| **1. You want your all-equity (no debt) firm to provide a return on equity of 13.5%. If total assets are $375,000, how much must be generated in net income to make this target? a. $50,6 25 b. $43,4 05 ** 1. You want your all-equity (no debt) firm to provide a return on
equity of 13.5%. If total assets are $375,000, how much must be
generated in net income to make this target?
a. $50,6
25
b. $43,4
05
c. $41,2
34
d. $45,6
89
e. $48,0
94
2. If the discount rate is 5.5%, the present value of $5,000
obtained 25 years from today would be worth
a. $1,183.
33
b. $1,311.
17
c. $1,067.
95
d. $1,124.
16
e. $1,245.
61
3. Brown Office Supplies recently reported $15,500 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)?
a. $5,1
14
b. $4,6
27
c. $5,3
69
d. $5,6
38
e. $4,8
70
4. What’s the future value of $1,500 after 5 years if the
appropriate interest rate is 6%, compounded semiannually, and
rounded to the nearest dollar?
a. $1,8
19
b. $2,1
17
c. $1,9
15
d. $2,2
23
e. $2,0
16
5. Acme Inc had a total assets turnover of 1.33 and an equity
multiplier of 1.75. Although it had net income of $10,600 on
$295,000 of sales, a private equity firm thinks it could have had
a net income $10,250 greater just by cutting costs. If this is
possible, how much greater would be the return on equity?
Hint: DuPont!
a. 7.2
8%
b. 9.7
9%
c. 6.5
5%
d. 8.9
0%
e. 8.0
9%
6. What is the value of a 20-year, noncallable bond with an
annual coupon rate of 9.5%, but making semiannual interest
payments? The bond has a face value of $1,000, and you
require an annual 8.4% discount rate for this investment.
a. $1,190.7
1
b. $1,105.6
9
c. $1,220.4
8
d. $1,133.3
4
e. $1,161.
67
7. Weir Incorporated has sales of $200,000 and accounts
receivable of $18,500. You can easily show that its DSO is well
over the industry average of 27 days. Suppose that it speeds up
collection, matches the industry average, and manages to earn
8% interest on the cash not tied up in receivables. What would
be the savings per year? Assume that sales are not affected by
the tighter credit.
a. $267.
54
b. $241.
45
c. $281.
62
d. $254.
16
e. $296.
44
8. What is the present value at 6% discount of a cash flow at t =
1 of $1,000 followed by three more consecutive cash flows of
$2,000 (at t = 2, 3, and 4). Hint: First draw a time diagram, then
use the formula for PV of an annuity followed by a single
discount to year 0.
a. $6,6
00
b. $6,9
30
c. $7,2
77
d. $6,2
86
e. $5,9
87
9. If you deposit $1,500 in your bank at 3.5% interest
compounded annually, after five years you will have
a. $1,964.
14
b. $2,165.
46
c. $1,781.
53
d. $2,062.
34
e. $1,870.
61
10. What is the present value of 30 consecutive annual
payments of $100, made at the end of each year, when the
discount rate is 9%?
a. 1,027.37
b. 13,630.81
c. 1326.77
d. 39,803.36
e. 2606.54
11. Acme Incorporated had $10,750 of sales, $5,500 of
operating costs, and $1,250 of depreciation. The company had
$3,500 of debt for which it pays 6.25% interest per year. Its
total tax rate was 35%. During the same period, the firm spent
$1,550 on required fixed assets and additional operating
working capital. What was its free cash flow?
a. $1,9
72
b. $2,0
76
c. $2,1
85
d. $1,8
73
e. 2300
12. What is the price of a zero coupon (1,000 face value) bond
with FIVE years to maturity when the required rate of return is
6%?
a. $923.3
6
b. $747.2
6
c. $813.3
5
d. $677.2
0
e. $1120.
35
13. If the stated or nominal interest rate (APR) is 18.00% to be
compounded monthly, what is the EFF (also called EAR)?
a. 22.6
5%
b. 19.5
6%
c. 18.5
8%
d. 21.5
7%
e. 20.5
4%
14. ABC's net income had $1,250,000. If it had a dividend payout
of 45% and has 225,000 shares outstanding, what were the
annual dividends per share?
a. $2.
26
b. $2.
50
c. $2.
63
d. $2.
38
e. $2.
14
15. Suppose that Acme Inc. had a net income of $19,000 on
sales of $325,000 and total assets are $250,000 at the end of
the fiscal year. The firm's debt to assets ratio was 45.0%. What
is the return on equity? (hint use the DuPont relationship)
a. 16.0
0%
b. 16.8
0%
c. 13.8
2%
d. 14.5
1%
e. 15.2
3% | |