1. Amortization tables are useful for each of the following reasons expect: A)de
ID: 2708750 • Letter: 1
Question
1. Amortization tables are useful for each of the following reasons expect:
A)determining how much of a total payment is interest and how much is principal for tax purposes
B)determining the regular periodic total payment
C)determining the principal balance due if the loan is being paid off early
D)all of these are useful purposes of an amortization table
2. A series of equal periodic finite cash flows that occur at the beginning of the period are known as a/an ________
A)ordinary annuity
B)amortization
C)perpetuity
D)annuity due
3. A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm's common stock is _________.
A)$100
B)$10
C)$12
D)$120
4. The present value of $100 received at the end of year 1, $200 received at the end of year 2, and $300 received at the end of year 3, assuming an opportunity cost of 13%, is
A)$453
B)$416
C)$500
D)$1,181
5. all of the following are noncash charges expect
A)accurals
B)depreciation
C)depletion
D)amortizaton
7. advantages of issuing common stock versus long-term debt include all of the following expect
A)the effects of dilution on earnings and voting power
B)increases firm's borrowing power
C)no fixed payment obligation
D)no maturity
8. A corporation has year end 1998 and a 1999 retained earnings balances of $320,000 and $400,000, respectively. The firm reported net profiles after taxes of $100,000 in 1999. The firm paid dividends in 1999 of__
A)$20,000
B)$0
C)$100,000
D)$80,000
9. A firm has the balance sheet accounts, common stock,and paid-in capital in excess of par, with values of $400,000 and $500,000, respectively. The firm has 40,000 common shares outstanding. if the firm had a pair value of $1, the stock originally sold for
A)$13.50/share
B)$11.50/share
C)$15.50/share
D)$12.50/share
10. Debbie borrows $3,500 from the bank at 12% annually compounded interest to be repaid in four equal installments. the interest paid in the second year is
A)$277
B)$322
c)$420
D)$1,152
11. long-term debt instruments used by both government and business are known as
A)bonds
B)stocks
C)bills
D)equities
12. A firm has the following accounts and financial data for 1999
Sales Revenue $3,060 Cost of good sold $1,800
Accounts Receivable 500 Preferred stock dividends 18
Interest expense 126 Tax rate 40%
Total oper. expenses 600 Number of shares of common
Accounts payable 240 stocks outstanding 1,000
The firm's earning available to common shareholders for 1999 are ___.
A) -$224
B)$516
C)302
D)$291
13. A firm with a cost of capital of 13 percent is evaluating three capital projects. The internal rates of return are as follows:
Internal Rate
Project of Return
1- 12%
2-15%
3-13%
The firm should
A) accept project 3 and rejects project 1 and 2
B) accept projects 2 and 3 reject project 1
C) accept project 1 and rejects projects 2 and 3
D) accept project 2 and reject projects 1 and 3
14. a firm has issued preferred stock at its $125 per share par value. the stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share. the cost of the preferred stock is
A) 7.2 percent
B) 12 percent
C) 15 percent
D) 12.4 percent
15. A never-ending stream of equal periodic, end-of-the-period cash flows is called a/an _______
A)annuity
B)amortization
C)annuity due
D)perpetuity
16. Current liabilities can be viewed as
A)debts due in less than a year
B)sources of cash inflows
C)sources of cash outflows
D)debts due in one year
17. An 8 percent preferred stock with a market price of $110 per share and a $100 par value pays a cash dividend of _________.
A)$8.80
B)$4.00
C)$8.00
D)$80.00
18. A firm must choose from six capital budgeting proposals outlined below. the firm is subject to capital rationing and has a capital budget of $1,000,000, the firm's cost of capital is 15 percent.
Project Initial Investment IRR NPV
1 $200,000 19% $100,000
2 400,000 17 20,000
3 250,000 16 60,000
4 200,000 12 -5,000
5 150,000 20 50,000
6 400,000 15 150,000
Using the internal rate of return approach to ranking prokects, which projects should the firm accept?
A)1,3,4, and 6
B)2,3,4 and 6
C)1,2,3,4 and 5
D)1,2,3 and 5
19. table 7.1
52-WEEK YLD VOL NET
YTD%CHG HI LO STOCK(SYM) Div % PE 100s CLOSE CHG
-5.1 48.72 20.10 FORD(F) 1.00 3.3 18 20,925 30.20 -0.56
Referring to Table 7.1, if we assume that Ford's dividends will grow at a rate of 10 perent forever, on Ford's stock would be
A)13.6%
B)8.9%
C)7.4%
D)11.0%
20. A firm is evaluating two projects that are mutually exclusiv with initial investments and cash flows as follows:
Project A Project B
Initial investment End of year cash flows Initial investment End of year cash flows
$40,000 $20,000 $90,000 $40,000
20,000 40,000
20,000 80,000
if the firm in table 9.1 has a required payback of two years, they should
A)accept project A and reject B
B)reject project A and accept B
C)accept projects A and B
D)reject both
Explanation / Answer
1) D)
2) D)
3) C)
4) C)
5) A)
7) A)
8) B)
9) C)
10) C)
11) A)
12C)302
13) B)
14) D)
15) D)
16) D)
17) A)
18) D)
19) A)
20) A)
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