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Question 40.
A firm writes 300 checks a day for an average amount of $200 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $70,000 a day in checks which it deposits immediately. Deposited funds are made available in 3 days. What is the firm s net float?
a. net disbursement float of $30,000
b. net disbursement float of $42,000
c. net collection float of $15,000
d. net disbursement float of $15,000
e. net collection float of $30,000

Question 41
A flexible short-term financial policy:
a. tends to increase the cash inflows of a firm in the future more so than a restrictive policy does.
b. tends to cause more production interruptions than does a restrictive policy due o inventory shortages.
c. tends to lower the selling prices that can be charged versus the prices under a restrictive policy.
d. lowers the costs of maintaining current assets.
e. tends to indicate that the carrying costs of a firm are relatively high as compared to the shortage costs

Question 42
Mr. Bean currently owns 650 shares of ABC, Inc. Each share is worth $59. If the company declares a 3-for-2 stock split, Mr. Bean will own _____ shares at a value of _____ per share, all else constant.
a. 867; $44.25
b. 488; $78.67
c. 867; $78.67
d. 975; $39.33
e. 975; $34.25

Question 43
The maximum firm value, according to the static theory of capital structure, occurs at a point where the:
a. financial distress costs are equal to zero.
b. value of the firm, as defined by M&M Proposition I, with tax, is exactly equal to the value of the firm, as defined by M&M Proposition I, without tax.
c. value of the firm equalizes the costs of financial distress with the present value of the tax shield on debt.
d. value of a levered firm initially begins to exceed that of an unlevered firm.
e. value of the firm is equal to the value defined by M&M Proposition I, with tax.

Question 44
Stock C has a beta 0.9 and an expected return 12%. Stock D has a beta 1.4. If the risk free rate 4.8%, what is Stock D's expected return so that Stock D can be plotted on the security market line?
a. 16%
b. 20%
c. 14%
d. 18%
e. 12%

Question 45
A firm's optimal capital structure:
a. exists when the debt-equity ratio is 0.50.
b. is the debt-equity ratio that exists at the point where the firm's weighted aftertax cost of debt is minimized.
c. is the debt-equity ratio that results in the lowest possible weighted average cost of capital.
d. is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1.
e. is generally a mix of 40% debt and 60% equity.

Question 46
A firm is considering a project with an initial cost $6,200,000. The project will produce cash inflows $1,800,000 a year for 5 years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +2%. The firm has a pre-tax cost of debt of 6.7% and a cost of equity of 9.4%. The debt-equity ratio is 0.6 and the tax rate is 35%. What is the net present value of the project?
a. $710,053
b. $790,909
c. $811,006
d. $742,067
e. $733,333

Question 47
Which one of the following statements concerning IPOs and underpricing is correct?
a. IPO underpricing generally increases the spread per share earned by underwriters.
b. IPO underpricing primarily benefits the issuing firm.
c. The more an issue is underpriced, the more it tends to be oversubscribed.
d. An investor tends to receive a higher percentage allocation of shares as the percentage of underpricing increases.
e. Underpricing tends to discourage investors from participating in the IPO market

Question 48
If shareholders are granted a preemptive right they will be:
a. able to determine who the candidates should be for any open seats on the board.
b. given the first right to purchase any new shares of stock that are issued.
c. given the choice of receiving dividends in cash or in additional shares of stock.
d. granted shares that receive additional voting privileges.
e. paid dividends prior to the preferred shareholders during the preemptive period.

Question 49
A firm is an all-equity firm with a total market value $230,000. The firm has 25,000 shares of stock outstanding. Management is considering issuing $100,000 of debt at an interest rate 7% and using the proceeds to repurchase shares. Management estimates that the economy will be fairly normal and thus the firm's earnings before interest and taxes (EBIT) will be $57,000. Ignore taxes. What is the anticipated earnings per share (EPS) if the debt is issued?
a. $3.46
b. $3.20
c. $3.75
d. $3.54
e. $3.82

Question 50
A company has paid increasing dividends of $0.54, $0.58, $0.62, $0.67, and $0.72 a share over the past five years, respectively. The firm estimates that future increases in their dividends will be comparable to the arithmetic average growth rate over these past five years. The stock is currently selling for $38.60 a share. The risk-free rate is 4 percent and the market risk premium is 8%. What is your best estimate of the company's cost of equity if their beta is 1.35?
a. 14.36%
b. 10.58%
c. 13.74%
d. 11.61%
e. 12.13%

Question 51
Which one of the following statements concerning financial statement analysis is correct?
a. The purchase of inventory using long-term credit will decrease the current ratio.
b. The firm with the highest price-earnings ratio will produce the highest earnings per share for the following year.
c. The company within a particular industry that has the lowest debt-equity ratio is the most profitable.
d. An increase in the accounts receivable turnover rate is an indication that a firm is collecting its receivables faster.
e. The Du Pont identity provides a measure of a firm's operating efficiency, asset use efficiency, and cash flow efficiency.

Question 52
A firm has just completed their review of proposed projects for the coming year and has determined that they would like to invest a total of $219,000 in new projects. The firm follows a residual dividend policy and has a target debt-equity ratio 0.6. The firm wants to pay dividends totaling $39,500 this year. To do so, how much must the firm earn in aftertax income this year?
a. $176,375
b. $244,000
c. $161,875
d. $107,125
e. $156,400

Question 53
A company is an all-equity firm that has projected earnings before interest and taxes, $497,000, forever. The current cost of equity is 16% and the tax rate is 34%. The company is in the process of issuing $1,100,000 of bonds at par that carry a 6% annual coupon. What is the levered value of the firm?
a. $2,142,793
b. $2,424,125
c. $2,560,125
d. $2,163,849
e. $2,478,932

Question 54
Which one of the following statements concerning financial leverage is correct?
a. Financial leverage is always beneficial to a firm when the interest rate on the debt is less than 10%.
b. The benefits of leverage are unaffected by changes in a firm's earnings before interest and taxes.
c. The earnings per share remain constant even when an all-equity firm switches to a debt-equity ratio of 0.4.
d. If a firm employs financial leverage, the shareholders will be exposed to greater risk.
e. A firm employing leverage will always have a higher earnings per share than a firm which does not employ leverage

Question 55
If the financial markets are efficient, then an unexpected negative announcement about a firm s earnings will:
a. cause all prices in the market to decline over a week s period as the news spreads.
b. cause the price of that firm s stock to instantly adjust with minor corrections being made in the following week so that the news is accurately reflected in the price.
c. cause the price of that firm s stock to instantly adjust to the appropriate price given the new information without further tendency to move upward or downward.
d. cause the price of that firm s stock to decline over a week s period as the news spreads.
e. instantly cause all prices in the market to decline and then readjust over a couple of days as the information is absorbed.

Question 56. A company is a specialty company in a niche market. Based on their latest projections, the company expects to increase their annual dividend by 40% per year for the next two years and by 10% for the following year. After that, the company plans to pay a constant dividend of $0.98 a share. The last dividend they paid was $0.40 a share. What should you expect to pay per share if the market rate of return on this stock is 15%?
a. $4.84
b. $4.18
c. $5.94
d. $5.62
e. $6.21

Question 57. A company is a specialty company in a niche market. Based on their latest projections, the company expects to increase their annual dividend by 40% per year for the next two years and by 10% for the following year. After that, the company plans to pay a constant dividend of $0.98 a share. The last dividend they paid was $0.40 a share. What should you expect to pay per share if the market rate of return on this stock is 15%?
a. $4.84
b. $4.18
c. $5.94
d. $5.62
e. $6.21

Question 58
A project has expected cash inflows, starting with year 1, of $6,200, $9,700, $10,200 and finally in year 4, $8,000. The profitability index is 1.3 and the discount rate is 8%. What is the initial cost of the project?
a. $29,641.11
b. $21,564.81
c. $28,034.26
d. $23,361.88
e. $20,223.53

Question 59
A company currently sells micro-fiber recliners for $199 each. The firm is considering selling leather recliners. The leather recliner would sell for $399 each and the company expects to sell 1,200 a year. If the firm carries the leather recliner, management feels that their sales of the micro-fiber recliner will decline by 300 units. Variable costs on the micro-fiber recliner are $99 each and $270 each on the leather recliner. The incremental annual fixed costs related to the leather recliner are $70,000 and the incremental annual depreciation related to the leather recliner is $15,000. The tax rate is 34%. What is the projected operating cash flow for this project?
a. $49,568
b. $47,263
c. $37,768
d. $34,668
e. $41,268

Question 60. Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)?
a. A reduction in the risk level of a firm will tend to increase the firm's WACC.
b. The WACC will decrease when the tax rate decreases for all firms that utilize debt financing.
c. The WACC can be used as the required return for all new projects with similar risk to that of the existing firm.
d. A 5 percent increase in a firm s debt-equity ratio will tend to increase the firm's WACC.
e. An increase in the market risk premium will tend to decrease a firm's WACC.

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Solution Preview

Question 40.

A firm writes 300 checks a day for an average amount of $200 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $70,000 a day in checks which it deposits immediately. Deposited funds are made available in 3 days. What is the firm s net float?
a. net disbursement float of $30,000
b. net disbursement float of $42,000
c. net collection float of $15,000
d. net disbursement float of $15,000
e. net collection float of $30,000

Answer: e. net collection float of $30,000
Disbursement float= $180,000 =300*200*3
Collection float= $210,000 =70000*3
Net float= -$30,000 =180000-210000
Since it is negative, there is a net collection float

Question 41
A flexible short-term financial policy:
a. tends to increase the cash inflows of a firm in the future more so than a restrictive policy does.
b. tends to cause more production interruptions than does a restrictive policy due o inventory shortages.
c. tends to lower the selling prices that can be charged versus the prices under a restrictive policy.
d. lowers the costs of maintaining current assets.
e. tends to indicate that the carrying costs of a firm are relatively high as compared to the shortage costs

Answer: e. tends to indicate that the carrying costs of a firm are relatively high as compared to the shortage costs

Question 42
Mr. Bean currently owns 650 shares of ABC, Inc. Each share is worth $59. If the company declares a 3-for-2 stock split, Mr. Bean will own _____ shares at a value of _____ per share, all else constant.
a. 867; $44.25
b. 488; $78.67
c. 867; $78.67
d. 975; $39.33
e. 975; $34.25

Answer: d. 975; $39.33

Number of shares= 975 =3*650/2
Price per share= $39.33 =650*59/975

Question 43
The maximum firm value, according to the static theory of capital structure, occurs at a point where the:
a. financial distress costs are equal to zero.
b. value of the firm, as defined by M&M Proposition I, with tax, is exactly equal to the value of the firm, as defined by M&M Proposition I, without tax.
c. value of the firm equalizes the costs of financial distress with the present value of the tax shield on debt.
d. value of a levered firm initially begins to exceed that of an unlevered firm.
e. value of the firm is equal to the value defined by M&M Proposition I, with tax.

Answer: c. value of the firm equalizes the costs of financial distress with the present value of the tax shield on debt.

Static theory of capital structure: Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.

Question 44
Stock C has a beta 0.9 and an expected return 12%. Stock D has a beta 1.4. If the risk free rate 4.8%, what is Stock D's expected return so that Stock D can be plotted on the security market line?
a. 16%
b. 20%
c. 14%
d. 18%
e. 12%

Answer: a. 16%

CAPM (Capital Asset Pricing Model) equation is:
r A= r f + beta A (r m - r f)
Stock C
risk free rate= r f = 4.80%
beta of stock= beta A= 0.9
return on market portfolio= r m = to be determined
required return on stock r A = 12.00%
Plugging in the values
r m = 12.8% =(12.%-4.8%)/0.9+4.8%

Stock D

risk free rate= r f = 4.80%
beta of stock= beta A= 1.4
return on market portfolio= r m = 12.8% (calculated above)
required return on stock r A = to be determined
Plugging in the values
r A = 16. % =4.8%+1.4*(12.8%-4.8%)

Question 45
A firm's optimal capital structure:
a. exists when the debt-equity ratio is 0.50.
b. is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized.
c. is the debt-equity ratio that results in the lowest possible weighted average cost of capital.
d. is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1.
e. is generally a mix of 40% debt and 60% equity.

Answer: c. is the debt-equity ratio that results in the lowest possible weighted average cost of capital.

Question 46
A firm is considering a project with an initial cost $6,200,000. The project will produce cash inflows $1,800,000 a year for 5 years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +2%. The firm has a pre-tax cost of debt of 6.7% and a cost of equity of 9.4%. The debt-equity ratio is 0.6 and the tax rate is 35%. What is the net present value of the project?
a. $710,053
b. $790,909
c. $811,006
d. $742,067
e. $733,333
...

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Amino acids multiple choice questions

Which statement is incorrect about the classification of amino acids?
a. Alanine and valine are neutral, nonpolar amino acids.
b. Lysine and arginine are basic amino acids.
c. Tryptophan and phenylalanine are aromatic amino acids.
d. Aspartic acid and aspargine are acidic amino acids.

Which of the following amino acids is the least water soluble at pH 7.0?
a. Tryptophan
b. Glutamic acid
c. Cysteine
d. Histidine

Which amino acid would migrate the furthest toward the anode (positive electrode) during paper electrophoresis at pH 7.0?
a. Aspartic acid
b. Alanine
c. Lysin
d. Glutamine

Which of the following functional groups, attached to an inert matrix, could function as a cation exchanger?
a. Diethylaminoethyl-
b. p-aminobenzyl-
c. Carboxymethyl-
d. Trimethylammonium-

Which of the following amino acids would make the best buffer at pH 4.5?
a. Histidine
b. Alanine
c. Glutamine
d. Aspartic acid

Which fact is incorrect about stereoisomers?
a. A diastereomer is a nonsuperimposable non-mirror image.
b. An enantiomer is a nonsuperimposible mirror image.
c. Diastereomers have different melting points.
d. Diastereomers rotate plane polarized light in equal but opposite direction.

Which statement is incorrect about L-isoleucine?
a. Its enantiomer is named O-isoleucine.
b. It contains a total of two asymmetric or chiral carbons.
c. It can also be named as (28, 38)-isoleucine using the (R,8) system.
d. Its diastereomer would be named O-alloisoleucine.

An isoelectric amino acid was dissolved in water and the resulting pH was approximately 7.6. What amino acid would possess this property?
a. Alanine
b. Glutamic acid
c. Histidine
d. Lysine

What volume of NaOH is required to adjust the solution of monosodium aspartate to pH 9.8?
a. 1 ml
b. 2 ml
c. 3 ml
d. 6 ml or more

What volume of 2 N Hel is required to completely titrate the 4 mmol of monosodium aspartate?
a. 2 ml
b. 3ml
c. Aml
d. 6 ml or more

Which statement is correct about the peptide ala-ser?
a. Alanine is at the N-terminal of the peptide.
b. There are a total six atoms that lie in the plane of the peptide bond linking alanine to serine.
c. The alpha-carbon of alanine is sp3 hybridized d All the above are correct statements.

What is the product formed from the acid hydrolysis of a simple amide?
a. Acid & base
b. Aldehyde & alcohol
c. Acid & amine
d. Ester & alcohol

The complete acid hydrolysis of the peptide ala-gln-trp-ser would yield:
a. Ala, gin, trp, ser
b. Ala, glu, ser
c. Ala, glu, trp, ser
d. Ala. ser

Fibrous proteins, such as collagen, have which of the following properties?
a. Highly soluble in water
b. Their hydrophilic residues are directed into the interior of the protein
c. Exhibit enzymatic activity
d. Serve structural roles in the cell

Quaternary structure is associated with:
a. The overall shape of a polypeptide chain
b. The sum of the secondary and tertiary interactions
c. Simple proteins with only one subunit
d. The relative orientation of one polypeptide to another polypeptide in a multi-subunit protein.

The information needed to define the structure of a protein is essentially contained in:
a. Amino acid composition
b. Amino acid sequence
c. Secondary structure
d. Tertiary structure.

Insulin is a polypeptide hormone that contains two short polypeptide chains linked by two interstrand disulfide bonds. The most logical order of events to perform in order to sequence this protein would be:
A: The peptides are reduced with mercaptoethanol.
B: The peptides are sequenced using Edman chemistry .
C: The peptides are separated by chromatography techniques. 0: The peptides are alkylated with iodoacetamide.
a. A, D,C, B b.C,A, 0, B
c. C, B, A, 0
d. A, B, C, 0

Which statement is incorrect about the peptide val-asp-trp-asn-ser?
a. This peptide would show a strong absorption band at 280 nm.
b. Reaction with chymotrypsin would yield two peptides.
c. To synthesize this peptide using the solid phase method of Merrifield, the amino acid directly attached to the resin would be serine.
d. After the second round of Edman chemistry using the reagent PITC, the PTH -amino acid residue released would be PTH-asn.

Which statement is incorrect about the reaction of the peptide ser-Iys-asp-trp-cys-metasn-phe-ala with the following reagents?
a. Reaction with cyanogens bromide would yield two peptides.
b. Reaction with trypsin would result in three peptides. The smallest of three peptides would have the highest pi of the three.
c. Reaciton with chymotrypsin would result in the peptides ser-Iys-asp & try-cys-met-Iysasn-phe-ala .
d. Reaction with chymotrypsin would yield a different set of peptides that overlap those obtained with tryspsin

Determine the amino acid sequence of the following oligopeptide from the experimental data below:
The amino acid composition is found the be ala, Iys, phe, met, cys plus some
decompsition products.
2. The peptide has a molecular weight around 700 Da and absorbs at 280 nm.
3. Treatment with carboxypeptidase results in tryptophan and a peptide.
4. CNBr treatment yields a tetrapeptide and a dipeptide.
5. Trypsine digestion produces an amino acid and a pentapeptide with met on the amino end.
6. Chymotrypsin digestion yields a dipeptide and a tetrapeptide.
a. trp-Iys-met-cys-met-ala
b. Iys-met-cys-phe-ala-trp
c. trp-ala-phe-cys-met-Iys
d. Iys-ala-cys-phe-met -trp

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