Question 1
The time value of money concept works on the principle that a dollar today is worth more than a dollar tomorrow. True False 17. The net present value capital budgeting method considers all estimated cash flows for the project's expected life. True False 28. The payback method, unlike the net present value method, does not ignore cash flows after the point of cost recovery. True False 37. The process of analyzing alternative investments and deciding which assets to acquire or sell is known as: A. Planning and control. B. Capital budgeting. C. Variance analysis. D. Master budgeting. E. Managerial accounting. 39. The time value of money concept: A. Means that a dollar today is worth less than a dollar tomorrow. B. Means that a dollar tomorrow is worth more than a dollar today. C. Means that a dollar today is worth more than a dollar tomorrow. D. Means that "Time is Money". E. Does not involve the concept of compound interest. 40. A minimum acceptable rate of return for an investment decision is called the: A. Internal rate of return. B. Average rate of return. C. Hurdle rate of return. D. Maximum rate of return. E. Payback rate of return. ? 60. A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the payback period for the new machine? A. 4 years. B. 6 years. C. 10.5 years. D. 14 years. E. 42 years. 82. Which of the following cash flows is not considered when using the net present value method? A. Future cash inflows. B. Future cash outflows. C. Past cash outflows. D. Non-uniform cash inflows. E. Cash inflow from the sale of the asset. 83. An estimate of an asset's value to the company, calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment, is known as: A. Annual net cash flows. B. Rate of return on investment. C. Net present value. D. Payback period. E. Unamortized carrying value. ? 88. The following present value factors are provided for use in this problem: Present Value Present Value of an Periods of 1 at 8% Annuity of 1 at 8% 1 0.9259 0.9259 2 0.8573 1.7833 3 0.7938 2.5771 4 0.7350 3.3121 Norman Co. wants to purchase a machine for $40,000, but needs to earn an 8% return. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value (round to the nearest whole dollar)? A. $(9,075) B. $2,685 C. $42,685 D. $(28,240) E. $52,000,Thank you very much!!
Question 2
Gavin tells Rod that he will pay him $400 to paint his house. Rod starts to paint, intending to accept. Halfway through his paint job, Gavin tells Rod that he wants to revoke the offer. Under this scenario: A) Gavin is not allowed to revoke because the contract is unilateral B) Gavin is allowed to revoke, but is liable to Rod for the reasonable value of benefit received C) Gavin may not revoke because the contract is bilateral D) Gavin is allowed to revoke if he finds Rod's efforts half-hearted or ineffective 2. If an offer does not state a time for acceptance, it is: A) valid for a reasonable time, which depends on the circumstances of the offer B) valid for 20 days from the day the offer is received by the offeree C) valid for 10 days from the day the offer is made D) valid until the offeree accepts it 3. Which of the following statements about shrinkwrap contracts is true? A) The label on the shrinkwrap states that by removing the shrinkwrap, the buyer accepts the terms of the software seller's licensing agreement B) Critics point out that all the consumers understand the contract before accepting the terms and conditions C) The practice of using shrinkwraps never raises ethical problems like those involved in the use of small print, complex, or "hidden" language D) Shrinkwrap contracts are enforceable even when the terms violate contract rules such as unconscionability 4. Beck tells his mom that he is thinking of selling his vintage coupe to his neighbor, Sam, for $100. Beck's mom calls Sam and tells him about her conversation with Beck. Sam then calls Beck and tells him that he accepts his offer. Under these circumstances: A) the offer has been conditionally tendered B) the offer violates the UCC's rule against third-party interveners in quasi-contracts C) the offer has not been communicated D) the offer has been effectively communicated 5. Advertisements are regulated outside of contract law by: A) the Federal Trade Commission B) the UCC C) the CISG D) the Restatement 6. Which of the following must be present for an offer to have a legal effect? A) Invitation to offer B) Communicating the intention to make an offer C) Definiteness D) Invitation to negotiate 7. To determine whether the offeror has created a present intent to contract, courts consider: A) how the offer was made B) the status of the person who has made the offer C) the intent of the parties subjectively D) whether the offeror has communicated it to the offeree 8. Which of the following basic requirements must be met, for an offer to sell goods to be a firm offer? A) The offeror must be a merchant B) It must contain assurances that it'll be revocable C) It must have been made orally D) It is revocable for the period of time stated in the offer 9. Under the UCC, a sales contract can be created: A) when the offeror forms subjective intent to contract B) if the contract is reduced to writing C) in any manner sufficient to show agreement, including conduct D) when the contract contains the price terms 10. An offeree who attempts to accept after an offer has terminated is making: A) an offer B) a revocation C) a solicitation. D) a counteroffer 11. A subcontractor's bid: A) is considered an offer B) can be withdrawn even if the general contractor has relied on it C) can be revocable D) is considered to be a part of a shrinkwrap agreement 12. When parties fail to expressly agree on the terms of a sales contract: A) the contract will not fail if the court finds that the parties intended to make a contract and that their agreement is complete enough to allow the court to reach a fair settlement of their dispute B) the contract is automatically void C) the contract will not be enforceable under the UCC D) the contract will fail if the court finds that the parties are acting as though they have a contract and it is impossible to point to a particular moment in time when the contract was created 13. Which of the following authorities requires that, at minimum, the terms of the offer must be sufficiently clear so that what was promised can be determined? A) The common law and the Restatement B) The CISG and the UCC. C) The UCC and the Restatement D) The UCC only 14. Ads for the sale of goods at a specified price are considered as ________ by the courts. A) an unfair offer B) giving everyone who sees the ad the power to bind into a contract C) solicitation of an offer D) invitations to negotiate 15. Which of the following statements about offers is true? A) Any definite offer made by a merchant is a "firm offer" under the UCC B) An offer is effective upon dispatch C) The death of the offeror will terminate the offer immediately D) A grumbling acceptance is a rejection and terminates the offer 16. Brian offers to sell Jerry his Ranch house but a hurricane destroys the house before Jerry accepts the offer. What would be the possible outcome of this offer? A) If the offer is not revoked within a week after the incident took place, the offer is considered to be open and Jerry can claim the recovery charges B) Jerry must be paid the recovery charges for losing the house as he had already been offered by Brian C) A written statement must be produced to the court of law, to terminate the offer D) The offer is terminated when the house is destroyed as it happened without the knowledge or fault of either of the parties 17. The doctrine of promissory estoppel does not require: A) an injustice as a result of reliance B) a consideration C) a promise D) a significant reliance on a promise 18. A counteroffer: A) does not significantly alter the material terms of the contract B) is an inquiry into the terms of the offer C) impliedly rejects an offer D) is a mirror-image of the offer 19. In an auction: A) acceptance occurs when an offeror makes the highest bid B) bidders are treated as offerors, making offers the seller is free to accept or reject C) an item cannot be withdrawn from sale prior to acceptance D) the seller is required to accept the final offer when the auction is advertised as being "with reserve." 20. Advertisements for rewards, such as for the return of lost property, information, or the capture of criminals, are generally: A) held to be offers for bilateral contracts B) held to be invitations but not offers C) held to be offers for unilateral contracts D) held to be firm offers 21. Kyle offered to sell Pam 500 television sets. Kyle is the: A) distributor B) agent C) offeror D) offeree 22. In an agreement between two parties, if the facts indicate that a term was left out because the parties were unable to reach an agreement about it, it would probably mean that: A) the intent to contract is absent, and no contract was created B) the CISG must fill in the gaps only if the price terms are left in the agreement C) the party's intent to contract and CISG must fill in any gaps left in the agreement D) the UCC must fill in any gaps left in the agreement 23. In an option contract: A) a separate contract for the limited purpose of holding the offer open is created B) the offeree is bound to accept the offer C) a joint contract is created for the limited purpose of keeping the offer open D) the offeree has purchased the right to accept within the stated period 24. Which of the following would terminate an offer without notice to the offeree? A) Promissory estoppel B) Physical inability of the offeree to perform C) Insanity of either party D) Enactment of a statute making the contract illegal after acceptance 25. According to the CISG, an offer: A) must express the quality of the goods to be valid B) is sufficiently definite, though it lacks the price terms C) must be directed to a specific person D) is not valid, if it impliedly provides means of determining the quantity of the goods 26. When the offeror does not specifically indicate what he/she was willing to do and what he/she wanted the offeree to agree to do in return, his/her behavior will probably be classed as: A) an offer B) an invitation to bid C) an invitation to negotiate D) a quasi-contract
Question 3
1. A firm's current assets and current liabilities are referred to as the firm's: A) capital structure. B) cash equivalents. C) working capital. D) net assets. E) capital interest. 2. The financial statement that summarizes a firm's operations over a period of time is called a(n): A) income statement. B) cash flow statement. C) production report. D) balance sheet. E) periodic operating statement. 3. Which one of the following ratios indicates how long a firm can pay its bills given its current cash balance? A) current ratio B) debt ratio C) cash coverage ratio D) quick ratio E) cash ratio 4. By definition, a bank that pays simple interest on a savings account will pay interest: A) only at the beginning of the investment period. B) only at the end of the investment period. C) only on the initial investment. D) on both the initial investment and all prior interest payments that are reinvested. E) only if all previous interest payments are reinvested. 5. A series of unending cash flows of equal amount that occur at equal intervals of time is called a(n): A) ordinary annuity. B) annuity due. C) absolute annuity. D) perpetuity. E) perpetuity due. 6. A note is: A) unsecured debt that is generally payable within the next ten years. B) a formal loan secured by real estate. C) long-term debt secured by part, or all, of the assets of the borrower. D) any liability classified as short-term debt on a financial statement. E) the formal agreement between a firm and its bondholders. 7. Anthony's Appliances pays a constant quarterly dividend of $.35 per share. How much are you willing to pay for one share if you require a 9 percent rate of return? A) $3.89 B) $7.78 C) $11.67 D) $15.56 E) $19.44 8. One year ago, you purchased 200 shares of stock for $29 a share. The stock pays $.60 a share in dividends each year. Today, you sold your shares for $31.60 a share. What is your total dollar return on this investment? A) $480 B) $520 C) $610 D) $640 E) $670 9. The stock of Jensen Shipping has a risk premium of 8.4 percent while the inflation rate is 2.6 percent and the risk-free rate is 4.2 percent. What is the expected return on this stock? A) 6.8 percent B) 8.4 percent C) 11.0 percent D) 12.6 percent E) 15.2 percent 10. Last week, Lester's Electronics paid an annual dividend of $2.10 on its common stock. The company has a longstanding policy of increasing its dividend by 3 percent annually. This policy is expected to continue. What is the firm's cost of equity if the stock is currently selling for $44.60 a share? A) 7.66 percent B) 7.71 percent C) 7.79 percent D) 7.85 percent E) 7.90 percent 11. Atlantic Seafood has determined that $17,000 is the break-even level of earnings before interest and taxes for the two capital structures it is considering. The one structure consists of all equity with 12,000 shares of stock. The second structure consists of 9,000 shares of stock and $50,000 of debt. What is the interest rate on the debt? A) 8.10 percent B) 8.25 percent C) 8.50 percent D) 8.67 percent E) 8.75 percent 12. Uptown Merchants just announced that it will be paying an annual dividend of $1.60 a share plus an extra dividend of $.40 a share this coming year. The company also announced that its regular dividend, which is all it anticipates paying after this year, will increase by 2 percent annually. What is the anticipated dividend per share 4 years from now? A) $1.60 B) $1.63 C) $1.70 D) $1.73 E) $2.16 13. The Pasta Maker needs to raise $16 million to update its machinery. Management estimates that it will cost the firm $240,000 for accounting, legal, and other costs related to the issuance of securities for this purpose. The underwriting spread is 8 percent and the issue price is $24 a share. How many shares of stock must The Pasta Maker sell to finance its new machinery? A) 626,543 shares B) 676,667 shares C) 735,507 shares D) 748,211 shares E) 794,348 shares 14. A firm has a weighted average cost of capital of 9.6 percent and a cost of equity of 14.5 percent. The debt-equity ratio is .70. There are no taxes. What is the firm's cost of debt? A) 2.60 percent B) 3.18 percent C) 3.27 percent D) 3.33 percent E) 3.59 percent 15. Breakable Gifts is an all-equity firm with a current cost of equity of 17.5 percent. The estimated earnings before interest and taxes are $224,000 annually forever. Currently, the firm has no debt but is in the process of borrowing $300,000 at 7.5 percent interest. The tax rate is 32 percent. What is the value of the unlevered firm? A) $870,400 B) $872,200 C) $938,700 D) $962,500 E) $966,400 16. Carter's Home Supply has a $35 million bond issue outstanding with a coupon rate of 8.5 percent. The tax rate is 38 percent. What is the present value of the tax shield? A) $9.7 million B) $10.2 million C) $10.4 million D) $12.8 million E) $13.3 million 17. Office Supplies and More is a retail outlet. The company went public a year ago at an offering price of $14 a share. Today, the stock is priced at $2.80 a share. The firm has decided to do a reverse stock split to return the stock to its original offering price. Which one of the following split ratios will best accomplish this goal? A) 2-for-7 B) 1-for-5 C) 1-for-7 D) 5-for-1 E) 7-for-1 18. Ziegler's has the following equity account balances: common stock of $42,000 with a $1 par value, capital surplus of $228,000, and retained earnings of $509,000. The stock has a market value of $38 a share. Assume the company issues a 20 percent stock dividend. How many shares of stock will the firm distribute as a result of this dividend? A) 8,400 shares B) 9,200 shares C) 43,750 shares D) 45,600 shares E) 101,800 shares 19. The Pickle Jar issued 300,000 shares of stock last week. The underwriters charged a 7.5 percent spread in exchange for agreeing to a firm commitment. The legal and accounting fees were $420,000. The company incurred $110,000 in indirect costs related to management time and other internal expenses. The offer price was $14 a share. Within the hour of trading, the stock was selling for $17.50 a share. What was the flotation cost as a percentage of the funds raised? A) 27.33 percent B) 38.07 percent C) 41.41 percent D) 56.48 percent E) 63.40 percent 20. AB Cutter has a cash balance of $10 and a beginning short-term loan balance of $100 at the beginning of quarter one. The net cash inflow for the first quarter is $79 and for the second quarter there is a net cash outflow of $27. All cash shortfalls are funded with short-term debt. The firm pays 3 percent of its prior quarter's ending loan balance as interest each quarter. The minimum cash balance is $10. What is the short-term loan balance at the end of the first quarter? A) $18 B) $24 C) $76 D) $100 E) $110 21. The Green Elephant has a line of credit with a local bank that permits it to borrow up to $3.5 million at any time. The interest rate is 0.46 percent per month. The bank charges compound interest and also requires that 4 percent of the amount borrowed be deposited into a noninterest-bearing account. What is the effective annual interest rate on this loan? A) 5.90 percent B) 5.98 percent C) 6.03 percent D) 6.08 percent E) 6.14 percent 22. California Wines offers credit terms of 2/5, net 25. What is the effective annual rate on a $8,000 purchase of wines if you forgo the discount? A) 38.76 percent B) 44.59 percent C) 47.23 percent D) 54.08 percent E) 61.20 percent 23. The Purple Fiddle generally receives 3 checks a month in the amounts of $18,200, $22,000, and $57,900. On average, it takes 2 days for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited. What is the amount of the average daily float? A) $3,270 B) $4,670 C) $4,920 D) $6,540 E) $6,610 24. Your German friend has decided to come and visit you in the U.S. You estimate the cost of her trip at $4,800. What is the cost to her in euros if the U.S. dollar equivalent of the euro 1.35? A) ?3,555.56 B) ?3,592.40 C) ?6,220.00 D) ?6,480.00 E) ?6,521.28 25. Your favorite running shoes cost $74 in the U.S. while the identical shoes cost C$79 in Canada. According to purchasing power parity, the C$/$ exchange rate is: A) C$.937/$1 B) C$.942/$1 C) C$.949/$1 D) C$1.01/$1 E) C$1.07/$1
Question 4
- What is meant by "analysts' independence"? When and how might analysts' independence be compromised? What pressures do analysts face that might reduce their independence? Is maintaining a "buy" recommendation on a stock after its price has fallen evidence that an analysts' independence is compromised? Do analysts who currently recommend investing in tech stocks and the broader stock market lack independence? - What exactly does Peter Houghton's memo say? Does the memo say that analysts should compromise their independence? How does the memo raise questions about analysts' independence? Does it make any difference whether "analysts aren't pressured to change recommendations, but only to make factual changes"? - What are the "buy side" and "sell side"? Why might the "sell side" be unwilling to make "sell" recommendations on stocks? If the "buy side" has its own analysts, would the "buy side" ever look at "sell side" analysts' reports? - Why might "sell side" companies extend the "normal, common courtesy" of warning firms before they downgrade their stocks? Would you consider this good business practice? What is Mr. Barkocy's "buy side" criticism of such practices? Why might the "sell side" ignore such criticism? - Former SEC chairman, Arthur Levitt, criticized analysts in January this year in a speech in Philadelphia. Read the speech at: http://www.sec.gov/news/speech/spch457.htm. Levitt comments that a "sell" recommendation from an analyst is as common as a Philly steak sandwich without the cheese. If analysts don't issue "sell" recommendations, how do they advise investors that they should sell certain stocks?,Your answers do not relate to the questions and do not make any sense. You have not provided me with the answers I requested.,Much better thank you!
Question 5
1) You are the director of a Washington, D.C. think tank focusing on tax and economic policy issues. You were recently (and informally) contacted by staff of the Congressional Joint Committee on Taxation to weigh in on a number of issues currently under consideration by a number of Congressmen and Congresswomen sitting on the Committee. In particular, the Committee asked you to reflect upon the following proposed changes and/or issues: i. The Committee has proposed phasing out the PAD for domestic corporations. ii. The Committee has considered separating the gift and estate tax systems from one unified system to two completely independent, separate systems. iii. The Committee is intrigued by the idea of eliminating the double taxation of corporate earnings. The members are, however, unsure which "level" of taxation should be eliminated. 2) The Committee would like for you to summarize your conclusions regarding the potential effects?both good and bad?of these potential changes. In formulating your answer, please discuss all of the possible tax and economic implications that you see arising from these transactions on all taxpayers. You are the director of a Washington, D.C. think tank focusing on tax and economic policy issues. You were recently (and informally) contacted by staff of the Congressional Joint Committee on Taxation to weigh in on a number of issues currently under consideration by a number of Congressmen and Congresswomen sitting on the Committee. In particular, the Committee asked you to reflect upon the following proposed changes and/or issues: i. The Committee has proposed phasing out the corporate alternate minimum tax (AMT). ii. The Committee has considered repealing the estate tax permanently, but it plans on retaining the gift tax. iii. The Committee is intrigued by the idea of eliminating the double taxation of corporate earnings. The members are, however, unsure which "level" of taxation should be eliminated. 3) The Committee would like for you to summarize your conclusions regarding the potential effects?both good and bad?of these potential changes. In formulating your answer, please discuss all of the possible tax and economic implications that you see arising from these transactions on all taxpayers. You are the director of a Washington, D.C. think tank focusing on tax and economic policy issues. You were recently (and informally) contacted by staff of the Congressional Joint Committee on Taxation to weigh in on a number of issues currently under consideration by a number of Congressmen and Congresswomen sitting on the Committee. In particular, the Committee asked you to reflect upon the following proposed changes and/or issues: i. The Committee has proposed phasing out Sec. 351 of the tax Code. ii. The Committee has considered separating the gift and estate tax systems from one unified system to two completely independent, separate systems. iii. The Committee has considered eliminating the built-in gains tax for S corporations. The Committee would like for you to summarize your conclusions regarding the potential effects?both good and bad?of these potential changes. In formulating your answer, please discuss all of the possible tax and economic implications that you see arising from these transactions on all taxpayers.
