BUSN 379 Midterm Latest Version

1. (TCO 1) Which one of the following actions best matches the primary goal of financial management?

2. (TCO 1) When analyzing alternative capital structures for a firm, a financial manager must consider which of the following?

3. (TCO 1) Book values are different from market values because:

4. (TCO 1) Which of the following is true regarding income statements?

5. (TCO1) Telemarket Inc. has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Telemarket’s taxes figure?

6. (TCO 1) Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what are the company’s income taxes?

7. (TCO 1) Pizza A had earnings after taxes of $390,000 in the year 2008, and 300,000 shares outstanding. In year 2009, earnings after taxes increased by 20 percent to $468,000 and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 2009?

8. (TCO 1) The income statement reflects:

9. (TCO 1) Best Electronics has EBIT of $450,000, interest of $30,000, taxes of $50,000, and depreciation of $80,000. What is the company’s operating cash flow?

10. (TCO 3) Linda invested $15,000 today, in an investment that pays 6.50 percent interest, compounded semi-annually. Which one of the following statements is correct concerning this investment?

11. (TCO 3) Mr. Smith will receive $8,500 a year for the next 14 years from a contract. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments?

12. (TCO 3) Paper Pro recently purchased a printing machine costing $97,000. The company financed this purchase at 8.25 percent interest, with monthly payments of $2,379.45. How many years will it take the firm to pay off this debt?

13. (TCO 3) Fine Oak Woodworks is considering a project that has cash flows of $6,000, $4,000, and $3,000 for the next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is true?

14. (TCO 4) You are considering two investments. Investment I is in a software company, and Investment II is an engineering company. The investments offer the following cash flows:

15. (TCO 3) North Bank offers you an APR of 13.17 percent compounded monthly, and South Bank offers you an effective rate of 13.75 percent on a business loan. Which bank should you choose and why?

1. (TCO 3) Given an interest rate of zero percent, the future value of a lump sum invested today will always:

2. (TCO 3) The difference between an ordinary annuity and an annuity due is the:

3. (TCO 3) Fanta Cola has $1,000 par value bonds outstanding at 12 percent interest. The bonds mature in 25 years. What is the current price of the bond if the YTM is 13 percent? Assume annual payments

4. (TCO 6 and 8) A bond's debenture will include which of the following?

5. (TCO 3) Bonds issued by Blue Sky Airlines have a face value of $1,000 and currently sell for $850. The annual coupon payments are $80. If the bonds have 10 years until maturity, what is the approximate YTM of the bonds?

6. (TCO 3) The preferred stock of Bean Coffee pays an annual dividend of $5.60. It has a required rate of return of eight percent. What is the price of the preferred stock?

7. (TCO 3) Intelligence Research, Inc. will pay a common stock dividend of $1.60 at the end of the year. The required rate of return by common stockholders is 13 percent. The firm has a constant growth rate of 7.5 percent. What is the current price of the stock?

8. (TCO 3) Royal Electric paid a $2 dividend last year. The dividend is expected to grow at a constant rate of five percent over the next three years. Common stockholders require a 12 percent return. What is the total amount of dividends stockholders will receive during the next three years?

9. (TCO 6) Which of the following is true regarding the primary market?

10. (TCO 6) A member of the NYSE who trades on the floor of the exchange for his or her personal account is called a(n):

11. (TCO 6) The yield to maturity on a bond is:

12. (TCO 6) A call provision in a bond agreement grants the issuer the right to:

13. (TCO 8) Which of the following is true regarding bonds?

14. (TCO 6) Which of the following best describes a zero-coupon bond?

15. (TCO 6) Which of the following are not true regarding convertible bonds? Select all that apply:

1. (TCO 1) Kate is the owner of Kate's Sun Wear, which is a sole proprietorship. Kate unexpectedly suffered a fatal heart attack. Which one of the following statements is correct given this situation?

2. (TCO 1) Which of the following is classified as tangible, fixed assets?

3. (TCO 1) Can you provide some examples of situations in which business ethics play a role in the financial management process?

4. (TCO 3) What are some real-life scenarios where you can apply the time value of money? Present two or three scenarios. Briefly explain your rationale.

5. (TCO 8) Are U.S. Treasury securities risk-free? Why or why not? Explain your rationale?

6. (TCO 6) What are some of the features of zero-coupon bonds that make them attractive to certain investors? Which type of investors will be most interested in these bonds?