I understand. How about just these? I am half way through the other ones anyways.

1. Broad Soap Corporation has a quick ratio of 1.0 and a current ratio of 2.0 implying that

a. the value of current assets is equal to the value of inventory.

b. the value of current assets is equal to the value of current liabilities.

c. the value of current liabilities is equal to the value of inventory.

d. All of the above.

e. None of the above.

ANS:

2. The Custom House Company is a relatively small, privately owned firm. Last year the company had after-tax income of $15,000, and 10,000 shares were outstanding. The owners were trying to determine the market value for the stock, prior to taking the company public. A similar firm which is publicly traded had a price/earnings ratio of 5.0. Using only the information given, estimate the market value of one share of Custom House's stock.

a. $10.00

b. $7.50

c. $5.00

d. $2.50

e. $1.50

ANS:

3. If Commonwealth Corporation has sales of $2 million per year (all credit) and days sales outstanding of 35 days, what is its average amount of accounts receivable outstanding (assume a 360 day year)?

a. $194,444

b. $57,143

c. $5,556

d. $97,222

e. $285,714

ANS:

4. A firm has a profit margin of 15 percent on sales of $20,000,000. If the firm has debt of $7,500,000, total assets of $22,500,000, and an after-tax interest cost on total debt of 5 percent, what is the firm's ROA?

a. 8.4%

b. 10.9%

c. 12.0%

d. 13.3%

e. 15.1%

ANS:

5. What is the effective annual return (EAR) for an investment that pays 10 percent compounded annually?

a. equal to 10 percent

b. greater than 10 percent

c. less than 10 percent

d. This question cannot be answered without knowing the dollar amount of the investment.

e. None of the above is correct.

ANS:

6. What is the term used to describe an annuity with an infinite life?

a. perpetuity

b. infinuity

c. infinity due

d. There is no special term for an infinite annuity.

ANS:

7. At an effective annual interest rate of 20 percent, how many years will it take a given amount to triple in value? (Round to the closest year.)

a. 5

b. 8

c. 6

d. 10

e. 9

ANS:

8. You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account. How much money will you receive?

a. $1,171

b. $1,126

c. $1,082

d. $1,163

e. $1,008

ANS:

9. What is the future value of a 5-year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate?

a. $670.44

b. $842.91

c. $1,169.56

d. $1,522.64

e. $1,348.48

ANS:

10. If a 5-year regular annuity has a present value of $1,000, and if the interest rate is 10 percent, what is the amount of each annuity payment?

a. $240.42

b. $263.80

c. $300.20

d. $315.38

e. $346.87

ANS:

11. You have the opportunity to buy a perpetuity which pays $1,000 annually. Your required rate of return on this investment is 15 percent. You should be essentially indifferent to buying or not buying the investment if it were offered at a price of

a. $5,000.00

b. $6,000.00

c. $6,666.67

d. $7,500.00

e. $8,728.50

ANS:

12. Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a year in Years 6 through 8, and $4,000 in Year 9, with all cash flows to be received at the end of the year. If you require a 14 percent rate of return, what is the present value of these cash flows?

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