FINANCE : 18 M/C QUESTIONS :

Question #1 (1 point)

Suppose a Polish zloty is selling for $0.3159 and a British pound is selling for $1.5186. What is the exchange rate (cross rate) of the Polish zloty to the British pound? That is, how many Polish zlotys are equal to a British pound?

3.9264

4.2601

4.5325

4.8072

Question #2 (1 point)

In 2012, Platecraft Inc.’s stock had been selling at $46.00 a share. Their dividend yield was 2.5% and they had expected earnings per share of $2.05. What was Platecraft’s dividend payout ratio in 2012?

68.7%

63.5%

56.1%

72.3%

Question #3 (1 point)

When the inflation rate differential between two countries changes, the exchange rate also adjusts to correspond to the relative purchasing powers of the countries.

True

False

Question #4 (1 point)

What is the primary purpose of a stock split?

to lower the price of a security into a more popular trading range

to increase a company’s retained earnings

to decrease the number of shares being traded

all of the above

Question #5 (1 point)

Which of the following are explanations for U.S. firms moving all or part of their operations to foreign soil?

to avoid import tariffs when selling their products in other countries

to take advantage of lower production costs

to minimize tax liability in the US by postponing tax payments until income has been repatriated

all of the above

Question #6 (1 point)

Assume the 180-day forward rate for the dollar/pound is $1.5409 and the spot rate is $1.5428. The 180-day forward contract in British pounds would therefore be selling at

0.493% discount

0.493% premium

0.246% discount

0.246% premium

Question #7 (1 point)

The decision of a company to declare a 10% stock dividend should result in

no change in the company’s net worth

a 1% increase in the company’s net worth

a 10% increase in the company’s net worth

a 10% decrease in the company’s net worth

Question #8 (1 point)

One possible strategy for a company to minimize foreign exchange risk would be to encourage quick collection of bills in weak currencies by offering sizable discounts, while extending liberal credit in strong currencies.

False

True

Question #9 (1 point)

You will receive the upcoming quarterly dividend if you buy stock on the ex-dividend date.

False

True

Question #10 (1 point)

Rothbard Industries earned $900,000 last year and paid out 30% of earnings in dividends. By how much did the company’s retained earnings increase?

$270,000

$540,000

$360,000

$630,000

Question #1 (1 point)

You are considering purchasing a new piece of equipment for $21,000 which will generate a cash inflow of $4,500 per year for 6 years. What is the internal rate of return?

6.6%

8.8%

7.7%

9.9%

Question #2 (1 point)

In 2011, Heizenburg Inc.’s stock had been selling at $25.00 a share. Their dividend yield was 3.5% and they had expected earnings per share of $2.50. What was Heizenburg's dividend payout ratio in 2011?

45%

50%

35%

40%

Question #3 (1 point)

McNulty Co. earned $5,250,000 last year and paid out 20% of earnings in dividends. With one million shares outstanding and a stock price of $35, what was the dividend yield?

4%

5%

2%

3%

Question #4 (1 point)

Consider a $1,000 par value bond with 10 years until maturity that has an $120 coupon payment and is currently selling for $900. Which of the following statements is true?

The yield to maturity is greater than the coupon rate.

The current yield is greater than its yield to maturity.

The coupon rate is greater than its current yield.

All of the above statements are true.

Question #5 (1 point)

Lawrence wishes to find the Yield to Maturity (YTM) on Apple Bros. Company’s bond. The bond currently sells for $850, has a 8% coupon interest rate and $1,000 par value, pays interest annually, and has 8 years to maturity.

13.1%

10.9%

10.5%

10.1%

Question #6 (1 point)

Suppose a Polish zloty is selling for US $0.3268 and a British pound is selling for US $1.5246. What is the exchange rate (cross rate) of the Polish zloty to the British pound? That is, how many Polish zlotys are equal to a British pound?

0.2144

4.6652

3.0600

0.3268

Question #7 (1 point)

Ward Corporation’s advisors indicate that the risk-free rate equals 4%; the firm’s beta equals 0.5; and the market return equals 12%. What is Ward Corp.’s required return on common stock?

12%

8%

14%

10%

Question #8 (1 point)

What is the after tax cost of debt on a 5 year bond with a 10% coupon rate, $1,000 par value, and annual coupon payments? The net proceeds of the initial bond issue were $1000, and the firm’s tax rate is 40%.

7.2%

10.0%

6.0%

8.0%

Question #9 (1 point)

Assume the 90-day forward rate for the dollar/pound is $1.5235 and the spot rate is $1.5208. The 90-day forward contract in British pounds would therefore be selling at

0.710% premium

0.355% discount

0.355% premium

0.710% discount

Question #10 (1 point)

A 20-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 12%. What should be the initial price of the bond?

$850.61

$103.67

$1,036.70

$85.06

Question #11 (1 point)

Please determine the approximate current value of Acme's bond. The annual coupon interest rate is 10%, the required return is 8%, the par value is $1,000 and the time to maturity is 10 years.

$1,134

$877

$1,000

$912

Question #12 (1 point)

Please find Malone Corp.'s weighted average cost of capital given the following information:

Cost of debt = 6.5%, cost of preferred stock = 11.0%, cost of common stock equity = 13.0%

Weight of debt = 45%, weight of preferred stock = 5%, weight of common stock equity = 50%

8%

7%

9%

10%

Question #13 (1 point)

You are considering purchasing a new piece of equipment for $21,000 which will generate a cash inflow of $4,500 per year for 6 years. Assuming an 8% cost of capital, what is the NPV? Based off this information should you purchase this equipment?

-$19,700, no, should NOT purchase

$197, yes, should purchase

-$197, no, should NOT purchase

$19,700, yes, should purchase

Question #14 (1 point)

You are considering purchasing a new piece of equipment for $21,000 which will generate a cash inflow of $4,500 per year for 6 years. What is the payback period for this project?

5.33 years

4.33 years

3.67 years

4.67 years

Question #15 (1 point)

Plantgrow Corp.'s growth rate each year for the past few years has been around 5% and they are expected to continue growing at this rate. Their required return is 10%. The company estimates their dividend next year to be $2.10 which is 5% higher than last year’s dividend of $2.00. What is the approximate price of Plantgrow's stock?

$84

$76

$80

$40

Question #16 (1 point)

Stringer Inc. believes there will be a 30% probability of receiving a cash flow next month of $5,000, a 40% probability of receiving $8,000, and a 30% probability of receiving $10,000. What is the coefficient of variation?

0.2535

0.2946

0.2728

0.3121

Question #17 (1 point)

The shares of Huggins Company sell for $40. The firm has a P/E ratio of 10. Forty percent of earnings are paid out in dividends. What is the firm’s dividend yield?

5%

2%

4%

3%

Question #18 (1 point)

When the inflation rate differential between two countries changes, the exchange rate also adjusts to correspond to the relative purchasing powers of the countries.

True

False