Wilmington University: FIN 305 week 7 final part A_ Answered.

Wilmington University: FIN 305 week 7 final part A_ Answered. 1. Managing the firm’s assets includes all of the following except: a. Computer systems b. Par value of common stock c. Marketable securities d. Raw material inventory 2. The primary financial goal of the corporation is: a. Maximizing shareholder wealth b. Maximizing stakeholder wealth c. Maximizing employment opportunities d. Maximizing profit 3. If I wanted to avoid the potential issue of “double taxation of profits” I should avoid setting up my company as a: a. Sole proprietorship b. Corporation c. Partnership d. All of the above are potentially liable to “double taxation” 4. Risk & return are key determinants in the price of a share of common stock. Increased risk, other things held constant, results in: a. A lower share price b. A higher share price c. No change in share price – the concepts are “mutually exclusive” d. Price will change – but one cannot determine from the information which way 5. Within the secondary market, which of the following Us Treasury securities’ prices will react most violently to a change in market interest rates (assume all securities were issued on the same date): a. 90- day T bills b. 10 year Treasury note c. 30 year Treasury note d. Being debt issues by the United States government – all will react the same but with different maturity dates 6. All of the following could be used to measure the risk associated with a share of common stock except: a. Alpha b. Beta c. Standard deviation d. Range e. Coefficient of variation 7. If I were to use the Capital Asset Pricing Model to judge the required return on a stock, which piece of information might I find useful: a. The annual dividend paid b. The current price of the stock c. The company’s net income after tax d. The yield on 90-day T bills 8. The common stock in the Smyrna Gold Mine Company, their slogan “If you can find it in Smyrna, heck you can find it anywhere!”, is considered to be twice as volatile as the “average stock”. This being the case, you would expect the beta on Smyrna’s stock to be: a. 1 b. 2 c. 200 d. 0.5 9. Next month when the FED’s Open Market Committee meets, some economist are predicting that they will raise interest rates because they fear inflation coming back into the US economy. If the FED does this, the prices of existing corporate bonds should: a. Go down b. Go up c. Not be affected because corporate interest rates are fixed in the secondary market d. Not be affected due to corporations “calling in” their lower interest rate bonds 10. A(n) yield curve reflects higher expected future rates of interest. a. Upward sloping b. Downward sloping c. Flat d. Linear 11. “MACRS” is: a. Used for calculating corporate taxes b. A set of account rules – they can be useful in constructing financial statements c. One way to calculate depreciation d. An accounting technique that attempts to “maximize accrual cash reporting systems” 12. Consider the following returns and yields: US T-Bill =8%: US 5 year T-Note = 7%’ US 30 year Bond=8%. Based on this information the slope of the yield curve is” a. Upward b. Downward c. Flat d. “normal” 13. A firm has balance sheet accounts indicating the following: “common stock” = $40,000.” Paid in capital in excess of par on common” = $500,000. “preferred stock” =$100,000 “retained earnings” =$750,000. The firm has 40,000 common share outstanding. Given that information. The single issue of common stock originally sold for: a. $12.50 b. $13.50 c. $16.00 d. $34.75 14. In 1989 the most famous (infamous) Leveraged But Out was completed – the buyout of RJR-Nabisco by the takeover kings KKR. One of KKR’s concerns was the spending of millions of dollars on a fleet of 6 corporate jets. If you were looking at RJR’s financial statements and decided to check that concern out by using ratio analysis, which of the following ratios would be most useful: a. The current ratio b. Total asset turnover ratio c. Inventory turnover ratio d. P/E price/earnings ratio 15. Continuing with the RJR situation an leveraged buy out means that the take over company borrows an enormous amount of money and uses those borrowed funds to buy back the common stock. After the take over, which of the following ratios would be the best indication that this has happened: a. Quick ratio b. ACP average collection period c. TIE times interest earned d. Net profit margin 16. Last RJR question immediately following the take-over, which balance sheet item would show the greatest reduction: a. Paid in capital in excess of par b. Fixed assets c. Accumulated depreciation d. Long term debt 17. In determining interest rates, the FED has the most direct influence on the total change which variable: a. The nominal rate of interest b. The real rate of interest c. The inflation premium d. The prime rate of interest 18. If the interest rate is zero the future value interest factor equals: a. 0.000 b. 1.000 c. 10.000 d. Undetermined 19. A corporate bond is sold for $1000 with a 6% coupon. Shortly thereafter interest rates in the economy increases to 8% due to inflation worries. Given this scenario, which of the following bond valuations for this bond in the secondary market would most likely happen a. $1000 b. $1080 c. $1196 d. None of the above would happen 20. The DuPont system helps an analyst understand how various financial statement variables ultimately affects ROE. Which of the following would increase ROE using this tool: a. Increase in cost of goods sold b. Increase in preferred stock dividends c. A movement of $ from accounts receivable to cash d. The use of debt to buy back common stock 21. The Gordon Model is a stock valuation model. Which of the following variables would be useful when using the Gordon Model: a. Net income b. The change in retained earnings c. The next dividend to be paid d. The par value of the stock 22. Considering the CAPM, which variable is the most useful: a. The yield of 90 day t bills b. The prime rate of interest c. The company’s net income d. The accumulative depreciation from the company’s latest balance sheet 23. Time value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today. a. True b. False 24. Publicly held corporations are those which are financed by the sale of treasury securities. a. True b. False 25. The current ratio is calculated by dividing Current Assets by Total Liabilities. a. True b. False