Final exam questions are adapted from Foundations of Financial

Customer Question

Final exam questions are adapted from Foundations of Financial Management

Already Tried:
1.     If you invest $8,000 at 12% interest, how much will you have in 7 years?
FV = PV x FV if (n=7, i=12)
FV = 8,000 x 2.211 = 17,688
2.     The concept of time value of money is important to financial decision making because:
a.     it emphasizes earnings of return on invested capital
b.     it recognizes that earning a return makes $1 worth more today than $1 received in the future.
c.     It can be applied to future cash flows in order to compare different streams of income.
d.     All of the above.
3.     An annuity may be defined as:
a.     a payment at a fixed interest rate.
b.     A series of payments of unequal amount.
c.     A series of yearly payments.
d.     A series of consecutive payments of equal amounts
4.     You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?
a.     Present value of an annuity of $1
b.     Future value of an annuity
c.     Present value of $1
d.     Future value of $1
5.     As the interest rate increases, the present value of an amount to be received at the end of a fixed period:
a.     increases
b.     decreases
c.     remains the same
d.     not enough information to tell
6.     To save for her new born son’s college education, Lea Wilson will invest $1,000 at the beginning of each year for the next 18 years. The interest rate is 12%. What is the future value?
a.     $7,690
b.     34,932
c.     $63,440
d.     $55,750
7.     XXXXXX XXXXX will receive $1 million in 50 years. The discount rate is 14%. As an alternative, she can receive $2,000 today. Which should she choose?
a.     the $1 million dollars in 50 years.
b.     $2,000 today.
c.     She should be indifferent.
d.     Need more information.
8-13 match the following with the items below:
a. annuity
b. future value
c. future value of an annuity
d. discount rate
e. interest factor (IF)
f. present value
g. semi-annual compounding
h. yield
____ 8. The interest or return is accumulated every six months.
____ 9. The discounted value of a future

Submitted: 1443 days and 16 hours ago.

Category: Homework

Value: $15

Status: CLOSED

Expert: BusinessTutor replied 1443 days and 15 hours ago.

Hello

I think that there is something missing. Is the last question complete? Also, please advise your deadline on this

Customer replied 1443 days and 6 hours ago.

You're absolutely correct....there was a portion missing, please see below for details:

____ 9. The discounted value of a future sum or annuity as of today's value.
__A_ 10. A series of consecutive payments or receipts of an equal amounts.
____ 11. The percentage rate at which future sums or annuities are brought back to their
present value.
____ 12. It is based on the number of periods (n) and how the interest rate (i) and whether
Or not there is more than one cash flow
____ 13. The interest rate that equates a future value of an annuity to a given present
value.

Accepted Answer

Expert: BusinessTutor replied 1441 days and 17 hours ago.

Hello mylz

Please click here for the solutions

regards,

Expert Type	Tutor
Category:	Homework
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Accepts:	4510
Answered:	4/29/2009

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Customer replied 1437 days and 19 hours ago.

I'm so sorry I already paid $4 for al of the answers and I think that these are from an older version and the final exam has changed I will log in momentarily because it is due by tomorrow if you give me a chance to look at the questions I can then advised if I need more assistance or if these will do....if so I'll be glad to purchase your response....otherwise do you think you will be able to assist with new questions if I pay $30?

Expert: BusinessTutor replied 1437 days and 12 hours ago.

Is it going to be a timed exam?

Customer replied 1437 days and 8 hours ago.

yes....3 hours

Expert: BusinessTutor replied 1437 days and 8 hours ago.

I can assist you with the questions, but can we meet later today as I need to go now? I prefer as late as possible, so when is the latest you can meet me here EST please?

Customer replied 1437 days and 8 hours ago.

The latest I would like to post this is around 7pm (eastern) so is it possible for you to meet me by 4pm or 4:30 being the latest?

Expert: BusinessTutor replied 1437 days and 8 hours ago.

Sure, I will try to be here starting 3 P.M., but 4 P.M. would be the latest

Thank you for the accept and for your trust

Customer replied 1437 days and 8 hours ago.

No problem...Thank you!

Expert: BusinessTutor replied 1437 days ago.

I am here :)

Customer replied 1437 days ago.

ok I'm going to log in now...

Customer replied 1437 days ago.

1st set of questions are....

1) Maximization of shareholder wealth is a concept in which

A.	profits are maximized on a quarterly basis.
B.	virtually all earnings are paid as dividends to common stockholders.
C.	increased earnings is of primary importance.
D.	optimally increasing the long-term value of the firm is emphasized.

2) What is the primary goal of financial management?

A.	Maximizing cash flow
B.	Maximizing shareholder wealth
C.	Increased earnings
D.	Minimizing risk of the firm

3) One of the major disadvantages of a sole proprietorship is

A.	the simplicity of decision making.
B.	low organizational costs.
C.	that there is unlimited liability to the owner.
D.	low operating costs.

Customer replied 1437 days ago.

While your responding to this I'm going to add another $15 the instructor advised its only 48 questions so are you good with $30 for 30 questions?

Expert: BusinessTutor replied 1437 days ago.

Sure, no problem at all :)

Customer replied 1437 days ago.

I added $15 did you receive it?

Customer replied 1437 days ago.

2nd set:

4) The statement of cash flows does NOT include which of the following sections?

A.	cash flows from sales activities
B.	cash flows from investing activities
C.	cash flows from operating activities
D.	cash flows from financing activities

5) Which of the following is not a primary source of capital to the firm?

A.	common stock
B.	preferred stock
C.	assets
D.	bonds

6) Which account represents the cumulative earnings of the firm since its formation, minus dividends paid?

A.	Common stock
B.	Accumulated depreciation
C.	Paid-in capital
D.	Retained earnings

Customer replied 1437 days ago.

3rd Set:

7) The most rigorous test of a firm's ability to pay its short-term obligations is its

A.	quick ratio.
B.	times-interest-earned ratio.
C.	current ratio.
D.	debt-to-assets ratio.

8) In examining the liquidity ratios, the primary emphasis is the firm's

A.	overall debt position.
B.	ability to earn an adequate return.
C.	ability to effectively employ its resources.
D.	ability to pay short-term obligations on time.

9) Which of the following is not considered to be a profitability ratio?

A.	times interest earned
B.	return on assets (investment)
C.	profit margin
D.	return on equity

Refer to the figure above. The firm's inventory turnover ratio is

A.	8x.
B.	0.1x.
C.	10x.
D.	2.7x.

11)

Refer to the figure above. Megaframe's current ratio is

A.	1.625:1
B.	3.2:1
C.	1.9:1
D.	1.5:1

12)

Refer to the figure above. The firm's debt to asset ratio is

A.	33%.
B.	48%.
C.	58%.
D.	25%.

Customer replied 1437 days ago.

I won't post anymore until you respond to these and then let me know when your ready....Thanks again!

Expert: BusinessTutor replied 1436 days and 23 hours ago.

ok, I received the $15 yes, thanks a million. You can keep posting the questions if you want, and I will post the answers to the above 3 sets, but do not click on accept until we are done with all questions. They will take less than 3 hours so no worries there :)

Customer replied 1436 days and 23 hours ago.

Ok no problem will do:)!

Customer replied 1436 days and 23 hours ago.

13) In general, the larger the portion of a firm's sales that are on credit, the

A.	higher will be the firm's need to borrow.
B.	more the firm can buy raw materials on credit.
C.	lower will be the firm's need to borrow.
D.	more rapidly credit sales will be paid off.

14) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced

A.	is lower.
B.	can be either higher or lower.
C.	is higher.
D.	is the same.

15) In order to estimate production requirements, we

A.	add projected sales in units to desired ending inventory and subtract beginning inventory.
B.	add beginning inventory to desired ending inventory and subtract projected sales in units.
C.	add beginning inventory to projected sales in units and subtract desired ending inventory.
D.	add beginning inventory to desired ending inventory and divide by two.

16) The key initial element in developing pro forma statements is

A.	an income statement.
B.	a sales forecast.
C.	a cash budget.
D.	a collections schedule.

17) A firm has beginning inventory of 300 units at a cost of $11 each. Production during the period was 650 units at $12 each. If sales were 700 units, what is the cost of goods sold (assume FIFO)?

A.	$8,000
B.	$7,700
C.	$9,000
D.	$8,100

18) The difference between total receipts and total payments is referred to as

A.	beginning cash flow.
B.	net cash flow.
C.	cumulative cash flow.
D.	cash balance.

19) The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation.

A.	variable costs
B.	marginal costs
C.	fixed costs
D.	semi-variable costs

20) Financial leverage deals with:

A.	the relationship of debt and equity in the capital structure.
B.	the entire income statement.
C.	the relationship of fixed and variable costs.
D.	the entire balance sheet.

21) When a firm employs no debt

A.	it has a financial leverage of zero.
B.	its operating leverage is equal to its financial leverage.
C.	it has a financial leverage of one.
D.	it will not be profitable.

Customer replied 1436 days and 23 hours ago.

22) A firm's break-even point will rise if

A.	contribution margins increase
B.	price per unit rises
C.	fixed costs decrease
D.	variable cost per unit rises

23) If a firm has a price of $4.00, variable cost per unit of $2.50 and a breakeven point of 20,000 units, fixed costs are equal to:

A.	$10,000
B.	$30,000
C.	$13,333
D.	$50,000

24) In break-even analysis, the contribution margin is defined as

A.	price minus fixed cost.
B.	variable cost minus fixed cost.
C.	price minus variable cost.
D.	fixed cost minus variable cost.

25) Kuznets Rental Center requires $1,000,000 in financing over the next two years. Kuznets can borrow long-term at 9 percent interest per year for two years. Alternatively, Kuznets can borrow short-term and pay 7 percent interest in the first year. Then, Kuznets projects paying 10 percent interest in the second year. Assuming Kuznets pays off the accrued interest at the end of each year, which of the following statements is true?

A.	Kuznets will definitely end up paying less under the long-term financing plan.
B.	Kuznets will probably pay more under the short-term financing plan.
C.	Kuznets will definitely end up paying more under the long-term financing plan.
D.	Kuznets will probably pay less under the short-term financing plan.

26) The theory of the term structure of interest rates which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding is the

A.	segmentation theory.
B.	liquidity premium theory.
C.	expectations hypothesis.
D.	market average rate theory.

27) Normally, permanent current assets should be financed by

A.	short-term funds.
B.	long-term funds.
C.	borrowed funds.
D.	internally generated funds.

28) Risk exposure due to heavy short-term borrowing can be compensated for by

A.	carrying illiquid assets.
B.	carrying highly liquid assets.
C.	carrying longer term, more profitable current assets.
D.	carrying more receivables to increase cash flow.

29) An aggressive working capital policy would have which of following characteristics?

A.	A low ratio of short-term debt to fixed assets.
B.	A high ratio of long-term debt to fixed assets.
C.	A high ratio of short-term debt to long-term sources of funds.
D.	A short average collection period.

30) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?

A.	Illiquid assets and heavy long-term borrowing
B.	Illiquid assets and heavy short-term borrowing
C.	Liquid assets and heavy long-term borrowing
D.	Liquid assets and heavy short-term borrowing

Expert: BusinessTutor replied 1436 days and 23 hours ago.

Here is what I have finished so far

Please click here

P.S. Do you need to show calculations?

Customer replied 1436 days and 23 hours ago.

Are you willing to do the remaining 18 questions? if so I'll add another $18 to the amount (just tell me exactly how to add more funds, the last time I just selected a button called bonus...but that button doesn't exist now)

Customer replied 1436 days and 23 hours ago.

Nope....it's all multiple choice

Customer replied 1436 days and 22 hours ago.

hey just making sure your still there...

Expert: BusinessTutor replied 1436 days and 22 hours ago.

I am yes :)

Please click here

Waiting for the new set

Expert: BusinessTutor replied 1436 days and 22 hours ago.

By the way, yes please go ahead and post the remaining questions. I have answered up to number 29 so far. As for adding the money, you can still do the bonus button thing :)

Expert: BusinessTutor replied 1436 days and 22 hours ago.

Sorry Mylz, I have answered 30 questions - sorry about that typing mistake :)

Customer replied 1436 days and 22 hours ago.

ok here they are:

31) "Float" takes place because

A.	the level of cash on the firm's books is equal to the level of cash in the bank.
B.	a firm is early in paying its bills.
C.	a lag exists between writing a check and clearing it through the banking system.
D.	a customer writes "hot" checks.

32) In managing cash and marketable securities, what should be the manager's primary concern?

A.	Maximization of liquid assets
B.	Maximization of profit
C.	Acceptable return on investment
D.	Liquidity and safety

33) How would electronic funds transfer affect the use of "float"?

A.	Decrease its use somewhat
B.	Increase its use somewhat
C.	Virtually eliminate its use
D.	Have no effect on its use

34) Dun & Bradstreet is known for providing

A.	credit scoring reports that rank a company's payment habits relative to its peer group.
B.	interest rate information to cash managers.
C.	cash management systems to corporate treasurers.
D.	consumer credit reports to credit card companies.

35) The three primary policy variables to consider when extending credit include all of the following except

A.	the level of inflation.
B.	credit standards.
C.	the terms of trade.
D.	collection policy.

36) Variables important to credit scoring models include

A.	negative public records.
B.	age of company in years.
C.	facility ownership.
D.	all of these variables apply.

37) What is generally the largest source of short-term credit small firms?

A.	Commercial paper
B.	Bank loans
C.	Installment loans
D.	Trade credit

38) Commercial paper that is sold without going through a broker or dealer is known as

A.	dealer paper.
B.	term paper.
C.	book-entry transactions.
D.	direct paper.

39) Which of the following is not a true statement about commercial paper?

A.	Finance paper is also referred to as direct paper.
B.	Industrial companies, utility firms or finance companies too small to sell direct paper sell dealer paper.
C.	Dealer paper is sold directly to the lender by a finance company.
D.	Finance paper is sold directly to the lender by the finance company.

40) A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?

A.	Increased receivables and increased bank loans
B.	Increased payables and increased bank loans
C.	Increased payables and decreased bank loans
D.	Decreased receivables and increased bank loans

41) Which method of controlling pledged inventory provides the greatest degree of security to the lender?

A.	Overall inventory liens
B.	Warehousing
C.	Trust receipts
D.	Blanket inventory liens

42) Firms exposed to the risk of interest rate changes may reduce that risk by

A.	hedging in the financial futures market.
B.	pledging or factoring accounts receivable.
C.	hedging in the commodities market.
D.	obtaining a Eurodollar loan.

43) As the interest rate increases, the present value of an amount to be received at the end of a fixed period

A.	decreases
B.	Not enough information to tell
C.	remains the same
D.	increases

44) In determining the future value of a single amount, one measures

A.	the present value of an amount discounted at a given interest rate.
B.	the present value of periodic payments at a given interest rate.
C.	the future value of an amount allowed to grow at a given interest rate.
D.	the future value of periodic payments at a given interest rate.

45) An annuity may be defined as

A.	a series of payments of unequal amount.
B.	a series of consecutive payments of equal amounts.
C.	a series of yearly payments.
D.	a payment at a fixed interest rate.

46) Mr. Blochirt is creating a college investment fund for his daughter. He will put in $850 per year for the next 15 years and expects to earn an 8% annual rate of return. How much money will his daughter have when she starts college?

A.	$12,263
B.	$23,079
C.	$24,003
D.	$11,250

47) If you were to put $1,000 in the bank at 6% interest each year for the next ten years, which table would you use to find the ending balance in your account?

A.	Future value of $1
B.	Future value of an annuity of $1
C.	Present value of an annuity of $1
D.	Present value of $1

48) If you invest $8,000 at 12% interest, how much will you have in 7 years?

A.	$17,688
B.	$80,712
C.	$3616
D.	$18,016

Customer replied 1436 days and 22 hours ago.

I have added the money to my account but I don't know how to give it to you...the button for bonus amount doesn't exist anymore and I don't want to post the funds incorrectly

Customer replied 1436 days and 22 hours ago.

I think if I select accept at that time the button will exist and I can then add the funds

Customer replied 1436 days and 21 hours ago.

We have like 30mins let me know if that's enough time or not...

Customer replied 1436 days and 21 hours ago.

Also let me know if you would like me to go ahead and select accept and see if that will allow me add the additional funds...

Expert: BusinessTutor replied 1436 days and 21 hours ago.

That is correct Mylz, once you click accept again, the bonus button will show. But do not accept until I provide the full solutions :)

Thanks

Expert: BusinessTutor replied 1436 days and 21 hours ago.

Here is until 42

Customer replied 1436 days and 21 hours ago.

Got it...

Accepted Answer

Expert: BusinessTutor replied 1436 days and 21 hours ago.

THIS ANSWER IS LOCKED!
You can view this answer by clicking here to Register or Login and paying $3.
If you've already paid for this answer, simply Login.

Expert Type	Tutor
Category:	Homework
Pos. Feedback:	99.7 %
Accepts:	4510
Answered:	5/3/2009

Experience: More than 5000 online tutoring sessions.

Ask this Expert a Question >

Customer replied 1436 days and 21 hours ago.

I got an 89.58% which definitley works for me:) Thanks for all your help I really appreciate it!!!

Expert: BusinessTutor replied 1436 days and 21 hours ago.

I am not very happy about that mylz, but does it tell you which ones were wrong?

Customer replied 1436 days and 21 hours ago.

Yes....here it is:

Score	89.58
Total Questions:	48
Total Correct	43
Start:	5/3/2009 1:15:00 PM
End:	5/3/2009 4:04:59 PM

Here is some additional information on items you missed: Topic:

You answered the following question incorrectly. Please refer to Chapter 3 in your text for additional study.

Refer to the figure above. The firm's debt to asset ratio is

Topic:

You answered the following question incorrectly. Please refer to Chapter 5 in your text for additional study.

A firm's break-even point will rise if

Topic:

You answered the following question incorrectly. Please refer to Chapter 6 in your text for additional study.

Kuznets Rental Center requires $1,000,000 in financing over the next two years. Kuznets can borrow long-term at 9 percent interest per year for two years. Alternatively, Kuznets can borrow short-term and pay 7 percent interest in the first year. Then, Kuznets projects paying 10 percent interest in the second year. Assuming Kuznets pays off the accrued interest at the end of each year, which of the following statements is true?

Topic:

You answered the following question incorrectly. Please refer to Chapter 8 in your text for additional study.

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

Topic:

You answered the following question incorrectly. Please refer to Chapter 8 in your text for additional study.

A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?

Customer replied 1436 days and 21 hours ago.

Did you receive any funds...I can't tell if it went through or not...and don't worry about it, I'm happy with the score out of 48 questions only 5 was incorrect....had I did this alone at least 30 would have been incorrect :)

Expert: BusinessTutor replied 1436 days and 21 hours ago.

I still owe you one mylz :)

Yes, I received the $15

Thanks :)

Expert: BusinessTutor replied 1436 days and 13 hours ago.

mylz

I have been reviewing the incorrect answers, number 40, we have answered correctly, please check the following link number 36

That is the book's website:

http://highered.mcgraw-hill.com/sites/0073027200/student_view0/mid-term_exam.html

I still am sorry about losing the marks on those questions. I also wanted to check something with you. You said you were ready to offer an additional "Are you willing to do the remaining 18 questions? if so I'll add another $18 to the amount", have you added this amount? I am checking because I was notified of the initial payment of $15, but not the $18

Please advise

Thank you