Finance MCQs Quiz Set

Question # 00025695 Posted By: expert-mustang Updated on: 09/11/2014 12:37 AM Due on: 09/11/2014
Subject Finance Topic Finance Tutorials:
Question
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1) Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent, and it paid
preferred stock dividends of $50,000. There were 100,000 shares outstanding and no interest expense.
What were Candy Corporation’s earnings per share?
a. $4.52
b. $7.59
c. $7.42
d. $3.91
2) The cash flows from operating activities section of the statement of cash flows considers
a. interest expense.
b. stock repurchases.
c. dividends paid.
d. cost of raw materials.
3) A firm has projected sales in May, June, and July of $100, $200, and $300, respectively. The firm
makes 20 percent of sales for cash and collects the balance one month following the sale. The firm’s total
cash receipts in July
a. are $200.
b. are $220.
c. are $180.
d. cannot be determined with the information provided.
4) In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of $8,000,
depreciation expense of $1,000, a minimum cash balance of $3,000, and a beginning cash balance of
$500. The excess cash balance (required financing) for August is
a. required total financing of $500.
b. required total financing of $2,500.
c. excess cash balance of $500.
d. excess cash balance of $5,500.
5) For positive interest rates, the future value interest factor is
a. sometimes negative.
b. always greater than 1.0.
c. never greater than 25.
d. always less than 0.
6) The present value of $200 to be received 10 years from today, assuming an opportunity cost of 10
percent, is
a. $200.
b. $50.
c. $518.
d. $77.

7) The present value of a $25,000 perpetuity at a 14 percent discount rate is
a. $350,000.
b. $285,000.
c. $178,571.
d. $219,298.
8) The future value of $100 received today and deposited in an account for four years paying semiannual
interest of 6 percent is
a. $450.
b. $889.
c. $134.
d. $126.
9) The future value of an annuity of $1,000 each quarter for 10 years, deposited at 12 percent compounded
quarterly is
a. $75,401.
b. $17,549.
c. $93,049.
d. $11,200.
10) Adam borrows $4,500 at 12 percent annually compounded interest to be repaid in four equal annual
installments. The actual end­of­year payment is
a. $2,641.
b. $1,125.
c. $942.
d. $1,482.
11) Ashley owns stock in a company which has consistently paid a growing dividend over the last five
years. The first year Ashley owned the stock, she received $1.71 per share and in the fifth year, she
received $2.89 per share. What is the growth rate of the dividends over the last five years?
a. 7 percent
b. 5 percent
c. 14 percent
d. 12 percent
12) Julian was given a gold coin originally purchased for $1 by his great­grandfather 50 years ago. Today
the coin is worth $450. The rate of return realized on the sale of this coin is approximately equal to
a. 13%.
b. 50%.
c. 7.5%.
d. cannot be determined with given information.
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13) Aunt Bertha borrows $19,500 from the bank at 8 percent annually compounded interest to be repaid in
10 equal annual installments. The interest paid in the third year is ________.
a. $1,947.10
b. $1,336.00
c. $2,906.11
d. $1,560.14
14) What annual rate of return would Grandma Zoe need to earn if she deposits $1,000 per month into an
account beginning one month from today in order to have a total of $1,000,000 in 30 years?
a. 5.98%
b. 5.28%
c. 6.23%
d. 4.55%
15) Combining negatively correlated assets having the same expected return results in a portfolio with
________ level of expected return and ________ level of risk.
a. the same; a lower
b. a lower; a higher
c. a higher; a lower
d. the same; a higher
16) Nico owns 100 shares of stock X which has a price of $12 per share and 200 shares of stock Y which
has a price of $3 per share. What is the proportion of Nico’s portfolio invested in stock X?
a. 50%
b. 77%
c. 67%
d. 33%
17) Jia Hua Enterprises wants to issue sixty 20­year, $1,000 par value, zero coupon bonds. If each bond is
priced to yield 7 percent, how much will Jia Hua receive (ignoring issuance costs) when the bonds are
first sold?
a. $12,393
b. $15,505
c. $18,880
d. $11,212
e. $20,000

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18) Tangshan China Company’s stock is currently selling for $80.00 per share. The expected dividend
one year from now is $4.00 and the required return is 13 percent. What is Tangshan’s dividend growth
rate assuming that dividends are expected to grow at a constant rate forever?
a. 9%
b. 10%
c. 8%
d. 11%
19) Nico Corporation expects to generate free­cash flows of $200,000 per year for the next five years.
Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever. If
the firm’s average cost of capital is 15 percent, the market value of the firm’s debt is $500,000, and Nico
has a half million shares of stock outstanding, what is the value of Nico’s stock?
a. $0.00
b. $1.43
c. $3.43
d. $2.43
20) A corporation is selling an existing asset for $1,000. The asset, when purchased, cost $10,000, was
being depreciated under MACRS using a five year recovery period, and has been depreciated for four full
years. If the as summed tax rate is 40 percent on ordinary income and capital gains, the tax effect of this
transaction is
a. $3,600 tax liability.
b. $280 tax benefit.
c. $0 tax liability.
d. $1,100 tax liability.
21) Should Tangshan Mining company accept a new project if its maximum payback is 3.5 years and its
initial after tax cost is $5,000,000 and it is expected to provide after­tax operating cash inflows of
$1,800,000 in year 1, $1,900,000 in year 2, $700,000 in year 3 and $1,800,000 in year 4?
a. Yes
b. No
c. It depends
d. None of the above
22) What is the NPV for the following project if its cost of capital is 15 percent and its initial after tax
cost is $5,000,000 and it is expected to provide after­tax operating cash inflows of $1,800,000 in year 1,
$1,900,000 in year 2, $1,700,000 in year 3 and $1,300,000 in year 4?
a. ($137,053)
b. $371,764
c. $1,700,000
d. None of the above

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23) What is the NPV for the following project if its cost of capital is 0 percent and its initial after tax cost
is $5,000,000 and it is expected to provide after tax operating cash inflows of $1,800,000 in year 1,
$1,900,000 in year 2, $1,700,000 in year 3 and $1,300,000 in year 4?
a. $1,700,000
b. $137,053
c. $371,764
d. None of the above
24) Breakeven cash inflow refers to
a. the minimum level of cash inflow necessary for a project to be acceptable,
that is, IRR < cost of capital.
b. the minimum level of cash inflow necessary for a project to be acceptable,
that is, NPV > $0.
c. the minimum level of cash inflow necessary for a project to be acceptable,
that is, NPV < $0.
d. none of the above is correct
25) The before­tax cost of debt for a firm which has a 40 percent marginal tax rate is 12 percent. The
after­tax cost of debt is
a. 12 percent.
b. 7.2 percent.
c. 4.8 percent.
d. 6.0 percent.
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