Question 1
Need help with Finance quiz. See attachment,Try this again.,Question 1 (1 point) Security markets provide liquidity Question 1 options: A) by allowing corporations to raise funds by selling new issues. B) by creating a market in which owners may easily turn an investment into cash through its sale. C) a and b are both correct. D) neither a nor b are correct. Question 2 (1 point) Corporations prefer bonds over preferred stock for financing their operations because Question 2 options: A) preferred stocks require a dividend B) bond interest rates change with the economy while stock dividends remain constant C) the after-tax cost of debt is less than the cost of preferred stock. D) none of these. Question 3 (1 point) The efficient market hypothesis has several forms. The weak form states that Question 3 options: A) last price data is unrelated to future prices. B) prices reflect all public information. C) all information both public and private is immediately reflected in stock prices. D) none of these Question 4 (1 point) The semi-strong form of the efficient market hypothesis states that Question 4 options: A) past price data is unrelated to future prices. B) prices reflect all public information. C) all information both public and private is immediately reflected in stock prices. D) none of these. Question 5 (1 point) Research has generally indicated that which Efficient Market hypothesis is clearly not correct? Question 5 options: A) Weak B) Semi-strong C) Strong D) Two of the above Question 6 (1 point) All of the following are disadvantages of going public except Question 6 options: A) the firm may now become active in mergers and acquisitions. B) the company must make all information available to the public through filings to the SEC and the state. C) an erosion of value may take place after the initial offering. D) there is a high cost associated with going public. Question 7 (1 point) Which of the following is not a key role of an investment banker? Question 7 options: A) Market maker B) Underwriter C) Acting as transfer agent D) Agent in private placement Question 8 (1 point) All of the following are advantages of going public except Question 8 options: A) more funds are available to publicly-traded firms. B) the fact that a company is public helps in bank negotiations and marketing. C) publicly-traded stocks afford the stockholders more liquidity. D) the firm disseminates more information to the public on corporate affairs. Question 9 (1 point) Dilution of earnings occurs because Question 9 options: A) a new issue of common stock creates more shares outstanding which reduces earnings per share temporarily. B) the company suffers a decline in earnings after taxes. C) the investment banker collects an underwriting fee. D) all of these. Question 10 (1 point) In issuing stock, the term "spread" refers to Question 10 options: A) the profit the managing investment banker gets for an issue of stock. B) the disparity between the initial asking price and the average price for the stock issued some months later. C) the difference between what the corporation gets for new issues of stock and what the public pays for the stock. D) the total cost to the corporation for issuing new stock. Question 11 (1 point) Newdex has net income of $2,500,000 and 1,000,000 shares outstanding. It needs to raise $3,610,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for $40 per share, less a spread of 5%. How much must Newdex's after-tax income increase to prevent dilution of EPS? Question 11 options: A) $40,000 B) $237,500 C) $250,000 D) none of these Question 12 (1 point) Maxwell Corp. is coming to the market with a new offering of 300,000 shares of stock at $25 to the public. Maxwell will received $22 per share. The firm has 1 million shares outstanding and earnings of $6 million. What is the amount of dilution in earnings per share? Question 12 options: A) $2.00 B) $1.38 C) $1.77 D) No dilution occurs since new money is received by Maxwell. Question 13 (1 point) Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will represent 800,000 shares. The shares will be priced at $25 to the public with a 4% spread. The out-of-pocket costs will be $450,000. What are the net proceeds to the firm? Question 13 options: A) $18,750,000 B) $19,200,000 C) $18,250,000 D) $19,550,000 Question 14 (1 point) An increasing proportion of shares in the U.S. are owned by Question 14 options: A) individual investors. B) corporations (Treasury Stock). C) institutions. D) governments. Question 15 (1 point) Which of the following statements is true with respect to cumulative voting? Question 15 options: A) Cumulative voting permits multiple votes for a single director. B) Cumulative voting gives minority shareholders a better chance of being represented on the board of directors. C) If 6 directors are to be elected and you own 100 shares, you may vote all 600 votes for one director and none for the others. D) All of these are true. Question 16 (1 point) A proxy is Question 16 options: A) a device for circumventing regular voting procedures. B) a coupon attached to each share of stock and used by the shareholders in casting his vote on current issues. C) an authorization of a registered stockholder to another person to act in his place at the meeting. D) a warrant allowing a stockholder to purchase a specified number of additional shares at a given price. Question 17 (1 point) If a preferred stock is of the cumulative type Question 17 options: A) dividends must be paid on an equal basis with common, so long as earnings permit. B) dividends cannot be passed if they are earned. C) the cumulative voting rule applies in the exercise of the voting privilege. D) unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders. Question 18 (1 point) Which of the following is not a true statement? Question 18 options: A) Common stockholders have a residual claim to income. B) Bondholders may force a corporation into bankruptcy for failure to make interest payments. C) Common stockholders are legally entitled to some dividend. D) A minority interest can still elect members to the Board of Directors under cumulative voting even though someone else owns 51% of the stock. Question 19 (1 point) Kuhns Corp. has 200,000 shares of preferred stock outstanding that is cumulative. The dividend is $6.50 per share and has not been paid for 3 years. If Kuhns earned $3 million this year, what could be the maximum payment ot the preferred stockholders on a per share basis? Question 19 options: A) $19.50 per share B) $15.00 per share C) $13.00 per share D) $6.50 per share Question 20 (1 point) Given that there are 5,000,000 shares outstanding in Miller Corp., how many shares will be required for a minority group of stockholders to elect 2 of the 9 members on the board of directors? (Assume cumulative voting required) Question 20 options: A) 800,001 B) 1,000,001 C) 1,090,910 D) 1,000,000 Question 21 (1 point) An individualinvesting in preferred stock receiving a before-tax preferred yield of 8.5% and having a tax rate of 25% would receive an after-tax preferred yield of: Question 21 options: A) 8.5% B) 7.2% C) 8.2% D) 7.9% Question 22 (1 point) Sharpe Products has 1 million outstanding shares and 9 directors to be elected. Cumulonimbus Holdings owns 175,000 shares of Sharpe. How many directors can Cumulonimbus elect with cumulative voting? Question 22 options: A) 0 B) 1 C) 2 D) 3 Question 23 (1 point) A corporate investor of preferred stock receiving a before-tax preferred yield of 10.2%, and having a corporate tax rate of 30% would receive an after-tax preferred yield of: Question 23 options: A) 10.2% B) 9.7% C) 7.1% D) 9.3% Question 24 (1 point) Nine rights are necessary to purchase one share of Fogel stock at $50. A right sells for $4. The ex-rights value of Fogel stock is Question 24 options: A) $12.50 B) $86 C) $90 D) none of these Question 25 (1 point) Tricki Corp stock sells for $60 rights-on, and the subscription price is $50. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is the price of Tricki expected to be when it beings trading ex-rights? Question 25 options: A) $57.23 B) $59.00 C) $59.09 D) $60 Question 26 (1 point) The Harsanyi Corp. is considering four investments. Which provides the highest after-tax return for Harsanyi Corp. if it is in the 34% tax bracket? Question 26 options: A) treasury bonds at 6.0% B) corporate bonds at 8.0% C) municipal bonds at 5.0% D) preferred stock at 7.0% Question 27 (1 point) A corporation may wish to repurchase some of its shares for all of the following reasons except Question 27 options: A) the stock may be needed for future mergers. B) the corporation's executives will financially benefit if the stock is resold later at a substantial profit. C) it can stabilize or increase the market price of the stock. D) the stock may be needed for an employee compensation plan. Question 28 (1 point) A reverse stock split Question 28 options: A) occurs when a company wants to increase the price of its common stock because the market hasn't recognized the improvements the company has made in achieving profitability. B) exchanges fewer new shares of common for old shares of common stock. C) will not change earnings per share. D) is more popular in bull markets than in bear markets. Question 29 (1 point) The marginal principle of retained earnings means that each potential project to be financed by retained earnings must Question 29 options: A) provide a higher rate of return than the stockholders can achieve after paying taxes on the distributed dividends. B) yield a return equal to or greater than the cost of capital. C) provide enough return to pay the corporation's marginal tax rate. D) have an internal rate of return greater than the corporate growth rate of dividends. Question 30 (1 point) A major desire of stockholders regarding dividend policy is Question 30 options: A) frequent stock dividends. B) dividend stability. C) high payouts when earnings are up and lower payouts when earnings are down. D) payment of dividends at frequent intervals. Question 31 (1 point) Stockholders may prefer dividends to reinvestment by the firm Question 31 options: A) because dividends resolve some uncertainty. B) because dividend payments have an information content. C) because investors may prefer current cash to future cash. D) all of these. Question 32 (1 point) The primary purpose of a stock split is to Question 32 options: A) indicate the firm's desire to retain funds. B) increase the investor's overall wealth. C) reduce the threat of a takeover by creating more shares. D) bring the stock price to a lower trading range. Question 33 (1 point) A firm may repurchase stock in the market because Question 33 options: A) it will increase the stockholder's wealth. B) the firm has inadequate capital budgeting alternatives. C) it provides positive informational content. D) all of these. Question 34 (1 point) Mirrlees Furniture earned $500,000 last year and had a 40 percent payout ratio. How much did the firm add to its retained earnings? Question 34 options: A) $200,000 B) $300,000 C) There is not enough information to tell. D) None of these. Information Dixon Corporation is considering a public offering of common stock. The firm will offer one million shares of common stock for sale. The estimated selling price is $30 per share with Dixon Corp. receiving $26.25 per share after the offering. Registration fees are estimated at $275,000. Use this information to answer the following questions. Question 35 (1 point) What is the spread in percent? Omit the percentage sign and round your answer to one decimal place. Question 35 options: Question 36 (1 point) What are the total expenses for the issue? Include the dollar sign and any necessary commas (ex: $5,000,000 would be entered as "$5,000,000" without the quotation marks). Question 36 options: Question 37 (1 point) If Dixon Corp. needs to generate $28 million, how many shares will have to be sold? Omit any commas and round to the nearest whole number (ex: 7,950.43 would be entered as "7950" without the quotation marks). Your Answer: Information The Houston Corp. needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000. Presently Houston Corp has earnings of $3 million and 750,000 shares outstanding. Using this information, answer the following questions. Question 38 (1 point) Compute the potential dilution from this new stock issue. Round your answer to the nearest penny and omit the dollar sign. Question 38 options: Question 39 (1 point) Compute the net proceeds to Houston Corp. Round the answer to the nearest whole dollar and omit the dollar sign and commas (ex: $12,500,000.23 would be entered as "12500000" without the quotation marks). Your Answer: Answer Question 40 (1 point) What rate of return must be earned on the net proceeds so that no dilution of earnings per share occurs? Omit the percent sign and take the answer to two decimal places (ex: 5.643% would be entered as "5.64" without the quotation marks). Your Answer:
Question 2
Instructions: Complete each of the following four problems using the TVOM calculations within Excel. The assignment MUST be done on an Excel spreadsheet (you will need to create your own spreadsheet) and MUST use TVOM calculations within Excel. These functions are under the Fx button in Excel, then look under the Financial Functions. The Fx Function is located just above the actual number section of your spreadsheet, right above the B or C column in most blank spreadsheets and most versions of Excel. Just click on the Fx button and then search for the specific function (present value, future value, etc., whatever you are trying to calculate). If you do not use the Excel functions you will lose 4 out of the 5 points on this assignment. Getting EACH answer correct using the spreadsheet function = 4 points. Having good presentation = 1 point. If you get the answers correct and have a good presentation, but you do NOT use the EXCEL TVOM functions, you will get 1 point. Problem 1: What is the present value of: a. $9,000 in 7 years at 8 percent? b. $20,000 in 5 years at 10 percent? c. $10,000 in 25 years at 6 percent? d. $1,000 in 50 years at 16 percent?
Question 3
Questions attached in word document 1. Koufax Company had sales in 2010 of $1,500,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $550,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $2.40). However, to process the new raw material, fixed operating costs will increase by $50,000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 10% increase in the number of units sold. Instructions Prepare a CVP income statement for 2010, assuming the changes are made as described. 2. City Electronix sells television sets and DVD players. The business is divided into two divisions along product lines. CVP income statements for a recent quarter?s activity are presented below. TV Division DVD Division Total Sales $700,000 $300,000 $1,000,000 Variable costs 490,000 240,000 730,000 Contribution margin $210,000 $ 60,000 270,000 Fixed costs 135,000 Net income $135,000 Instructions (a) Determine sales mix percentage and contribution margin ratio for each division. (b) Calculate the company?s weighted-average contribution margin ratio. (c) Calculate the company?s break-even point in dollars. (d) Determine the sales level in dollars for each division at the break-even point. 3. Jennet Company manufactures and sells three products. Relevant per unit data concerning each product are given below. Product A B C Selling price $12 $13 $15 Variable costs and expenses $4 $8 $8 Machine hours to produce 2 1 2 Instructions (a) Compute the contribution margin per unit of the limited resource (machine hour) for each product. (b) Assuming 4,500 additional machine hours are available, which product should be manufactured? (c) Prepare an analysis showing the total contribution margin if the additional hours are (1) divided equally among the products, and (2) allocated entirely to the product identified in (b) above. 4. An investment banker is analyzing two companies that specialize in the production and sale of candied apples. Old-Time Apples uses a labor-intensive approach, and Mod-Apple uses a mechanized system. CVP income statements for the two companies are shown below. Old-Time Apples Mod-Apple Sales $400,000 $400,000 Variable costs 280,000 140,000 Contribution margin 120,000 260,000 Fixed costs 40,000 180,000 Net income $ 80,000 $ 80,000 The investment banker is interested in acquiring one of these companies. However, she is con- cerned about the impact that each company?s cost structure might have on its profitability. Instructions (a) Calculate each company?s degree of operating leverage. Determine which company?s cost structure makes it more sensitive to changes in sales volume. (b) Determine the effect on each company?s net income if sales decrease by 10% and if sales increase by 5%. Do not prepare income statements. (c) Which company should the investment banker acquire? Discuss. 5. Sele Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2010, the company incurred the following costs. Variable Cost per Unit Direct materials $6.50 Direct labor $2.45 Variable manufacturing overhead $5.75 Variable selling and administrative expenses $3.90 Fixed Costs per Year Fixed manufacturing overhead $282,150 Fixed selling and administrative expenses $240,100 Sele Company sells the fishing lures for $25. During 2010, the company sold 80,000 lures and produced 95,000 lures. Instructions (a) Assuming the company uses variable costing, calculate Sele?s manufacturing cost per unit for 2010. (b) Prepare a variable costing income statement for 2010. (c) Assuming the company uses absorption costing, calculate Sele?s manufacturing cost per unit for 2010. (d) Prepare an absorption costing income statement for 2010.
Question 4
3. (TCO 3) ABC Electronics is considering an investment that will have cash flows of $16,000, $5,000 and $4,000 for years 1 through 3. What is the approximate value of this investment today if the appropriate discount rate is 9% per year? (Points : 3) $23,250 $27,250 $21,970 None of the above 4. (TCO 3) You deposited $3,000 in your bank account today. An increase in which of the following will increase the future value of your deposit assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all answers that apply: (Points : 4) interest rate initial amount of your deposit frequency of the interest payments length of the investment period 5. (TCO 3) If you borrow $50,000 today at 10% interest for eight years. How much of your first payment will be applied towards the principal of the loan? (Points : 3) $5,000 $4,372 $4,790 zero, all will be applied towards the interest 6. (TCO 3) Match the following terms with the examples as appropriate: (Points : 4) Potential Matches: 1 : You obtained a business loan for four months. The loan will allow you to paid $300 in interest for three months and a final payment of interest and principal at the end of the four month. 2 : You obtained a mortgage to buy a home. You will pay $800 per month to cover both interest and principal. 3 : a way used by the US government to borrow money on short-term basis. 4 : You borrow $1,000 from your best friend. In return, you will give him back $1150 in 3 months. Answer : Pure discount loan : Amortized Loan : Interest-only Loan : Treasury Bill 7. (TCO 3) You are interested in saving to buy a new machine that costs $1,105. You can deposit $250 in your bank today. If your bank pays 8% annual interest on its accounts, how long will it take you to save for the new machine? (Points : 4) about 19 years about 9 years about 4.5 years Can not be determined 8. (TCO 3) How can we apply the concept of time value of money in evaluating a mortgage?
Question 5
PR 6-5A Sales-related and purchase-related transactions The following were selected from among the transactions completed by The Grill Company during April of the current year: Apr. 3. Purchased merchandise on account from Grizzly Co., list price $60,000, trade discount 30%, terms FOB destination, 2/10, n/30. 4. Sold merchandise for cash, $23,750. The cost of the merchandise sold was $14,000. Apr. 5. Purchased merchandise on account from Ferraro Co., $26,000, terms FOB shipping point, 2/10, n/30, with prepaid freight of $600 added to the invoice. 6. Returned $7,000 ($10,000 list price less trade discount of 30%) of merchandise purchased on April 3 from Grizzly Co. 11. Sold merchandise on account to Logan Co., list price $12,000, trade discount 25%, terms 1/10, n/30. The cost of the merchandise sold was $5,000. 13. Paid Grizzly Co. on account for purchase of April 3, less return of April 6 and discount. 14. Sold merchandise on VISA, $90,000. The cost of the merchandise sold was $55,000. 15. Paid Ferraro Co. on account for purchase of April 5, less discount. 21. Received cash on account from sale of April 11 to Logan Co., less discount. 24. Sold merchandise on account to Half Moon Co., $17,500, terms 1/10, n/30. The cost of the merchandise sold was $10,000. 28. Paid VISA service fee of $4,000. 30. Received merchandise returned by Half Moon Co. from sale on April 24, $2,500. The cost of the returned merchandise was $1,400. Instructions Journalize the transactions.
