WorksheetsToán tiếng anh 2
Total questions: 129
Worksheet time: 1hrs 5mins
Which of the following is NOT directly reflected in the cash budget of a firm that is in the zero tax bracket?
Depreciation
Payments lags
Repurchases of common stock
Payment for plant construction
AT Co., Ltd has total demand for money is $3 billion. The cost of transferring securities in cash is $250,000, the return on securities is 15% a year. According to the Baumol-Allais-Tobin (BAT) optimal reserve model, the optimal reserve amount is
$100 million
$50 million
$150 million
$200 million
AT Co., Ltd has total demand for money is $1 billion. The cost of transferring securities in cash is $ 200,000, the return on securities is 12% a year. According to the Baumol-Allais- Tobin (BAT) optimal reserve model, the optimal reserve amount is
$57.7 million
$50.4 million
$100 million
$60 million
AT Co., Ltd has total demand for money is $ 4 billion. The cost of transferring securities in cash is $ 250,000, the return on securities is 20% a year. According to the Baumol-Allais-Tobin (BAT) optimal reserve model, the optimal reserve amount is
$100 million
$150 million
$90 million
$120 million
Amounts due from customers when goods are sold on credit are called
Trade debits
Trade balance
Trade discount
Trade off
Which of the following is NOT commonly regarded as being a credit policy variable?
Payments deferral period
Collection policy
Credit standards
Cash discounts
Given an accounts receivable turnover of 8 times and annual credit sales of $762,000 and the average accounts receivable of $92,250 the average collection period (360-day year) is:
45 days.
90 days.
75 days.
60 days.
Given an accounts receivable turnover of 8 times, annual credit sales of $428,000 and average collection period (360-day year) is 45 days, the average accounts receivable is:
$53,500
$8,044
$58,400
$35,500
In ABC inventory classification model, items class A is:
large dollar value items but comprise a relatively small percentage of the total number of items held in inventory
low dollar value items but comprise a large percentage of the total items held in inventory
low dollar value items but comprise a relatively small percentage of the total number of items held in inventory
large dollar value items but comprise a large percentage of the total items held in inventory
Sears sells mattresses at all stores located in the Toronto area. The mattresses are stored in a central warehouse. Annual demand is 2,400 mattresses, spread evenly throughout the year. The cost of placing and receiving an order is $32. The annual carrying cost is $10/unit. What is the size of the order Sears should place with its supplier to minimize its inventory cost?
124 units
150 units
168 units
172 units
A firm's inventory turnover (IT) is 5 times on a cost of goods sold (COGS) of $800,000. If the IT is improved to 8 times while the COGS remains the same, a substantial amount of funds is released from or additionally invested in inventory. In fact,
$60,000 is released
$160,000 is released
$100,000 is additionally invested
$60,000 is additionally invested.
Ninety-percent of X company's total sales of S600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively:
73 days and $108,000.
365 days and $108,000.
73 days and $120,000.
81 days and $108,000.
Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in:
an increase in the average collection period.
a decrease in bad debt losses.
an increase in sales.
higher profits.
The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the customers take the discount, 62% pay within the net period, and the rest pay within 45 days of invoice. What would receivables be if all customers took the cash discount?
Lower than the present level.
No change from the present level
Higher than the present level
Unable to determine without more information.
An increase in the firm's receivable turnover ratio means that:
it is collecting credit sales more quickly than before.
cash sales have decreased.
it has initiated more liberal credit terms.
inventories have increased.
Costs of not carrying enough inventory include:
lost sales; customer disappointment; possible worker layoffs.
lost sales.
customer disappointment.
possible worker layoffs.
Credit policy of every company is largely influenced by __________ and
Liquidity, profitability
Liquidity, accountability
Liability, profitability
Liability, liquidity
Which of the following statements is most consistent with efficient inventory management? The firm has a
low incidence of production schedule disruptions.
below average inventory turnover ratio.
below average total assets turnover ratio.
relatively high current ratio.
Vogel Bird Seed's total sales of $1,320 million is on credit. The company has an average accounts receivable balance for the year of $165 million. The average collection period would be (Assume a 360-day year)
45 days
36 days
40.7 days
30 days
Vogel Bird Seed's total sales of $1,800 million is on credit. The company has an average accounts receivable balance for the year of $250 million. The average collection period would be (Assume a 360-day year)
50 days
47 days
55 days
30 days
Vogel Bird Seed's total sales of $1,800 million is on credit. The company has an average accounts receivable balance for the year of $350 million. The average collection period would be (Assume a 360-day year)
70 days
67 days
60 days
85 days
Annual demand is 3,500 units, spread evenly throughout the year. The price of product is VND300,000 per unit. The cost of placing and receiving an order is VND150,000. The annual carrying cost is 12% per unit price. What is the size of the order should place with its supplier to minimize its inventory cost?
171 units
148 units
117 units
184 units
Annual demand is 1500 units, spread evenly throughout the year. The price of product is VND 760,000 per unit. The cost of placing and receiving an order is VND200,000. The annual carrying cost is 12% per unit price. What is the size of the order should place with its supplier to minimize its inventory cost?
82 units
94 units
85 units
76 units
Annual demand is 5000 units, spread evenly throughout the year. The price of product is VND500,000 per unit. The cost of placing and receiving an order is VND250,000. The annual carrying cost is 15% per unit price. What is the size of the order should place with its supplier to minimize its inventory cost?
183 units
165 units
185 units
176 units
Company X has the total demand of materials is 1800 units a year. The price is VND 350.000/unit. The cost of placing and receiving an order is VND 230.000. The annual carrying cost is 10% of the price. According to EOQ model what is the company's re-ordering point? (suppose that a year has 360 days. the time of purchase is 6 days)
30 units
28 units
31 units
29 units
Company X has the total demand of materials is 1500 units a year. The price is VND 280.000/unit. The cost of placing and receiving an order is VND 184.000. The annual carrying cost is 8% of the price. According to EOQ model what is the company's re-ordering point? (suppose that a year has 360 days. the time of purchase is 6 days)
25 units
27 units
31 units
20 units
Company X has the total demand of materials is 2100 units a year. The price is VND 400.000/unit. The cost of placing and receiving an order is VND 250.000. The annual carrying cost is 12% of the price. According to EOQ model what is the company's re-ordering point? (suppose that a year has 360 days. the time of purchase is 6 days)
35 units
25 units
30 units
20 units
A credit transaction has conditional payment of 3/10 net 60. In case the buyer pays on the 60th day of delivery; what is the commercial credit cost?
22.27%
12.24%
16.89%
15.90%
A credit transaction has conditional payment of 2/10 net 50. In case the buyer pays on the 50th day of delivery; what is the commercial credit cost?
18.37 %
14.29%
16.92 %
15.96 %
A credit transaction has conditional payment of 3/15 net 60. In case the buyer pays on the 60th day of delivery: what is the commercial credit cost?
24.74%
19.24%
18.87%
22.91%
Company X has the total demand of materials is 5,500 units a year. The price is VND 260,000 per unit. The cost of placing and receiving an order is VND 370,000. The annual carrying cost is 15% of the price. According to EOQ model, what is the best size of the order to minimize the inventory cost?
323 units
232 units
117 units
401 units
Company X has the total demand of materials is 11,000 units a year. The price is VND 520,000 per unit. The cost of placing and receiving an order is VND 700,000. The annual carrying cost is 15% of the price. According to EOQ model, what is the best size of the order to minimize the inventory cost?
444 units
332 units
417 units
405 units
Company X has the total demand of materials is 8,250 units a year. The price is VND 400,000 per unit. The cost of placing and receiving an order is VND 555,000. The annual carrying cost is 15% of the price. According to EOQ model, what is the best size of the orderto minimize the inventory cost?
A. 391 units
B. 335 units
C. 210 units
D. 301 units
Spontaneous financing includes
accounts payable.
accounts receivable.
short-term loans.
a line of credit.
XYZ is an oil based business company, which does not have adequate working capital. It fails to meet its current obligation, which leads to bankruptcy. Identify the type of decision involved to prevent risk of bankruptcy.
Liquidity decision.
Investment decision.
Dividend decision.
Finance decision.
Which of the following statements is CORRECT?
Under normal conditions, a firm's expected ROE would probably be higher if it financed with short-term rather than with long-term debt, but using short-term debt would probably increase the firm's risk
Conservative firms generally use no short-term debt and thus have zero current liabilities
A short-term loan can usually be obtained more quickly than a long-term loan, but the cost of short-term debt is normally higher than that of long-term debt
If a firm that can borrow from its bank at a 6% interest rate buys materials on terms of 2/10 net 30, and if it must pay by Day 30 or else be cut off, then we would expect to see zero accounts payable on its balance sheet
Which of the following statements is CORRECT?
Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies
Trade credit is provided only to relatively large, strong firms
Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate
Commercial paper is typically offered at a long-term maturity of at least five years
Which of the following statements is NOT CORRECT?
Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate
Accruals are 'free' in the sense that no explicit interest is paid on these funds
A conservative approach to working capital management will result in most if not all permanent current operating assets being financed with long-term capital
Bank loans generally carry a higher interest rate than commercial paper
Which of the following statements is NOT CORRECT?
If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10 net 30 to net 60
A company may hold a relatively large amount of cash and marketable securities if it is uncertain about its volume of sales, profits, and cash flows during the coming year
Credit policy has an impact on working capital because it influences both sales and the time before receivables are collected
The cash budget is useful to help estimate future financing needs, especially the need for short-term working capital loans
Which of the following statements is NOT CORRECT?
An informal line of credit and a revolving credit agreement are similar except that the line of credit creates a legal obligation for the bank and thus is a more reliable source of funds for the borrower
Funds from short-term loans can generally be obtained faster than from long-term loans for two reasons: (1) when lenders consider long-term loans they must make a more thorough evaluation of the borrower's financial health, and (2) long-term loan agreements are more complex
The maturity of most bank loans is short term. Bank loans to businesses are frequently made as 90-day notes which are often rolled over, or renewed, rather than repaid when they mature. However, if the borrower's financial situation deteriorates, then the bank may refuse to roll over the loan
Loans from commercial banks generally appear on balance sheets as notes payable. A bank's importance is actually greater than it appears from the dollar amounts shown on balance sheets because banks provide non spontaneous funds to firms
Which of the following statements is NOT CORRECT?
The maturity matching, or 'self-liquidating,' approach to financing involves obtaining the funds for permanent current assets with a combination of long-term capital and short-term capital that varies depending on the level of interest rates. When short-term rates are relatively high, short-term assets will be financed with long-term debt to reduce costs
A promissory note is the document signed when a bank loan is executed, and it specifies financial aspects of the loan
A line of credit can be either a formal or an informal agreement between a borrower and a bank regarding the maximum amount of credit the bank
D. If a firm has set up a revolving credit agreement with a bank, the risk to the firm of being unable to obtain funds when needed is lower than if it had an informal line of credi
Which of the following statements is NOT CORRECT?
The facts (1) that no explicit interest is paid on accruals and 2) that the firm can control the level of these accounts at will makes them an attractive source of funding to meet working capital needs
Accruals are "free" capital in the sense that no explicit interest must normally be paid on accrued liabilities
Accruals are "spontaneous," but unfortunately, due to law and economic forces, firms have little control over the level of these accounts
Short-term financing is riskier than long-term financing since, during periods of tight credit, the firm may not be able to rollover (renew) its debt. This is especially true if the funds are used to finance long-term assets rather than short-term assets
A trade credit discount such as 1/10 net 30. What is the annual cost of not accepting the 1% discount?
18.18%
20.20%
19.19%
21.21%
A trade credit discount such as 1/10 net 35. What is the annual cost of not accepting the 1% discount?
14.55%
15.44%
12.35%
13.25%
A trade credit discount such as 1/10 net 40. What is the annual cost of not accepting the 1% discount?
12.12%
11.44%
12.55%
11.25%
A trade credit discount such as 1/10 net 45. What is the annual cost of not accepting the 1% discount?
10.39%
10.93%
19.03%
19.93%
A trade credit discount such as 1/10 net 50. What is the annual cost of not accepting the 1% discount?
9.09%
10.09%
11.09%
8.09%
A trade credit discount such as 2/10 net 30. What is the annual cost of not accepting the 2% discount?
36.73%
37.63%
33.67%
35.18%
A trade credit discount such as 2/10 net 45. What is the annual cost of not accepting the 2% discount?
20.99%
21.99%
22.99%
19.29%
Which of the following is NOT a cash outflow for the firm?
depreciation.
dividends.
interest payments.
taxes.
All of the following influence capital budgeting cash flows EXCEPT:
A method of project financing used.
accelerated depreciation
salvage value.
tax rate changes.
A single, overall cost of capital is often used to evaluate projects because:
it avoids the problem of computing the required rate of return for each investment proposal.
it is the only way to measure a firm's required return.
it acknowledges that most new investment projects have about the same degree of risk
it acknowledges that most new investment projects offer about the same expected return.
The estimated benefits from a project are expressed as cash flows instead of income flows because:
it is cash, not accounting income, that is central to the firm's capital budgeting decision.
it is simpler to calculate cash flows than income flows.
this is required by the Internal Revenue Service.
this is required by the Securities and Exchange Commission.
A capital investment is one that
has the prospect of long-term benefits.
has the prospect of short-term benefits.
is only undertaken by large corporations.
applies only to investment in fixed assets.
In the _________ the future value of all cash inflow at the end of time horizon at a particular rate of interest is calculated.
Discounting technique
Risk-free rate
Compounding technique
Risk Premium
When __________ is greater than zero the project should be accepted.
Net present value
Internal rate of return
Profitability index
Modified internal rate of return
______ is defined as the length of time required to recover the initial cash outlay.
Payback-period
Inventory conversion period
Discounted payback-period
Budget period
A project's profitability index is equal to the ratio of the ______ of a project's future cash flows to the projects
present value; initial cash outlay
net present value; initial cash outlay
present value; depreciable basis
net present value; depreciable basis
To increase a given present value, the discount rate should be adjusted
downward.
upward.
no change.
constant.
In order to maximize firm value, management should invest in new assets when the internal rate of return is:
greater or equal to the firm's marginal cost of capital
greater than the cost of debt financing.
less than the firm's marginal cost of capital
less than the accounting rate of return.
The firm should accept independent projects if:
the profitability index is greater than 1.0.
the payback is less than the IRR
the IRR is positive.
the NPV is greater than the IRR
If the IRR is greater than the required rate of return, the:
present value of all the cash inflows will be greater than the initial outlay.
payback will be less than the life of the investment.
project should be rejected.
payback will be greater than the life of the investment.
Which of the following investments would have the highest future value at the end of 10 years? Assume that the effective annual rate for all investments is the same and is greater than zero.
Investment a pays 5250 at the beginning of every year for the next 10 years (a total of 10 payments).
Investment a pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments).
Investment a pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
Investment a pays $250 at the end of every year for the next 10 years (a total of 10 payments).
Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero.
Investment a pays $250 at the end of every year for the next 10 years (a total of 10 payments).
Investment a pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments).
Investment a pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
Investment a pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).
A profitability index of 0.85 for a project means that:
the project returns 85 cents in present value for each current dollar invested.
the present value of benefits is 85% greater than the project's costs.
the project's NPV is greater than zero.
the payback period is less than one year.
Which of the following statements is correct?
If the PI of a project is less than 1, its NPV should be less than 0.
If the NPV of a project is greater than 0, its PI will equal 0
If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.
If the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its NPV will be greater than 0.
The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above is 12%. What will be the status of $20,000 after two years if it is invested at this point of time?
$25,088
$28,032
$24,048
$22,056
The new machine will cost $75,250 plus $12,250 for shipping and installation. Net working capital will rise by $10,000. The depreciable basis of new machine is:
$87,500
$97,500
$63,000
$85,250
The new machine will cost $75,250 plus $12,250 for shipping and installation. Net working capital will rise by $10,000. The initial cash outflow (ICO) is:
$97,500
$63,000
$87,500
$85,250
Basket Wonders has determined that the after-tax cash flows for the project will be $10,000; $12,000; $14,000; $12,000; and $10,000, respectively, for each of the Years 1 through 5. The initial cash outlay will be $50,000. The Payback Period (PBP) is:
4.2 years
3.2 years
4.8 years
3.8 years
Basket Wonders has determined that the after-tax cash flows for the project will be $26,000; $28,000; $30,000; $32,000; and $30,000, respectively, for each of the Years 1 through 5. The initial cash outlay will be $100,000. The Internal Rate of Return (IRR) is:
13.65%
15.63%
16.35%
14.56%
Basket Wonders has determined that the after-tax cash flows for the project will be $25,000; $27,000; $30,000; $32,000; and $24,000, respectively, for each of the Years 1 through 5. The initial cash outlay will be $120,000. The Net Present Value (NPV) at 12% is: ( đáp án là -20,846)
-$20,694
$20,694
-$26,094
$26,094
X has determined that the before-tax cash flows for the project will be $30,000; $32,000; $32,000; $28,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $200,000. Final salvage value of asset is $5,000. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. Net cash flow for year 1 to 4:
$72,500; $74,000; $74,000; $76,000
$22,500; $24,000; $24,000; $26,000
$80,000; $82,000; $82,000; $78,000
$72,500; $74,000; $74,000; $71,000
X has determined that the before-tax cash flows for the project will be $15,000; $16,000; $18,000; $13,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $120,000. Final salvage value of asset is zero. Assuming that the marginal tax rate equals 28%. The Company expects to depreciate its assets on a straight-line basis. Net cash flow for year 1 to 4:
A. $40,800; $41,520; $42,960; $39,360
B. $22,500; $24,000; $24,000; $26,000
C. $80,000; $82,000; $82,000; $78,000
D. $72,500; $74,000; $74,000; $71,000
X has determined that the before-tax cash flows for the project will be $25,000; $28,000; $30,000; $35,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $300,000. Final salvage value of asset is zero. Assuming that the marginal tax rate equals 25%. The Company expects to depreciate its assets on a straight-line basis. Net cash flow for year 1 to 4:
A. $93,000; $95,160; $96,600; $100,200
B. $122,500; $124,000; $124,000; $126,000
C. $80,000; $82,000; $82,000; $78,000
D. $72,500; $74,000; $74,000; $71,000
Basket Wonders has determined that the beforetax cash flows for the project will be $70,000; $84,000; $94,000; $62,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $500,000. Final salvage value of asset is $10,000. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The company expects to depreciate its assets on a straight-line basis. The Net Present Value (NPV) at 15% is:
A. $28.8 thousand
B. $20.8 thousand
C. $25.4 thousand
D. -$9.6 thousand
Basket Wonders has determined that the beforetax cash flows for the project will be $15,000; $16,000; $18,000; $13,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $120,000. Final salvage value of asset is $5,000. Assuming that the marginal tax rate equals 28% (not on salvage value of asset). The company expects to depreciate its assets on a straight-line basis. The Net Present Value (NPV) at 10% is:
A. $13.98 thousand
B. $15.25 thousand
C. $25.4 thousand
D. -$10.6 thousand
Basket Wonders has determined that the beforetax cash flows for the project will be $25,000; $20,000; $18,000; $25,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $200,000. Final salvage value of asset is $10,000. Assuming that the marginal tax rate equals 28% (not on salvage value of asset). The company expects to depreciate its assets on a straight-line basis. The Net Present Value (NPV) at 10% is:
A. $15,62 thousand
B. $16,25 thousand
C. $18,43 thousand
D. $19,6 thousand
X has determined that the before-tax cash flows for the project will be $30,000; $32,000; $36,000; $30,000; $28,000, respectively, for each of the Years 1 through 5. The initial cash outlay will be $500,000. Final salvage value of asset is $10,000. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. Net cash flow for year 1 to 5:
A. $122,500; $124,000; $127,000; $122,500; $131,000
B. $22,500; $24,000; $27,000; 22,500; 21,000
C. $122,500; $124,000; $127,000; $122,500; $121,000
D. $22,500; $24,000; $27,000; $22,500; $31,000
X has determined that the before-tax cash flows for the project will be $24,000; $26,000; $24,000; $22,000; $18,000, respectively, for each of the Years 1 through 5. The initial cash outlay will be $200,000. Final salvage value of asset is $15,000. Assuming that the marginal tax rate equals 28% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. Net cash flow for year 1 to 5:
A. $57,280; $58,720; $57,280; $55,840; $67,960
B. $22,500; $24,000; $27,000; 22,500; 21,000
C. $122,500; $124,000; $127,000; $122,500; $121,000
D. $22,500; $24,000; $27,000; $22,500; $31,000
X has determined that the before-tax cash flows for the project will be $20,000; $25,000; $25,000; $30,000; $35,000, respectively, for each of the Years 1 through 5. The initial cash outlay will be $250,000. Final salvage value of asset is $15,000. Assuming that the marginal tax rate equals 28% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. Net cash flow for year 1 to 5:
A. $64,400; $68,000; $68,000; $71,600; $90,200
B. $57,280; $58,720; $57,280; $55,840; $67,960
C. $122,500; $124,000; $127,000; $122,500; $131,000
D. $22,500; $24,000; $27,000; $22,500; $31,000
X has determined that the before-tax cash flows for the project will be: $51,500; $53,000; $53,000; $49,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $500,000. Final salvage value of asset is $10,000. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The Net Present Value (NPV) at 15% is: Không có đáp án -26,62 gì đó cơ
A. $7,450
B. $9,250
C. $30,180
D. -$31,120
X has determined that the before-tax cash flows for the project will be: $35,000; $30,000; $40,000; $38,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $350,000. Final salvage value of asset is zero. Assuming that the marginal tax rate equals 28%. The Net Present Value (NPV) at 15% is: ra kqua khác -28,10
A. $8,450
B. $9,250
C. $10,180
D. $7,120
X has determined that the before-tax cash flows for the project will be: $25,000; $28,000; $30,000; $35,000, respectively, for each of the Years 1 through 4. The initial cash outlay will be $300,000. Final salvage value of asset is zero. Assuming that the marginal tax rate equals 28%. The Net Present Value (NPV) at 15% is: -26,66...
A. $4,210
B. $8,450
C. $7,450
D. $7,120
Company X has determined that the earning after tax for the project of buying a new machine will be VND 22.5; 24; 24; 21 million, respectively, for each of the Years 1 through 4. The initial investment is VND 200 million. Final salvage value of the machine after 4 year is VND 5 million. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. The cost of capital of the company is 15% per year. What is the net present value (NPV) of this project?
A. VND 11.11 million
B. VND 8.25 million
C. VND 30.18 million
D. VND -131.64 million
Company X has determined that the earning after tax for the project of buying a new machine will be VND 45; 48; 48; 42 million, respectively, for each of the Years 1 through 4. The initial investment is VND 400 million. Final salvage value of the machine after 4 year is VND 10 million. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. The cost of capital of the company is 15% per year. What is the net present value (NPV) of this project?
A. VND 22.22 milion
B. VND 20.25 million
C. VND 40.15 million
D. VND -101.35 million
Company X has determined that the earning after tax for the project of buying a new machine will be VND 56.25; 60; 60; 52.5 million respectively, for each of the Years 1 through 4. The initial investment is VND 500 million. Final salvage value of the machine after 4 year is VND 12.5 million. Assuming that the marginal tax rate equals 25% (not on salvage value of asset). The Company expects to depreciate its assets on a straight-line basis. The cost of capital of the company is 15% per year. What is the net present value (NPV) of this project?
A. VND 27.77 milion
B. VND 25.7 million
C. VND 30.75 million
D. VND -121.71 million
A project with the initial investment of VND 1,000 million, has an operating period of 5 years and earning after-tax income of VND 300 million per year The discount rate is 16% per year. In case of using the PI method to calculate, which of following statement is true?
A. Deny this project because PI <1
B. Accept this project because PI> 0
C. Accept this project because PI>1
D. Deny this project because PI <0
A project with the initial investment of VND 1,200 million, has an operating period of 5 years and earning after-tax income of VND 360 million per year. The discount rate is 16% per year. In case of using the PI method to calculate, which of following statement is true?
A. Deny this project because PI <1
B. Accept this project because PI> 0
C. Accept this project because PI>1
D. Deny this project because PI <0
A project with the initial investment of VND 1,500 million, has an operating period of 5 years and earning after-tax income of VND 450 million per year. The discount rate is 16% per year. In case of using the PI method to calculate, which of following statement is true?
A. Deny this project because PI <1
B. Accept this project because PI> 0
C. Accept this project because PI>1
D. Deny this project because PI <0
A project with the initial investment of VND 100 million, has an operating period of 3 years. The earning after-tax income through 3 years is VND 40; 50; 60 milion respectively. The discount rate is 20% per year. In case of using the IRR method to calculate, which of following statement is true?
A. Accept this project because IRR> discount rate
B. Deny this project because IRR < discount rate
C. Deny this project because IRR> extraction rate
D. Accept this project because IRR = discount rate
A project with the initial investment of VND 140 million, has an operating period of 3 years. The earning after-tax income through 3 years is VND 56; 70; 84 milion respectively. The discount rate is 20% per year. In case of using the IRR method to calculate, which of following statement is true?
A. Accept this project because IRR> discount rate
B. Deny this project because IRR < discount rate
C. Deny this project because IRR> extraction rate
D. Accept this project because IRR = discount rate
A project with the initial investment of VND 180 million, has an operating period of 3 years. The earning after-tax income through 3 years is VND 72; 90; 108 milion respectively. The discount rate is 20% per year. In case of using the IRR method to calculate, which of following statement is true?
A. Accept this project because IRR> discount rate
B. Deny this project because IRR < discount rate
C. Deny this project because IRR> extraction rate
D. Accept this project because IRR = discount rate
A project with the initial investment of VND 450 million has an operating period of 4 years. The earning after-tax through 4 years is VND 120; 180; 190; 160 million respectively. Caculate the IRR of this project.
A. 15.71%
B. 17.51%
C. 18.62%
D. 16.28%
A project with the initial investment of VND 225 million has an operating period of 4 years. The earning after-tax through 4 years is VND 72; 90; 95; 80 million respectively. Caculate the IRR of this project.
A. 17.94%
B. 15.31%
C. 18.12%
D. 16.18%
A project with the initial investment of VND 180 million has an operating period of 4 years. The earning after-tax through 4 years is VND 48; 72; 76; 55 million respectively. Caculate the IRR of this project.
A. 14.36%
B. 15.59%
C. 18.64%
D. 16.03%
Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?
A. Accounts payable.
B. Long-term debt.
C. Common stock.
D. Preferred stock
Which of the following is not an example of variable costs?
A. Depreciation.
B. Packaging
C. Direct labor
D. Freight costs
The debt ratio is a measure of a firm’s:
A. leverage.
B. profitability.
C. liquidity.
D. efficiency
The cost of equity capital is all of the following EXCEPT:
A. generally lower than the before-tax cost of debt.
B. the minimum rate that a firm should earn on the equity-financed part of an investment.
C. a return on the equity-financed portion of an investment that, at worst, leaves the market price of the stock unchanged
. D. by far the most difficult component cost to estimate.
The common stock of a company must provide a higher expected return than the debt of the same company because
A. there is more systematic risk involved for the common stock.
B. there is less demand for stock than for bonds.
C. there is greater demand for stock than for bonds.
D. there is a market premium required for bonds.
In calculating the proportional amount of equity financing employed by a firm, we should use:
A. the current market price per share of common stock times the number of shares outstanding.
B. the common stock equity account on the firm's balance sheet. .
C. the sum of common stock and preferred stock on the balance sheet.
D. the book value of the firm
In calculating the costs of the individual components of a firm's financing, the corporate tax rate is important to which of the following component cost formulas?
A. debt.
B. common stock.
C. preferred stock.
D. retained earnings
The term "capital structure" refers to:
A. long-term debt, preferred stock, and common stock equity.
B. current assets and current liabilities.
C. total assets minus liabilities.
D. shareholders' equity
Market values are often used in computing the weighted average cost of capital because A. this is consistent with the goal of maximizing shareholder value. B. this is the simplest way to do the calculation. C. this is required in the U.S. by the Securities and Exchange Commission. D. this is a very common mistake.
A. this is consistent with the goal of maximizing shareholder value.
B. this is the simplest way to do the calculation.
C. this is required in the U.S. by the Securities and Exchange Commission. .
D. this is a very common mistake
Rank in ascending order (i.e., 1 = lowest, while 3 = highest) the likely after-tax component costs of a Company's long-term financing.
A. 1 = bonds; 2 = preferred stock; 3 = common stock.
B. 1 = bonds; 2 = common stock; 3 = preferred stock.
C. 1 = common stock; 2 = preferred stock; 3 = bonds.
D. 1 = preferred stock; 2 = common stock; 3 = bonds.
Lei-Feng, Inc.'s $100 par value preferred stock just paid its $10 per share annual dividend. The preferred stock has a current market price of $96 a share. The firm's marginal tax rate (combined federal and state) is 40 percent, and the firm plans to maintain its current capital structure relationship into the future. The component cost of preferred stock to Lei-Feng, Inc. would be closest to
A. 10.4 percent
B. 6.05 percent
C. 6.25 percent
D. 5.10 percent
If the weighting of equity in total capital is 1/3, that of debt is 2/3, the return on equity is 15% that of debt is 10% and the corporate tax rate is 32%, what is the Weighted Average Cost of Capital (WACC)?
A. 9.533%
B. 10.533%
C. 7.533%
D. 11.350%
The expected dividend is $2.50 for a share of stock priced at $25. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8%?
A. 18%
B. 8%
C. 25%
D. 10%
Which of the following is not considered a permanent source of financing?
A. Commercial paper
B. Corporate bonds
C. Common stock
D. Preferred stock
Assume that Basket Wonders (BW) has preferred stock outstanding with par value of $100, dividend per share of $6.30, and a current market value of $70 per share. The Cost of BW’s preferred stock is:
A. 9.0%
B. 6.3%
C. 70%
D. 30%
Assume that Basket Wonders (BW) has a company beta of 1.35. Research by Julie Miller suggests that the risk-free rate is 5% and the expected return on the market is 12%. The cost of equity capital (in CAPM model) is:
A. 14.45%
B. 7.54%
C. 6.75%
D. 8.88%
A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
A. Sell common stock.
B. Borrow more.
C. Shift short-term to long-term debt.
D. Shift long-term to short-term debt
Which of the following statements (in general) is correct?
A. The lower the total debt-to-equity ratio, the lower the financial risk for a firm.
B. A low receivables turnover is desirable.
C. An increase in net profit margin with no change in sales or assets means a poor ROI.
D. The higher the tax rate for a firm, the lower the interest coverage ratio.
Debt-to-total assets (D/TA) ratio is 0.4. What is its debtto-equity (D/E) ratio?
A. 0.667
B. 0.2
C. 0.6
D. 0.333
Financing a long-lived asset with short-term financing would be
A. an example of "high risk -- high (potential) profitability" asset financing.
B. an example of "moderate risk -- moderate (potential) profitability" asset financing.
C. an example of "low risk -- low (potential) profitability" asset financing.
D. an example of the "hedging approach" to financing
If a company issues bonus shares the debt equity ratio will
A. Will improve
B. Remain unaffected
C. Will be affected
D. Unable to determine without more information
The firm’s target capital structure should be consistent with which of the following statements?
A. Maximize the earnings per share (EPS).
B. Minimize the cost of debt.
C. Obtain the highest possible bond rating.
D. Minimize the cost of equity.
____________ and____________ carry a fixed rate of interest and are to be paid off irrespective of the firm’s revenues.
A. Debentures, Bonds
B. Debentures, Dividends
C. Dividends, Bonds
D. Dividends, Treasury notes
Which of the following is a primary market transaction?
A. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
B. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker - you just give him cash and he gives you the stock.
C. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction.
D. You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE.
You recently sold to your brother 200 shares of Disney stock, and the transfer was made through a broker, and the trade occurred on the NYSE. This is an example of:
A. A secondary market transaction.
B. A futures market transaction.
C. A primary market transaction.
D. A money market transaction
Which of the following statements is CORRECT?
A. Capital market instruments include both longterm debt and common stocks.
B. An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift.
C. The NYSE does not exist as a physical location; rather, it represents a loose collection of dealers who trade stocks electronically. .
D. If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market transaction
Which of the following statements is CORRECT?
A. As they are generally defined, money market transactions involve debt securities with maturities of less than one year.
B. The IPO market is a subset of the secondary market.
C. If you purchased 100 shares of Disney stock from your brother-in-law, this would be an example of a primary market transaction.
D. If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction
Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This means that the company
A. has greater than average financial risk when compared to other firms in its industry.
B. will not experience any difficulty with its creditors.
C. has less liquidity than other firms in the industry.
D. will be viewed as having high creditworthiness
The market value of debt is $425 million and the total market value of the firm is $800 million. The cost of equity is 15% the pretax cost of debt is 8% and the tax rate is 20%. What is the WACC?
A. 10.43%
B. 13.04%
C. 14.03%
D. 11.34%
The market value of debt is $450 million and the total market value of the firm is $900 million. The cost of equity is 16% the pretax cost of debt is 9% and the tax rate is 22%. What is the WACC?
A. 11.51%
B. 12.51%
C. 10.51%
D. 13.51%
The market value of debt is $475 million and the total market value of the firm is $1,000 million. The cost of equity is 17% the pretax cost of debt is 10% and the tax rate is 24%. What is the WACC?
A. 12.54%
B. 15.24%
C. 14.25%
D. 13.52%
The market value of debt is $500 million and the total market value of the firm is $1,100 million. The cost of equity is 18% the pretax cost of debt is 11% and the tax rate is 26%. What is the WACC?
A. 13.52%
B. 12.53%
C. 15.32%
D. 14.23%
The market value of debt is $525 million and the total market value of the firm is $1,200 million. The cost of equity is 19% the pretax cost of debt is 12% and the tax rate is 28%. What is the WACC?
A. 14.47%
B. 15.47%
C. 16.47%
D. 13.47%
