The ABC Company has a net profit margin of 7.75 percent on sales of $382,846. The company has 17,792 shares of stock outstanding at a market price of $19.1 per share. What is the price-earnings ratio?

a.      11.45

b.      4.56

c.       10.5

d.      3.7

Net profit = 7.75 * 382846/100 = 29670.565

Earning per share = 29670.565/17792 = 1.6676

Price Earning ratio = Market Price / Earning Per share = 19.1 / 1.6676 = 11.45

How many years will it take to double your money at 9% compounded semi-annually?

a.       15

b.      4.5

c.       7.85

d.      15.7

N = (ln2 / ln 1.045) /2 = 0.693 / 0.0440 = 15.75 /2 = 7.85

You want to have $13,226 in cash to buy a car in 3 years. You expect to earn 14.8% per year on your savings. How much do you need to deposit today if this is the only money you save for this purpose?

a.      $8,741.84

b.       $3,456.95

c.       $5,796.56

d.      $4,500

A = p(1 + r%)^n

13226 = P*(1.148)^3

13226 = P*1.51295

P = 13226 / 1.51295 = 8741.86

Suppose an investment offers to triple your money in 14 years. What annual rate of return are you being offered if interest is compounded monthly?

a.      7.87%

b.      0.65%

c.       4%

d.      3%

K = 3^1/168 - 1

Ln K = 1/168 * ln 3 - 1

Ln K = 1/168 * 1.0986 - 1

Ln K = 0.006539 - 1

K = 1.006560 - 1 = 0.006560

K = 0.6560 % (monthly)

K = 0.6560*12 = 7.872

ABC Company offers a perpetuity which pays annual payments of $13,194. This contract sells for $310,531 today. What is the interest rate?

a.       3.45%

b.      4.25%

c.       2.45%

d.      4.87%

Interest Rate = 13194/310531 * 100 = 0.04248*100 = 4.248 = 4.25 %

A firm has net working capital of $2,258 and current assets of $7,872. What is the current ratio?

a.       0.4

b.      3.1

c.       6.2

d.      1.4

Current liability = 7872 - 2258 = 5614

Current ratio  = 7872 / 5614  = 1.402 = 1.4

What is the net present value of the following cash flows? Assume an interest rate of 5.16%.

Present value of 5573 = 5299.54

Present value of 5045 = 4589.18

Present value of 5743 = 4938.41

Net present value = -12960 + 5299.54 + 4589.18 + 4938.41 = 1840

a.       $14,800

b.      $13,456

c.       $4,569

d.      $1,840

If you put $453 in a savings account at the beginning of each year for 6 years, how much money will be in the account at the end of the 6th year? Assume that the interest rate is 11%.

a.       $3,356.5

b.      $4,543.78

c.       $3,978.82

d.      $2,500.35

453*1.11^6     +          453*1.11^5     +          453*1.11^4     +          453*1.11^3     +          453*1.11^2     +            453*1.11

= 453* (1.8704 + 1.6850 + 1.5180 + 1.3676 + 1.2321 + 1.11)

= 453 * 8.7831 = 3978.74

Jack Miller, an employee of ABC Company was recently promoted and he is now in charge of managing the company's long-term investments. This means, he is in charge of the company's:

a.       capital structure decisions.

b.      working capital management decisions.

c.       cash management decisions.

d.      risk management decisions.

e.       capital budgeting decisions

Interest paid to a firm's debt-holders is tax-deductible to the paying company.

• True

ABC Company earned $657,257 in taxable income for the year. How much tax does the company owe on this income?

a.       $145,923.56

b.      $223,467.38

c.       $450,345

d.      $300,658.98

Tax rate = 34%

Tax = 657257*34% = 223,467.38

ABC Inc. has sales of $278,589, costs of $131,535, depreciation expense of $23,949, and interest paid of $34,779. The tax rate is 43 percent. How much net income did the firm earn for the period?

a.       $40,459.76

b.      $60,567.92

c.       $34,549

d.      $50,345.82

Net income before tax = 278589 - 131535 - 23949 - 34779 = 88326

Tax rate = 43%

Tax = 88326 * 43% = 37980.18

Net income after tax = 88326 - 37980.18 = 50345.82

In its most recent financial statements, ABC reported $58,883 million of net income and $794,740 million of retained earnings. The previous retained earnings were 798,446 million. How much in dividends was paid to shareholders during the year?

a.       $61,859

b.      $54,359

c.       $62,589

d.      $45,768

Dividend paid = 798446 - 794740 + 58883 = 62589

If you receive $392 at the end of each year for the first three years and $744 at the end of each year for the next three years. What is the present value? Assume interest rate is 10%.

a.       $8,234.67

b.      $2,567.34

c.       $2,364.94

d.      $4,728.8

Calculate PV of 392 for 3 years in excel then calculate PV of 744 for next 3 years and then add it

ABC, Inc. has total equity of $361,152, long-term debt of $116,400, net working capital of $1,600, and total assets of $781,777. What is the total debt ratio?

a.       0.5380

b.      0.4583

c.       0.2658

d.      0.3456

Total debt ratio = 116400 / (781777 - 361152) = 116400 / 420625 = 0.2658

As the number of years is increased, the:

a.      PV increases, FV decreases

b.      PV increases, FV increases

c.       PV decreases, FV increases

d.      PV decreases, FV decreases

Which one of the following transactions occurred in the primary market? 

a.      Delta, Inc offered newly issued shares to the general public.

b.      Anthony purchased 50 shares of RIM stock from his best friend, Edward.

c.       Emma instructs her broker to sell all of her shares in General Electric, Inc.

d.      Delta, Inc offered newly issued shares to the general public.

e.       The president of J.C. Penny, Inc. sold some of her shares to her daughter on the NYSE.