Multiple Choice Question 51 Which of the following is considered a hybrid organizational form? corporation sole proprietorship limited liability partnership partnership Multiple Choice Question 59 Which of the following is a principal within the agency relationship? the CEO of the firm the board of directors a company engineer a shareholder Multiple Choice Question 78 Which of the following presents a summary of the changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period? The statement of retained earnings. The statement of working capital. The statement of cash flows. The statement of net worth. Multiple Choice Question 57 Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have? $2,303,010 $1,844,022 $2,123,612 $803,010 Multiple Choice Question 63 Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory? 65.2 days 64.3 days 61.7 days 57.9 days Multiple Choice Question 70 Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio? 1.74 0 0.60 1.47 Multiple Choice Question 84 Which of the following is not a method of “benchmarking”? Conduct an industry group analysis. Identify a group of firms that compete with the company being analyzed. Utilize the DuPont system to analyze a firm’s performance. Evaluating a single firm’s performance over time. Multiple Choice Question 67 Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.) $26,454 $16,670 $22,680 $19,444 Multiple Choice Question 62 PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.) $2,735,200 $2,615,432 $2,431,224 $2,815,885 Multiple Choice Question 64 PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.) $480,906 $414,322 $477,235 $429,560 Multiple Choice Question 72 Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year f.

1. Multiple Choice Question 51
Which of the following is considered a hybrid organizational
form?
corporation
sole proprietorship
limited liability partnership
partnership
Multiple Choice Question 59
Which of the following is a principal within the agency
relationship?
the CEO of the firm
the board of directors
a company engineer
a shareholder
Multiple Choice Question 78

2. Which of the following presents a summary of the changes in a
firm’s balance sheet from the beginning of an accounting period
to the end of that accounting period?
The statement of retained earnings.
The statement of working capital.
The statement of cash flows.
The statement of net worth.
Multiple Choice Question 57
Teakap, Inc., has current assets of $ 1,456,312 and total assets
of $4,812,369 for the year ending September 30, 2006. It also
has current liabilities of $1,041,012, common equity of
$1,500,000, and retained earnings of $1,468,347. How much
long-term debt does the firm have?
$2,303,010
$1,844,022
$2,123,612
$803,010
Multiple Choice Question 63

3. Efficiency ratio: Gateway Corp. has an inventory turnover ratio
of 5.6. What is the firm's days's sales in inventory?
65.2 days
64.3 days
61.7 days
57.9 days
Multiple Choice Question 70
Leverage ratio: Your firm has an equity multiplier of 2.47.
What is its debt-to-equity ratio?
1.74
0
0.60
1.47
Multiple Choice Question 84
Which of the following is not a method of “benchmarking”?
Conduct an industry group analysis.

4. Identify a group of firms that compete with the company being
analyzed.
Utilize the DuPont system to analyze a firm’s performance.
Evaluating a single firm’s performance over time.
Multiple Choice Question 67
Present value: Jack Robbins is saving for a new car. He needs to
have $ 21,000 for the car in three years. How much will he have
to invest today in an account paying 8 percent annually to
achieve his target? (Round to nearest dollar.)
$26,454
$16,670
$22,680
$19,444
Multiple Choice Question 62
PV of multiple cash flows: Ferris, Inc., has borrowed from their
bank at a rate of 8 percent and will repay the loan with interest
over the next five years. Their scheduled payments, starting at
the end of the year are as follows—$450,000, $560,000,
$750,000, $875,000, and $1,000,000. What is the present value
of these payments? (Round to the nearest dollar.)

5. $2,735,200
$2,615,432
$2,431,224
$2,815,885
Multiple Choice Question 64
PV of multiple cash flows: Ajax Corp. is expecting the
following cash flows—$79,000, $112,000, $164,000, $84,000,
and $242,000—over the next five years. If the company's
opportunity cost is 15 percent, what is the present value of these
cash flows? (Round to the nearest dollar.)
$480,906
$414,322
$477,235
$429,560
Multiple Choice Question 72
Future value of an annuity: Jayadev Athreya has started on his
first job. He plans to start saving for retirement early. He will
invest $5,000 at the end of each year for the next 45 years in a

6. fund that will earn a return of 10 percent. How much will
Jayadev have at the end of 45 years? (Round to the nearest
dollar.)
$5,233,442
$2,667,904
$1,745,600
$3,594,524
Multiple Choice Question 57
Serox stock was selling for $20 two years ago. The stock sold
for $25 one year ago, and it is currently selling for $28. Serox
pays a $1.10 dividend per year. What was the rate of return for
owning Serox in the most recent year? (Round to the nearest
percent.)
32%
40%
12%
16%
Multiple Choice Question 62

7. Bond price: Regatta, Inc., has six-year bonds outstanding that
pay a 8.25 percent coupon rate. Investors buying the bond today
can expect to earn a yield to maturity of 6.875 percent. What
should the company's bonds be priced at today? Assume annual
coupon payments. (Round to the nearest dollar.)
$972
$1,014
$923
$1,066
Multiple Choice Question 57
PV of dividends: Next year Jenkins Traders will pay a dividend
of $3.00. It expects to increase its dividend by $0.25 in each of
the following three years. If their required rate of return is 14
percent, what is the present value of their dividends over the
next four years?
$9.72
$12.50
$11.63
$13.50

8. Multiple Choice Question 79
Capital rationing. TuleTime Comics is considering a new show
that will generate annual cash flows of $100,000 into the
infinite future. If the initial outlay for such a production is
$1,500,000 and the appropriate discount rate is 6 percent for the
cash flows, then what is the profitability index for the project?
0.11
0.90
1.90
1.11
Multiple Choice Question 88
What decision criteria should managers use in selecting projects
when there is not enough capital to invest in all available
positive NPV projects?
The profitability index.
The internal rate of return.
The modified internal rate of return.
The discounted payback

9. Multiple Choice Question 60
How firms estimate their cost of capital: The WACC for a firm
is 13.00 percent. You know that the firm's cost of debt capital is
10 percent and the cost of equity capital is 20%. What
proportion of the firm is financed with debt?
30%
33%
50%
70%
Multiple Choice Question 85
If a company's weighted average cost of capital is less than the
required return on equity, then the firm:
Must have preferred stock in its capital structure
Is financed with more than 50% debt
Is perceived to be safe
Has debt in its capital structure
Multiple Choice Question 68

10. The cost of equity: Gangland Water Guns, Inc., is expected to
pay a dividend of $2.10 one year from today. If the firm's
growth in dividends is expected to remain at a flat 3 percent
forever, then what is the cost of equity capital for Gangland if
the price of its common shares is currently $17.50?
12.00%
14.65%
15.00%
15.36%
Multiple Choice Question 32
A firm's capital structure is the mix of financial securities used
to finance its activities and can include all of the following
except
stock.
bonds.
equity options.
preferred stock.
Multiple Choice Question 54

11. M&M Proposition 1: Dynamo Corp. produces annual cash flows
of $150 and is expected to exist forever. The company is
currently financed with 75 percent equity and 25 percent debt.
Your analysis tells you that the appropriate discount rates are
10 percent for the cash flows, and 7 percent for the debt. You
currently own 10 percent of the stock.
If Dynamo wishes to change its capital structure from 75
percent to 60 percent equity and use the debt proceeds to pay a
special dividend to shareholders, how much debt should they
issue?
$600
$225
$321
$375
Multiple Choice Question 69
Multiple Analysis: Turnbull Corp. had an EBIT of $247 million
in the last fiscal year. Its depreciation and amortization
expenses amounted to $84 million. The firm has 135 million
shares outstanding and a share price of $12.80. A competing
firm that is very similar to Turnbull has an enterprise
value/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the
nearest million dollars.

12. $1,315 million
$1,334 million
$1,787 million
$453.6 million
Multiple Choice Question 86
External financing needed: Jockey Company has total assets
worth $4,417,665. At year-end it will have net income of
$2,771,342 and pay out 60 percent as dividends. If the firm
wants no external financing, what is the growth rate it can
support?
30.3%
27.3%
32.9%
25.1%
Multiple Choice Question 46
Which of the following cannot be engaged in managing the
business?
a sole proprietor

13. a general partner
a limited partner
none of these
Multiple Choice Question 80
Which of the following does maximizing shareholder wealth not
usually account for?
Government regulation.
Risk.
The timing of cash flows.
Amount of Cash flows.
Multiple Choice Question 41
The strategic plan does NOT identify
working capital strategies.
the lines of business a firm will compete in.

14. major areas of investment in real assets.
future mergers, alliances, and divestitures.
Multiple Choice Question 67
Firms that achieve higher growth rates without seeking external
financing
none of these.
have a low plowback ratio.
have less equity and/or are able to generate high net income
leading to a high ROE.
are highly leveraged.
Multiple Choice Question 75
Payout and retention ratio: Drekker, Inc., has revenues of
$312,766, costs of $220,222, interest payment of $31,477, and a
tax rate of 34 percent. It paid dividends of $34,125 to
shareholders. Find the firm's dividend payout ratio and retention
ratio.
85%, 15%
45%, 55%

15. 15%, 85%
55%, 45%
Multiple Choice Question 30
The cash conversion cycle
begins when the firm uses its cash to purchase raw materials
and ends when the firm collects cash payments on its credit
sales.
estimates how long it takes on average for the firm to collect its
outstanding accounts receivable balance.
shows how long the firm keeps its inventory before selling it.
begins when the firm invests cash to purchase the raw materials
that would be used to produce the goods that the firm
manufactures.
Multiple Choice Question 58
You are provided the following working capital information for
the Ridge Company:
Ridge Company
Account
$
Inventory
$12,890
Accounts receivable

16. 12,800
Accounts payable
12,670
Net sales
$124,589
Cost of goods sold
99,630
Cash conversion cycle: What is the cash conversion cycle for
Ridge Company?
129.9 days
46.4 days
83.5 days
38.3 days