 0.2769 or 27.69%
D. 31.26 percent
E. 28.80 percent

Quiz 9
Câu 1: Which one of the following statements related to dividend policy is
correct?
A. Dividend policy focuses on the timing of dividend payments.
B. Both dividends and dividend policy are irrelevant.
C. Whether or not a company ever pays a dividend is irrelevant to equity
valuation.
D. Homemade dividends increase the importance of a company's dividend
policy decisions.
E. The primary question related to dividend policy is whether or not a
dividend should ever be paid.
Câu 2: Which one of the following factors tends to increase cash
dividends?
A. Corporate investors
B. Flotation costs
C. Capital gains tax deferment
D. Terms contained in bond indentures
E. Homemade dividends

Câu 3: Which one of the following statements related to cash dividends is

correct?
A. If a firm has paid regular quarterly dividends for at least five
consecutive years, it is legally obligated to continue doing so.
B. A dividend is never a liability of the issuer until it has been declared.
C. The dividend yield expresses the annual dividend as a percentage of net
income.
D. Extra cash dividends cannot be repeated in the future.