QUESTION 1

Which of the following is CORRECT?

One of the advantages of the corporate form of organization is that avoids double taxation.
m It is easier to transfer one's ownership interest in a partnership than in a corporation.
m One of the advantages of a sole propriertorship is that the propriertorship is exposed to unlimited liability.
One of the advantages of a corporation from a social standpoint is that every stockholder has equal rights, i.e. "one person, one vote"

QUESTION 2

Which of the following items is NOT normally considered to be a current asset?

Accounts payable
Inventory
Accounts receivables
Cash

QUESTION 3

You have a chance to buy an annuity that pays $2.500 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

$5,493.71
$5,782.85
$6,087.21
$2,129.03

QUESTION 4

You want to quit your job and go back to schooi for a law degree 4 years from now, and you plan to save $3,500 per year, beginning immediately. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much will you have 4 years from today?

$16.112
$16,918
$17,763
$18,652

QUESTION 5

Which of the following actions would be likely to reduce conflicts of interest between stockholders and managers?

Congress passes a law that severely restricts hostile takeovers.
Managerial compensation is changed so that managers receive larger cash salaries but fewer long-term options to buy shares of stock.
The company's outside auditing firm is offered a lucrative consulting contract with the company.
The board of directors becomes more vigilant in its oversight of the company's management.

QUESTION 6

Jose now has $500. How much would he have after 6 years if he leaves it invested at 5.5% with annual compounding?

$591.09
$622.20
$654.95
$689.42

QUESTION 7

Suppose you have $2.000 and plan to purchase a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. How much will you have when the CD matures?

$3,754.27
$3,941.99
$4,139.09
$4.346.04 Question Completion Status.

QUESTION 8

Shop-Til-You-Drop Inc recently reported net income of 5.2 million and depreciation of $600,000. What was is net cash flow? Assume it has no amortization expense.

$5,400,000
$5,600,000
$5.800,000
$6,000.000

QUESTION 9

Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 5.5%. how much is the bond worth today?

$585.43
$614.70
$645.44
$677.71

QUESTION 10

You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $7,000 per year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions, how much will you have 3 years from today?

$20,993
$22,098
$23.261
$25.645

QUESTION 11

Which of the following could explain why business might choose to operate as a corporation rather than as a sole propriertorship or a partnership?

Corporations generally face fewer regulations.
Less of a corporation's income is generally subject to taxes.
Orporate investors are exposed to unlimited liaBILITY.
Corporartions generally find it easier to raise capital

QUESTION 12

Whic of the following statements would most people in business agree with?

Although peoples' moral characters are probably develop before they get into a business school. It is still useful business for business schools to cover ethics. if only to give students an idea about the adverse consequences of unethical behavior to themselves, their firms and the nation.

Firms and government agencies almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees.

"Whistle blowers", because of the courage that takes to blow the wistle. are generally promoted rapidly than other employees.

It is not useful for large corporations to develop a formal set of rules defining ethical and unethical behavior.

QUESTION 13

What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5%?

$16,576
$17,449
$18,367
$20.352

QUESTION 14

Which of the following statements is CORRECT?

One of the disadvantages of incorporating your business is that you become subject to liabilities in the event of bankruptcy.
Sole proprietorships are subject to more regulations than corporations.
In any partnership, every partner has the same rights. priviligies. and liability exposure as every other partner.
Sole propriertorship and patnerships generally have tax advantage over corporations.

QUESTION 15

Which of the following statements is CORRECT?

Four key financial statements are the balance sheet, the income statement, the statement of cash flows, and the statement of retained earnings.
The balance sheet gives us a picture of the firm's financial situation over a preiod of time.
The income statement c Ives us a snapshot of what is happening at a point in time. Question Completion Status.
The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits

QUESTION 16

Lennox Furniture Company's 2005 balanced sheet showed total current assets of $1,500.000. All of the current assets were required in operations, and its current liabilities consisted of $300,000 of accounts payable. $200.000 of 6% short term notes to the bank, and $100,000 of accrued wages and taxes. What was the net operating working capital that was financed by investors at the end of 2005?

$1,100,000
$1,200,000
$1,300,000
$1,400,000

QUESTION 17

Companies generate income from their "regular" operations and from things like interest on securities they hold, which is called non-operating income. Mit& Metals recently reported $9,000 of sales. $6.000 of operatring costs other than depreciation. and $1.500 of depreciation. The company had no amortization charges and non-operatring income. It had issued $4,000 of bonds that carry a 7% interest rate, and its federal-plus-state income tax rate was 40%. What was the firms's operating income, or EDIT?

$1,100
$1,200

QUESTION 18

How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%?

$438.03
$461.08
$485.35
$537.78

QUESTION 19

The primary operatring goal of the publicly-owned firm interested in serving its stockholders should be to

Maximize its expected total corporate income.
Maximize its expected E:PS.
Minimize the chances of !ngQpc.
Maximize the stock price per share over the long run, which is the stock's intrinsic value.

QUESTION 20

Suppose the U.S. Treasury offers to sell you a bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1.000. What interest rate would you earn if you bought this bond at the offer price?

4.37%
4.86%
5.40%
6.00%