19 Questions
| Total Attempts: 3561

Questions and Answers

- 1.Stockholders' equity is:
- A.
The fair market value of a company

- B.
Liabilities minus assets

- C.
Contributed capital plus retained earnings

- 2.
- A.
$16,775

- B.
$19,090

- C.
$25,000

- 3.
- A.
If the NPV of a project is greater than 0, its PI will equal 0

- B.
If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0

- C.
If the PI of a project is less than 1, its NPV should be less than 0

- 4.
- A.
Net profit margin = 37.32%

- B.
Asset turnover = 11.81%

- C.
Leverage = 1.87

- 5.
- A.
6%

- B.
10%

- C.
10.4%

- 6.
- A.
Becomes less profitable

- B.
Increases its investment in working capital

- C.
Reduces its accounts payable period

- 7.
- A.
3.2 years

- B.
3.5 years

- C.
4 years

- 8.A (n) ______ would be an example of a principal, while a (n) _____ would be an example of an agent.
- A.
Shareholder; manager

- B.
Manager; owner

- C.
Accountant; bondholder

- 9.The company cost of capital for a firm with a 60/40 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:
- A.
7.02%

- B.
9.12%

- C.
13.80%

- 10.A company's _______ is (are) potentially the most effective instrument of good corporate governance.
- A.
Common stock shareholders

- B.
Board of directors

- C.
Top executive officers

- 11.Ninety-percent of Vogel Bird Seed's total sales of $600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively:
- A.
365 days and $108,000

- B.
73 days and $120,000

- C.
73 days and $108,000

- 12.Woatich Windmill Company is considering a project that calls for an initial cash outlay of $50,000. The expected net cash inflows from the project are $7,791 for each of 10 years. What is the IRR of the project?
- A.
6%

- B.
8%

- C.
9%

- 13.
- A.
$11,883

- B.
$13,883

- C.
$15,883

- 14.As a firm's cash conversion cycle increases, the firm:
- A.
Becomes less profitable

- B.
Increases its investment in working capital

- C.
Reduces its accounts payable period

- 15.
- A.
10.73%

- B.
16.00%

- C.
19.00%

- 16.
- A.
$23.32

- B.
$29.14

- C.
$41.18

- 17.What will be the category of company, whose stock could most suitably be valued using The constant-growth dividend discount model:
- A.
"Mature" company

- B.
Rapidly growing company

- C.
A Start up

- 18.
- A.
Profit margins are normally consistent across firms within an industry

- B.
Sales are relatively stable and might not change, thus giving stability to stock price, even though earnings might change significantly

- C.
P/S multiple provides a framework to evaluate the effects of corporate policy decisions and price changes

- 19.
- A.
-10.44, Reject

- B.
-13.81, Reject

- C.
-13.81, Accept