FIN623_Assessment Tool Page 1 of 6 Goldey-Beacom College Assessment Survey Corporate Finance (FIN623) Time: 50 minutes Choose the alternative the best answers the question. Du Pont equation 1. The Wilson Corporation has the following relationships: Sales/Total assets 2.0 Return on assets (ROA) 4% Return on equity (ROE) 6% What is Wilson’s profit margin and debt ratio? a. 2% and 0.33 b. 4% and 0.33 c. 4% and 0.67 d. 2% and 0.67 e. 4% and 0.50 P/E ratio and stock price 2. Cleveland Corporation has 100,000 shares of common stock outstanding. The company’s net income is $750,000 and its P/E is 8. What is the company’s stock price? a. $20.00 b. $30.00 c. $40.00 d. $50.00 e. $60.00 ROA 3. The Meryl Corporation's common stock is currently selling at $100 per share, which represents a P/E ratio of 10. If the firm has 100 shares of common stock outstanding, a return on equity of 20 percent, and a debt ratio of 60 percent, what is its return on total assets (ROA)? a. 8.0% b. 10.0% c. 12.0% d. 16.7% e. 20.0% Equity multiplier 4. A firm which has an equity multiplier of 4.0 will have a debt ratio of a. 4.00 b. 3.00 c. 1.00 d. 0.75 e. 0.25 FIN623_Assessment Tool Page 2 of 6 Liquidity ratios 5. Oliver Incorporated has a current ratio = 1.6, and a quick ratio equal to 1.2. The company has $2 million in sales and its current liabilities are $1 million. What is the company’s inventory turnover ratio? a. 5.0 b. 5.2 c. 5.5 d. 6.0 e. 6.3 Profit margin 6. The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that went into this calculation. You are given the following information: total debt/total assets = 0.35 and total assets turnover = 2.8. What is the profit margin? a. 3.48% b. 5.42% c. 6.96% d. 2.45% e. 12.82% PV of an annuity 7. What is the present value of a 5-year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate? a. $ 670.43 b. $ 842.91 c. $1,169.56 d. $1,348.48 e. $1,522.64 Interest rate of an annuity 8. South Penn Trucking is financing a new truck with a loan of $10,000 to be repaid in 5 annual end- of-year installments of $2,504.56. What annual interest rate is the company paying? a. 7% b. 8% c. 9% d. 10% e. 11% Number of periods for an annuity 9. Your subscription to Jogger's World Monthly is about to run out and you have the choice of renewing it by sending in the $10 a year regular rate or of getting a lifetime subscription to the magazine by paying $100. Your cost of capital is 7 percent. How many years would you have to live to make the lifetime subscription the better buy? Payments for the regular subscription are made at the beginning of each year. (Round up if necessary to obtain a whole number of years.) a. 15 years ...