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I need to solve a corporate finance multiple choice exam

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I need to solve a corporate finance multiple choice exam
Submitted: 5 years ago.Category: Business and Finance Homework
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Answered in 9 minutes by:
10/29/2012
Business Tutor: Ellen, Lawyer, Accountant & Researcher replied 5 years ago
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Question 1
1.
Which of the following statements is CORRECT?
Answer

One advantage of forming a corporation is that equity investors are usually exposed to less liability than they would be in a partnership.

Corporations face fewer regulations than sole proprietorships.

It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive legal documents are required.

If a partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

One disadvantage of operating a business as a sole proprietor is that the firm is subject to double taxation, because taxes are levied at both the firm level and the owner level.
1 points
Question 2
1.
The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to
Answer

Maximize its expected total corporate income.

Maximize its expected EPS.

Maximize the stock price per share over the long run, which is the stock's intrinsic value.

Minimize the chances of losses.

Maximize the stock price on a specific target date.
1 points
Question 3
1.
An APR will be equal to an effective annual rate if?
Answer

Compounding occurs quarterly.

Compounding occurs continuously.

Compounding occurs annually.

APR can never be equal to effective annual rate.

Compounding occurs semi-annually.
1 points
Question 4
1.
Agency problems can be best characterized as?
Answer

Forcing owners to bear the full cost of their actions.

dislike of firm's bondholders by its equity holders.

Problems arising due to governments substantial investment in the firm's stock.

Differing incentives between managers and owners.

Allowing owners to share the cost of their actions with others.
1 points
Question 5
1.
Vasudevan Inc. recently reported operating income of $5.35 million, depreciation of $1.20 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $0.6 million. How much was its free cash flow, in millions?
Answer

$3.47

$4.69

$3.77

$3.12

$3.81
1 points
Question 6
1.
Over the years, O'Brien Corporation's stockholders have provided $20,000,000 of capital, when they purchased new issues of stock and allowed management to retain some of the firm's earnings. The firm now has 1,000,000 shares of common stock outstanding, and it sells at a price of $28.50 per share. How much value has O'Brien's management added to stockholder wealth over the years, i.e., what is O'Brien's MVA?
Answer

$10,625,000

$9,775,000

$10,200,000

$9,350,000

$8,500,000
1 points
Question 7
1.
Considered alone, which of the following would INCREASE a company's current ratio?
Answer

An increase in accrued liabilities.

An increase in net fixed assets.

An increase in accounts payable.

An increase in notes payable.

An increase in accounts receivable.
1 points
Question 8
1.
Which of the following would indicate an IMPROVEMENT in a company's financial position, holding other things constant?
Answer

The current and quick ratios both increase.

The debt ratio increases.

The inventory and total assets turnover ratios both decline.

The times-interest-earned ratio declines.

The profit margin declines.
1 points
Question 9
1.
Ryngard Corp's sales last year were $16,000, and its total assets were $16,000. What was its total assets turnover ratio (TATO)?
Answer

1.05

1.00

1.14

1.11

1.07
1 points
Question 10
1.
Ajax Corp's sales last year were $545,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times-interest-earned (TIE) ratio?
Answer

15.48

16.21

11.53

14.60

14.45
1 points
Question 11
1.
River Corp's total assets at the end of last year were $350,000 and its net income was $32,750. What was its return on total assets?
Answer

9.36%

10.76%

10.57%

9.45%

11.42%
1 points
Question 12
1.
Precision Aviation had a profit margin of 6.00%, a total assets turnover of 1.5, and an equity multiplier of 1.8. What was the firm's ROE?
Answer

15.71%

16.20%

19.76%

15.55%

19.93%
1 points
Question 13
1.
How much would $1, growing at 11.5% per year, be worth after 75 years?
Answer

$4,039.36

$3,336.87

$3,512.49

$4,074.49

$4,355.49
1 points
Question 14
1.
How much would $5,000 due in 20 years be worth today if the discount rate were 5.5%?
Answer

$1,747.92

$1,713.64

$1,508.01

$1,867.87

$2,090.65
1 points
Question 15
1.
You want to quit your job and go back to school for a law degree 4 years from now, and you plan to save $3,300 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today?
Answer

$11,545.39

$16,406.61

$15,191.31

$18,837.22

$12,760.70
1 points
Question 16
1.
Your father is about to retire, and he wants to buy an annuity that will provide him with $50,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the annuity today?
Answer

$722,676.43

$686,177.62

$846,772.39

$729,976.19

$635,079.29
1 points
Question 17
1.
Your father's employer was just acquired, and he was given a severance payment of $462,500, which he invested at a 7.5% annual rate. He now plans to retire, and he wants to withdraw $35,000 at the end of each year, starting at the end of this year. How many years will it take to exhaust his funds, i.e., run the account down to zero?
Answer

65.24

48.93

65.90

80.90

60.68
1 points
Question 18
1.
Suppose you just won the state lottery, and you have a choice between receiving $2,750,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.
Answer

6.91%

4.89%

6.98%

5.61%

6.52%
1 points
Question 19
1.
Master Card and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 22.00%, with interest paid monthly, what is the card's EFF%?
Answer

30.45%

28.26%

22.90%

24.36%

25.33%
1 points
Question 20
1.
Suppose you are buying your first condo for $110,000, and you will make a $15,000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6.5% nominal interest rate, with the first payment due in one month. What will your monthly payments be?
Answer

$510.39

$558.43

$600.46

$546.42

$588.46
1 points
Question 21
1.
Which of the following statements is CORRECT?
Answer

If a bond's yield to maturity exceeds its coupon rate, the bond will sell at a premium over par.

All else equal, if a bond's yield to maturity increases, its current yield will fall.

All else equal, if a bond's yield to maturity increases, its price will fall.

A zero coupon bond's current yield is equal to its yield to maturity.

If a bond's yield to maturity exceeds its coupon rate, the bond will sell at par.
1 points
Question 22
1.
Adams Enterprises' bonds currently sell for $970. They have a 15-year maturity, an annual coupon of $85, and a par value of $1,000. What is their yield to maturity?
Answer

8.25%

7.54%

9.84%

8.87%

10.55%
1 points
Question 23
1.
Sadik Inc.'s bonds currently sell for $1,130 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)?
Answer

9.82%

7.70%

8.40%

8.85%

8.49%
1 points
Question 24
1.
Malko Enterprises' bonds currently sell for $1,410. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. What is their current yield?
Answer

6.60%

5.32%

5.53%

4.63%

4.10%
1 points
Question 25
1.
Assume that you are considering the purchase of a 20-year, bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 8.8% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Answer

$1,299.71

$1,065.34

$926.84

$1,310.36

$990.76
1 points
Question 26
1.
Which of the following would NOT be considered as a real asset?
Answer

A factory.

A Machine.

A Computer.

A patent.

A Corporate bond.
1 points
Question 27
1.
Brown Office Supplies recently reported $19,000 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)?
Answer

$7,952

$7,449

$8,370

$7,366

$9,374
1 points
Question 28
1.
Scranton Shipyards has $15.5 million in total investor-supplied operating capital, and its WACC is 10%. Scranton has the following income statement: What is Scranton's EVA?


Answer

$1,062,500

$850,000

$680,000

$807,500

$935,000
1 points
Question 29
1.
Kop Corporation's 5-year bonds yield 6.50%, and T-bonds with the same maturity yield 4.80%. The default risk premium for Kop's bonds is DRP = 0.40%, the liquidity premium on Kop's bonds is LP = 1.30% versus zero on T-bonds, the inflation premium (IP) is 1.50%, and the maturity risk premium (MRP) on 5-year bonds is 0.40%. What is the real risk-free rate, r*?
Answer

3.07%

2.44%

2.90%

2.35%

2.99%
1 points
Question 30
1.
You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?
Answer

Its total assets turnover must be below the industry average.

Its TIE ratio must be below the industry average.

Its total assets turnover must be above the industry average.

Its total assets turnover must equal the industry average.

Its return on assets must equal the industry average.
Business Tutor: Ellen, Lawyer, Accountant & Researcher replied 5 years ago


Thank you.

I am working on your answers. 15 min. please.
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Customer reply replied 5 years ago
take your time...
Business Tutor: Ellen, Lawyer, Accountant & Researcher replied 5 years ago
Thank you for letting me know
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Customer reply replied 5 years ago
I have 3 hours
Business Tutor: Ellen, Lawyer, Accountant & Researcher replied 5 years ago
Unfortunately these questions were much more time-consuming than I anticipated. Therefore I am going to provide you with the answers I have completed to date and opt out without charge to your JustAnswer account

1. One advantage of forming a corporation is that equity investors are usually exposed to less liability than they would be in a partnership.

2 Maximize the stock price per share over the long run, which is the stock's intrinsic value.

3.Compounding occurs annually.

4. Differing incentives between managers and owners.

5 3.77

6.$8,500,000

7. An increase in accounts payable

8 The current and quick ratios both increase.

9 1.00
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Customer reply replied 5 years ago
Your answers were bad. I'm very dissapointed with you. Not only answer just a few answers bad also in a wrong way. Shame on you!
Business Tutor: Steven, M.Acc., Instructor replied 5 years ago
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