BUSN 379 Midterm New

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

2. (TCO 1) Which of the these activities is not a capital budgeting task?

3. (TCO 1) Market value is important to the financial manager because:

4. (TCO 1) The income statement reflects:

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 is the marginal tax rate?

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 financial statement that summarizes a firm's operations over a period of time is called a(n):

9. (TCO 1) Green Leaf Nursery has EBIT of $250,000, 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 $6,500 a year for the next 14 years from his trust. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments?

12. (TCO 3) Your neighbor just received a credit offer in an e-mail. The company is offering him $6,000 at 12.8 percent interest. The monthly payment is only $110. If he accepts this offer, how long will it take him to pay off the loan?

13. (TCO 3) Fine Oak Woodworks is considering a project that has cash flows of $5,000, $3,000, and $8,000 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) Which one of the following will increase the future value of a lump sum invested today?

2. (TCO 3) Which one of the following best exemplifies a perpetuity?

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 11 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 $1,080. The annual coupon payments are $125. If the bonds have 20 years until maturity, what is the approximate YTM of the bonds?

6. (TCO 3) Bean Coffee issued preferred stock many years ago. It carries a dividend of $8 per share, fixed. As time has passed, yields have decreased from the original eight percent (at the time of issuance) to six percent. What was the current price of the stock? Hint: Yield is the same as required rate of return.

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 $4 dividend last year. The dividend is expected to grow at a constant rate of six percent over the next four years. Common stockholders require a 13 percent return. What are the values of the dividends for years 1, 2 and 3, respectively?

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 annual interest on a bond divided by the bond's market price is called the:

12. (TCO 6) Star Industries has one outstanding bond issue. An indenture provision prohibits the firm from redeeming the bonds during the first two years. This provision is referred to as a _____ provision.

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) In a general partnership, each partner is personally liable for:

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 1) Explain agency theory. Provide an example of a potential agency problem for a corporation, and identify means by which the firm can help reduce or eliminate that problem.

5. (TCO 8) Explain some of the key risks associated with bonds

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?