Dance Party 2

45 Questions | Total Attempts: 19

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Dance Quizzes & Trivia

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Questions and Answers
  • 1. 
    The stock of Alpha Company has an expected return of 15.5% and a beta of 1.5, and Gamma Company stock has an expected return of 13.4% and a beta of 1.2. Assume the CAPM holds. What's the expected return on the market?
    • A. 

      12%

    • B. 

      7%

    • C. 

      10.3%

    • D. 

      11.2%

  • 2. 
    The stock of Alpha Company has an expected return of 18% and a beta of 1.5, and Gamma Company stock has an expected return of 15.6% and a beta of 1.2. Assume the CAPM holds. What's the risk-free rate?
    • A. 

      8.0%

    • B. 

      6.0%

    • C. 

      0%

    • D. 

      4.7%

  • 3. 
    If the risk-free rate last year was 3%, and the return on the market was 11%, which firm had the best performance on a risk-adjusted basis?
    • A. 

      Firm A

    • B. 

      Firm B

    • C. 

      Firm C

    • D. 

      There is no difference in performance on a risk-adjusted basis

  • 4. 
    Refer to Gamma Electronics. What's the payback period for the investment?
    • A. 

      1.8 years

    • B. 

      2.0 years

    • C. 

      2.5 years

    • D. 

      2.8 years

  • 5. 
    Refer to Gamma Electronics. If the firm has a 15% cost of capital, what's the discount payback period of the investment?
    • A. 

      1.5 years

    • B. 

      2.0 years

    • C. 

      2.4 years

    • D. 

      2.6 years

  • 6. 
    Refer to Exhibit 8-3. If the two projects are independent, which project should the firm choose based on the IRR rule?
    • A. 

      Project 1

    • B. 

      Project 2

    • C. 

      Both projects

    • D. 

      cannot decide because the hurdle rate is unknown

  • 7. 
    Refer to Exhibit 8-3. If the two projects are mutually exclusive, which project should the firm choose? What is the problem that the firm should be concerned with in making this decision?
    • A. 

      Project 1; discount rate

    • B. 

      Project 2; discount rate

    • C. 

      Project 1; project scale

    • D. 

      Project 2; project scale

  • 8. 
    If the two projects are mutually exclusive, and the firm's hurdle rate is 18%, which project should the firm choose?
    • A. 

      Project 1

    • B. 

      Project 2

    • C. 

      The incremental project

    • D. 

      Both projects

  • 9. 
    Which project should you accept? What is the problem that you should be concerned with in making this decision?
    • A. 

      Project 1; the timing of cash flows

    • B. 

      Project 2; the timing of cash flows

    • C. 

      Project 1; project scale

    • D. 

      Project 2; project scale

  • 10. 
    Refer to NPV Profile. What's the IRR for project 1?
    • A. 

      12%

    • B. 

      14%

    • C. 

      18%

    • D. 

      Cannot tell from the given information

  • 11. 
    Refer to NPV Profile. What's the IRR for project 2?
    • A. 

      12%

    • B. 

      14%

    • C. 

      18%

    • D. 

      Cannot tell from the given information

  • 12. 
    Refer to NPV Profile. If Gamma Company has a hurdle rate of 11%, and the two projects are independent, which project should Gamma Company invest?
    • A. 

      Project 1

    • B. 

      Project 2

    • C. 

      Both project 1 and project 2

    • D. 

      Neither project

  • 13. 
    Refer to NPV Profile. If the hurdle rate is 11%, and the two projects are mutually exclusive, which project should be accepted?
    • A. 

      Project 1

    • B. 

      Project 2

    • C. 

      Both projects

    • D. 

      Neither project

  • 14. 
    Refer to NPV Profile. If the hurdle rate is 13%, and the two projects are mutually exclusive, which project should be accepted?
    • A. 

      Project 1

    • B. 

      Project 2

    • C. 

      Both projects

    • D. 

      Neither projects

  • 15. 
    Refer to NPV Profile. If the hurdle rate is 19%, and the two projects are independent, which project should be accepted?
    • A. 

      Project 1

    • B. 

      Project 2

    • C. 

      Both projects

    • D. 

      Neither project

  • 16. 
    When the IRR is equal to the discount rate, the NPV is:
    • A. 

      Positive

    • B. 

      Equal to zero

    • C. 

      Negative

    • D. 

      Cannot be determined without knowing the discount rate

  • 17. 
    When the IRR is equal to the discount rate, the NPV is:
    • A. 

      Positive

    • B. 

      Equal to zero

    • C. 

      Negative

    • D. 

      Cannot be determined without knowing the discount rate

  • 18. 
    Capital budgeting must be placed on an incremental basis. This means that ______ must be ignored and _______ must be considered.
    • A. 

      Sunk cost; opportunity cost

    • B. 

      Sunk cost; financing cost

    • C. 

      Cannibalization; opportunity cost

    • D. 

      Opportunity cost; net working capital

  • 19. 
    Roger is considering the expansion of his business into a property he purchased two years ago. Which of the following items should not be included in the analysis of this expansion?
    • A. 

      Roger can lease the property to another company for $12,000 per year.

    • B. 

      Costs of hiring additional staff

    • C. 

      The property was extensively renovated last year at a cost of $15,000.

    • D. 

      The expansion will result in a slight increase of inventory carried.

  • 20. 
    Alpha Car Rental purchased 5 cars for a total of $100,000 three years ago. Now it is replacing the cars with newer vehicles. The company has depreciated 92.59% of the old cars, and sold these cars for a total of $ 25,000. Assume a tax rate of 40%. What is the cash inflow from the sale of these vehicles?
    • A. 

      $25,000

    • B. 

      $15,000

    • C. 

      $17,964

    • D. 

      $16,500

  • 21. 
    Sam's Insurance must choose between two types of printers. Both printers meet the firm's quality standard. Printer A costs $3,500 and is expected to last 3 years with operating costs of $380 per year. Printer B costs $2,500 and is expected to last 2 years with operating costs of $400 per year. Assume a discount rate of 10%. Which printer should Sam's Insurance purchase? What is the equivalent annual cost of this machine?
    • A. 

      Printer B; $3,194

    • B. 

      Printer A; $1,625

    • C. 

      Printer B; $2,904

    • D. 

      Printer A; $1,787

  • 22. 
    When a firm introduces a new product and some of the new product's sales come at the expense of the firm's existing products, this is known as:
    • A. 

      Sunk costs.

    • B. 

      Incremental costs.

    • C. 

      Marginal costs.

    • D. 

      Cannibalization.

  • 23. 
    Financial analysts focus on _______ when evaluating potential investments.
    • A. 

      Cash

    • B. 

      Profit

    • C. 

      Accruals

    • D. 

      Expenses

  • 24. 
    Opportunity costs:
    • A. 

      Are irrelevant.

    • B. 

      Should be considered when determining an investment's relevant cash flows.

    • C. 

      Are equal to the firm's sunk costs.

    • D. 

      All of the above.

  • 25. 
    The following data have been computed for a firm: when sales are $20,000, EBIT is $5,000 and operating leverage is 2.5.  Suppose sales increase to $23,000; what is the new level of EBIT?
    • A. 

      $1,875

    • B. 

      $6,875

    • C. 

      $3,000

    • D. 

      $8,435

  • 26. 
    What is Never-crash Airline's WACC, if their marginal tax rate equals 34%?
    • A. 

      19.22%

    • B. 

      24.45%

    • C. 

      18.50%

    • D. 

      4.62%

  • 27. 
    Find the break even point given the following information: sale price per unit = $50, variable cost per unit = $35; fixed costs = $50,000.
    • A. 

      2,298

    • B. 

      3,000

    • C. 

      3,333

    • D. 

      4,000

  • 28. 
    Find the break even point given the following information: total costs: $135,000; variable costs per unit = $10; sale price per unit = $25; sales = 10,000 units.
    • A. 

      3,000

    • B. 

      2,333

    • C. 

      1,667

    • D. 

      1,886

  • 29. 
    What is Bavarian Sausage's breakeven point in the worst case scenario?
    • A. 

      572

    • B. 

      1,125

    • C. 

      5,000

    • D. 

      2,526

  • 30. 
    By how much would Bavarian Sausage's breakeven point change in the best case scenario if  variable cost increase by $2?
    • A. 

      Increase by 228

    • B. 

      Decrease by 228

    • C. 

      Remain unchanged

    • D. 

      Increase by 95

  • 31. 
    By how much would Bavarian Sausage's breakeven point change in the most likely scenario if the price/unit turns out to be only $6?
    • A. 

      Decrease by 375

    • B. 

      Remain unchanged

    • C. 

      Increase by 375

    • D. 

      Decrease by 228

  • 32. 
    Hollywood Productions has a $4 contribution margin for the new DVD they are releasing to the general public.  The DVD sells for $20.  If the fixed costs to produce the DVD were $500,000, how many units must be sold for Hollywood Productions to break even?
    • A. 

      25,000 units

    • B. 

      31,250 units

    • C. 

      75,000 units

    • D. 

      125,000 units

  • 33. 
    Bavarian Brewhouse is planning on going public.  Under the underwriting agreement the underwriting discount is $1.25 per share. If the offering price of the stock is set at $12.50 per share, what is the percentage underwriting discount??
    • A. 

      8%

    • B. 

      9%

    • C. 

      10%

    • D. 

      11%

  • 34. 
    Bavarian Brewhouse is planning on going public.  Under the underwriting agreement the underwriting discount is $1.30. Legal and other expenses amount to $1,350,000. If the offering price of the stock is set at $12.50 per share, how many shares does the company have to issue to raise $75 million?
    • A. 

      6,696,429

    • B. 

      6,816,964

    • C. 

      6,000,000

    • D. 

      5,769,345

  • 35. 
    Refer to Smith Enterprises. What is the underwriter's discount?
    • A. 

      14.3%

    • B. 

      12.5%

    • C. 

      16.3%

    • D. 

      10.2%

  • 36. 
    Refer to Smith Enterprises. What is the total percentage costs of the IPO (underwriting and underpricing)?
    • A. 

      35.7%

    • B. 

      14.3%

    • C. 

      18.8%

    • D. 

      21.4%

  • 37. 
    A non-U.S. based company would like to issue a form of its common equity in the U.S.  A current method for doing so would be
    • A. 

      To contract for a U.S. investment back to issue a sponsored ADR.

    • B. 

      To let a U.S. investment bank issue an unsponsored ADR.

    • C. 

      To sell put options on its own stock to U.S. investors.

    • D. 

      None of the above.

  • 38. 
    If ABC's stock price closes at $39.00 the day before the offering, what will be the net proceeds for ABC from this offering?
    • A. 

      $109.55 million

    • B. 

      $110.88 million

    • C. 

      $112.32 million

    • D. 

      $117.00 million

  • 39. 
    If ABC's stock price closes at $39.00 the day before the offering, calculate the total cost of the seasoned equity offering to ABC's existing stockholders as a percentage of the offering proceeds.
    • A. 

      16.23%

    • B. 

      18.51%

    • C. 

      20.10%

    • D. 

      20.40%

  • 40. 
    What is Bavarian Brew's required return on equity before the restructuring. Assume no corporate taxes.
    • A. 

      10%

    • B. 

      6%

    • C. 

      11%

    • D. 

      12%

  • 41. 
    Refer to Bavarian Brew. If the corporate tax rate equals 34% and dividend income is tax free, at which personal tax rate on interest income is there no gain from leverage?
    • A. 

      34%

    • B. 

      40%

    • C. 

      15%

    • D. 

      0%

  • 42. 
    Refer to Bavarian Brew. If the corporate tax rate equals 34% and the personal tax rate on interest income equals 40%, for which tax rate on dividend income is the gain from leverage equal to zero?
    • A. 

      15.2%

    • B. 

      9.1%

    • C. 

      12.6%

    • D. 

      6.6%

  • 43. 
    Assuming a corporate tax rate of 35%, what is Miller's Drugstore's value?
    • A. 

      $125,000

    • B. 

      $25,000

    • C. 

      $133,750

    • D. 

      $75,000

  • 44. 
    Roy's Toy, Inc. currently has no debt outstanding.  Its current cost of equity is 12% and the current value of the company is $20,000,000.  Roy is proposing to finance 1/4 of its assets with debt at a cost of 8% per annum.  What will be Roy's cost of levered equity if things go as planned? Ignore any tax effects.
    • A. 

      12.00%

    • B. 

      13.00%

    • C. 

      13.33%

    • D. 

      None of the above

  • 45. 
    Refer to Kennesaw Steel Corporation. The tax rate is 40%.  What level of EBIT will earnings per share equal zero for shareholders under the new capital structure? (assume that the stock can be repurchased at $50 per share)
    • A. 

      $0

    • B. 

      $60,000

    • C. 

      $120,000

    • D. 

      $160,000