MID TEST FINANCIAL MANAGEMENT

A wealthy woman just died and left her pet cats the following estate: $50,000 per year for the next 15 years with the first cash flow today. At a discount rate of 3.2%, what is the feline estate worth in today's dollars?

• A) $607,180.14

• B) $601,180.14

• C) $608,180.14

• D) $774,000.00

Which of the following can lead to increased expected cash flow over time to the firm?

• A) Open and collaborative relations with the community

• B) Qualified and motivated employees

• C) Greater customer satisfaction

• D) All of the above

You place $500 into your checking account at First Bank and earn 1% APR on your deposit. Your professor borrows money at a rate of 8% from the same bank for a tuition loan for her son. Which of the following statements is true?

• A) You benefit from earning interest on your deposit, safety for your funds, and having a recognizable means for paying for your financial obligations without having to hold cash.

• B) You and your professor have an obvious conflict of interest because you have accounts at the same financial institution.

• C) The bank is criminally liable to you for paying an interest rate lower than the expected rate of inflation.

• D) Your professor is the only party to be made worse off by this example because she is the only party paying net interest.

Debts to be paid more than one year from now are claims against the firm's assets: in other words, they are long-term liabilities. These claims are from ________ who have provided capital to the firm but whose entire repayment is not due during the coming year or operating cycle.

• A) banks and bondholders

• B) banks and stockholders

• C) stockholders and bondholders

• D) all long-term lenders

Of the following, which is NOT one of the four main areas of finance?

• A) International finance

• B) Corporate finance

• C) All are considered main areas of finance

• D) . Investments

Which of the following identities is FALSE?

• A) Change in Equity = Paid-in-Surplus - Net New Borrowing from Creditors

• B) Net New Borrowing = Ending Long-term Liabilities - Beginning Long-Term Liabilities

• C) Cash Flow to Owners = Dividends - Net New Borrowing from Owners

• D) Net New Borrowing from Owners = Change in Equity

Four years ago, Robert's annual salary was $52,500. Today, he earns $73,800. What has been the average annual rate of growth of Robert's salary?

• A) 8.89%

• B) 10.38%

• C) 41.52%

• D) $5,325 per year

Average U.S. wages in 1990 were $28,960, far larger than the average wage in 1930 of $1,970. What was the average annual increase in wages over this 60-year period?

• A) 4.58%

• B) 2.45%

• C) 24.50%

• D) 3.31%

Stocks are bought and sold in ________ markets.

• A) equity

• B) debt

• C) derivatives

• D) foreign exchange

Cash flow from assets is derived from ________.

• A) cash flow from creditors and cash flow from investing activities

• B) cash flow from operating activities and cash flow from financing activities

• C) cash flow from operating activities and cash flow from investing activities

• D) cash flow from financing activities and cash flow from investing activities