1. Which of the following would be included among the investment numbers of a capital budget?
a. purchase price of the asset
b. trade in value of and asset being replaced
c. investment tax credit from acquisition
d. all of the above
2. Projected sales growth assumes
a. adequate asset base
b. decrease in property, plant, and equipment
c. decrease in account receivable
d. decrease in inventory
e. none of the above
3. Earl Jason is saving for a pair of Jet skis. How much money must Earl put aside now to receive $14,000 six years from now if the money is compounding at an 8% annual compound rate?
a. $8846
b. $8800
c. $8822
d. $8810
e. none of the above
4. When projected assets are less than projected liabilities and equity, the firm will have
a. needed for debt
b. need for equity
c. excess cash
d. none of the above
5. A differential analysis
a. can be used to compare an alternative to the status quo
b. can be used to compare any set of alternatives
c. is easier to comprehend if a consistent frame of reference is employed
d. B and C
e. A, B, C
6. If the bond’s coupon rate is equal to the general rates in the market, the bond will sell at a
a. premium
b. discount
c. neither a nor b
7. Typically, the minimum value the target firm is willing to accept is the
a. liquidation value
b. book value
c. earnings valuation
d. none of the above
8. Sales less cost of goods sold yields
a. operating income
b. EBIT
c. gross margin
d. none of the above
9. flexibility issues are those which
a. deal with a company’s financing reserves
b. impact the debt capacity that a firm should maintain
c. all of the above
10. The DuPont formula combines three ratios in yield
a. debt to equity
b. ROA
C. ROE
D. Debt to assets
e. none of the above
11. NPV is the preferred method for ranking investments because
a. it does not consider the time value of money
b. it measures the creation of value
c. it is sensitive to change in the hurdle rate assumption
d. A and B
e. B and C
12. If Carla Rice puts $200 in the bank for nine years and the money compounds at 7% annually how much will Carla have at the end of the nine years?
a. $362
b. $368
c. $374
d. $381
e. none of the above