Ques 1: What is the major complaint by firms concerning the Sarbanes-Oxley act of 2012?

B. the legal requirement to disclose project information.

Ques 2: One of the major disadvantages of a sole proprietorship is: A. that there is unlimited liability to the owner.

Ques 3: The Sarbanes-Oxley Act set up the Public Company Accounting Oversight Board with the responsibility for all of the following except:. C. certifying the competence of financial executives.

Ques 4: The financial manager should make decisions that are in the best interest of:. C. the firm’s owners.

Ques 5: The advantages of sole proprietorship include: D. easy to start.

Ques 6: Ethical behavior is important for business because:

. D. there are laws requiring it.

Ques 7: Which of the following should be the appropriate goal for the firm?

C. shareholder wealth maximization

Ques 8: Which of the following is NOT a major criticism of boards of directors?

A. they are not willing to fire CEO’s.

Ques 9: The most important way that businesses grow is by: B. reinvesting residual cash flows.

Ques 10: Big Golf Corp paid taxes of $ 90,000 and purchased equipment worth $175,000 during the year that ended June 30, 2008. The firm had net income of $500,000 during the year ended June 30, 2008. After paying out $95,000 in dividends, the balance went into retained earnings. If the firm’s total retained earnings were $900,000, what was the level of retained earnings on its balance sheet on July 1, 2007?

D. $ 495,000

Ques 11: FAST Corporation has announced that its net income for the year ended June 30, 2008, is $1,000,320. The company paid a 7 percent dividend and had an EBITDA of $ 4,900,000. Its depreciation and amortization expense was equal to $1,500,000. The company’s tax rate is 36 percent. What is the amount of interest expense for the Corporation?

A. $ 1,837,000

Ques 12: Fundamental accounting principles do not include:

B. the owner’s equity obligation.

Ques 13: Auton, Inc. a manufacturer of robots had total revenues of $2,000,000 in the year ending 2011 with an operating cost of $1,000,000. The company's earnings are taxed at 30% and its annual interest expenses were $300,000. The only depreciable asset the company owns is a specialized machine that it bought for $1,000,000 and is depreciating over 5 years using the straight line method. What is the firm's EBT?

D. $500,000

Ques 14: If a company's balance sheet shows retained earnings of $10,000,000, then its cash on hand must be greater than $10,000,000. B. False Ques 15: Which of the following activities will have a positive effect on cash flow (i.e. will increase cash)?.. C. A decrease in accounts receivables.

Ques 16: Given the following information for Tandoori Grill Restaurant, calculate its total asset turnover and return on equity ratios:

Net profit margin 8% Return on total assets 15% Debt ratio 30%

B. 1.875; 21.43%

Ques 17: B. J. Industries has a current ratio of 2.5, with $2.5 million in current assets. Due to sales growth, it wants to expand accounts receivable and inventories by taking on additional short-term debt. If it wants to maintain a minimum current ratio of 2.0, what is the maximum additional short-term funding it can borrow?

D. $500,000

Ques 18: By offering its credit customers a cash discount for early payment, a firm may be able to:

A. Reduce its accounts receivable balance and increase account receivable turnover.

Ques 19: Flying Penguins Corp. has total current assets of $11,845,175, current liabilities of $5,311,020, and an inventory of $7,000,000. What is the quick ratio?

A. 0.91 Ques 20: Irani Brothers Company has total assets of $807,200, total equity of $509,500, total sales of $945,300, and net income of $200,176. If management wants a profit margin of 27.1% by how much should net income increase to reach this profit margin goal?

B. $56,000

Ques 21: Solar Solutions reports the following account balances: inventory of $6,200, equipment of $6,200, accounts payable of $15,500, cash of $11,200, and accounts receivable of $12,400. How much does the firm have in net working capital?

C. $14,300

Ques 22: If a firm has a lower asset turnover ratio than the industry average, the implication is that:

D. the firm is utilizing assets less efficiently than other firms in the industry.

Ques 23: XYZ Corp. has Sales of $1,000,000, and its most recent balance sheet shows $27,000 in Cash, Total Assets of $805,000, Total Liabilities of $287,000, Total Current Assets of $405,000, Total Current Liabilities of $175,000, and Inventory of 210,000. The firm's Current and Quick ratios are:

C. 2.31 ; 1.11

Ques 24: In order to create Common-size financial statements we divide balance sheet accounts by ______and income statement accounts by ______?

D. Total Assets ; Net Sales

Ques 25: Holding all other variables constant, an increase in the interest rates will cause ______to decrease

B. Present value

Ques 26: Carrie needs to accumulate $40,000 to make a down payment on a house at the end of 4 years. How much money should she deposit in a bank account today to accomplish this if the bank pays 6% interest compounded per year?

D. 31,685

Ques 27: You are planning a trip to Europe in 5 years from now and you can save $3,000 per year beginning one year from today. You plan to deposit these funds in a bank account that pays 8% per year. How much money you would have accumulated just after you make the 5th deposit?

D. 17,600

Ques 28: You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?

B. The discount rate increases.

Ques 29: Suppose a State of Maryland bond will pay $1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5%, how much is the bond worth today?

A. $651.60

Ques 30: You inherited an oil well that will pay you $25,000 per year for 25 years, with the first payment being made today. If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it? B. $299,574

Ques 31: NBA sensation Jeremy Lin is negotiating a new 5-year contract with the New York Knicks. The Knicks offer him the following “Lincredible” compensation proposals. Jeremy’s financial advisor says he can invest Jeremy’s savings in a “Linsane” mutual fund that yields 7% per year. To maximize the present value of his “Linvestment” which proposal should he accept? B. $5 million signing bonus and $9 million paid at the end of the contract.

Ques 32: Finn Hudson wants to propose to Rachel Berry. Currently, he has $15,700 in his college savings account. Finn knows that the diamond ring that Rachel likes costs $20,000. He finds a part-time job with a singing telegram company where he can make $500 per week after tax. The McKinley Savings Bank offers the following investment options. Which one should Finn choose so that he can propose to Rachel as quickly as possible? D. 4.5% compound interest with continuous compounding.

Ques 33: In singer Whitney Houston’s will, she leaves her daughter, Bobbi Kristina, $20 million. Bobbi Kristina goes to the Body Guard Bank where her financial advisor, Frank Farmer, recommends that she use a discount rate of 5% when evaluating her investment alternatives. He tells her about an “I Will Always Love You” perpetuity investment that promises an initial payout of 2.0% at the end of the first year and subsequent payments that grow in each year. If Bobbi Kristina invests the entire $20 million in this perpetuity, what minimum growth rate will she need to break even?

C. 3%

Ques 34: Don purchased a stock for $37 and sold this stock a year later for $50. His total holding period return was 50%. What is the amount of dividends that Don received?

C. 5.5

Ques 35: Mr. Boyles has made an investment that will generate returns that are subject to the state of the economy during the year. Use the following information to calculate the standard deviation of the return distribution for Mr. Boyles' investment. (Round to the Nearest Hundredth)

State Return Probability Not So Good 10.00% 30.00% OK 15.00% 40.00% Awesome 50.00% 30.00%

B) 0.24 Ques 36: A stock portfolio is equally allocated among Stock A, B, and C. Stocks A, B, and C have betas of 1.9, 1, and 0.57, respectively. The market has just risen 4%. What would you expect to happen to this stock portfolio? C. The stock portfolio will rise 4.6%.

Ques 37: The risk-free rate of return is currently 5 percent, whereas the market risk premium is 11 percent. If the beta of Briar Tek's stock is 2, then what is the expected return on Briar Tek?

D. 27.00%

Ques 38: You invested $15,000 in a portfolio with an expected return of 10 percent and $10,000 in a portfolio with an expected return of 16 percent. What is the expected return of the combined portfolio?

D. 12.40%

Ques 39: Karen purchased a stock for $40 last year. She found out today that she had a –75% return on her investment. Which of the following must be true?

D. Both A and C must be true.

Ques 40: The return distribution for the asset XYZ is as shown below: Return Probability - 0.1 0.10 + 0.1 0.40 +0.20 0.30 +0.30 0.20 What is the standard deviation for the XYZ returns?

B. 0.1118

Ques 41: The beta of Microsoft’s stock is 1.2, whereas the risk-free rate of return is 4 percent. Assume that the expected return on the market is 16 percent. Then, what is the expected return on Microsoft stock?

C. 18.40%

Ques 42: If you have a 3 year loan that requires $1,000 payments each year at 7% annual interest rate what would be the present value of the loan? A. $2,624.32

Ques 43: Robert has a mortgage on his home of $400,000 and has a fixed rate mortgage of 6.125% for 30 years. What would his monthly payments be for this loan? C. $2,430.45

Ques 44: What is the effective annual interest rate?. B. Rate that reflects compounding.

Ques 45: Stern Associates is considering a project that has the following cash flow data. What is the project's payback?

Year 0 1 2 3 4 5 Cash flows -$1,100 $300 $310 $320 $330 $340

E. 3.52 years

Ques 46: Oranges Inc. is considering a project that has the following cash flow and Cost of Capital data. What is the project's discounted payback?

Cost of Capital: 10.00% Year 0 1 2 3 4 Cash flows -$950 $525 $485 $445 $405

D. 2.22 years Ques 47: Maxwell Food is considering a project that has the following cash flow data. What is the project's IRR?

Year 0 1 2 3 4 5 Cash flows -$9,500 $2,000 $2,025 $2,050 $2,075 $2,100

C. 2.57%

Ques 48: A. Use the smaller of the two Internal Rates of Return. Computing the Internal Rate of Return for a given set of cash flows, especially when the final cash flow is negative, occasionally results in two Internal Rates of Return. When this happens the best course of action is to:

B. Do not try to interpret the results because they are meaningless.

Ques 49: Regarding Capital Budgeting, the authors contend that Internal Rate of Return is superior to Net Present Value because: D. None of the above.

Ques 50: Bailey Company is considering developing a new iPhone app. The cost of development is expected to be $750,000 (all incurred in time zero) and management expects net cash flows from sale of the app to be $100,000 in year one and $150,000, $225,000, $250,000, $280,000 and $300,000 in years two through six, respectively. What is the Net Present Value of this project if the discount rate is 12%? A. $88,764