Question

1. Which of the following are income tax deductible items to a corporation?

a. Common stock dividends
b. preferred stock dividends
c. Retained earnings
d. Bond interest expenses

2. The opportunity cost is defined as the

a. rate of return based on historical costs
b. rate of return available in the financial markets
c. cost associated with the acquisition of investments

3. ABC Inc. has $4,000 in cash, $16,000 in accounts receivable, $20,000 in inventories, and $20,000 in current liabilities. What is ABC Inc.'s acid test (or quick) ratio?

a. 0.2
b. 0.8
c. 2
d. 1

4. To compound $100 quarterly for 20 years at 8% we must use

a. 40 periods at 4%
b. 5 periods at 12%
c. 10 periods at 4%
d. 80 periods at 2%

5. ABC Inc. bonds pay an annual coupon of 9-1/2%. They have 8 years to maturity and face value, or par, of $1,000. Compute the present value of ABC Inc.'s bonds if investors' rate of terutn is 10%.

a. 950
b. 973.33
c. 1027.17
d. 1516.18