1. Which of the following should be the goal of the financial manager of a corporation?
A.To maximize the number of capital budgeting projects undertaken
B.To maximize net income on the income statement
C.To maximize current market value of the stock
D.To maximize earnings per share


2. Which of the following is considered a noncash expense on the income statement?
A.Income taxes
B.Depreciation
C.Interest expense
D.Wages and salaries
E.Cost of goods sold


3. Use the following balance sheet items to compute net working capital: cash = $110; accounts receivable = $410; inventory = $350; property & equipment = $1,000; accounts payable = $60; short-term debt = $375; and long-term debt = $510.
A.-$590
B.$ 0
C.$100
D.$435
E.$535


4. Calculate net income using the following information: Sales = $135.00; Cost of goods sold = $40.00; Selling, general and administrative expense = $35; Depreciation = $20.00; Interest expense = $20.00; Tax rate = 34%.
A.$ 13.20
B.$ 19.80
C.$ 20.00
D.$ 23.10
E.$ 42.90


5.
Taxable IncomeTax Rate
$ 0 - 50,00015 %
$ 50,001 - 75,00025 %
$ 75,001 - 100,00034 %
$100,001 - 335,00039 %
$335,001 - 10,000,00034 %
$10,000,001 - 15,000,00035 %
$15,000,001 - 18,333,33338 %
$18,333,334 +35 %
R-1 2-1

Taxrate, Inc. reported taxable income of $77,000. Based on this information, the firm's
A.average tax rate was 18.7%
B.average tax rate was 34.0%
C.marginal tax rate was 15.0%
D.marginal tax rate was 25.0%
E.marginal tax rate was 39.0%



6. How much would you have to invest today at 8% compounded annually to have $25,000 to buy a trailer house in 4 years?
A.$18,267.26
B.$18,375.75
C.$19,147.25
D.$21,370.10
E.$22,149.57


7. The ___________ tax rate is the rate that applies if one more dollar of income is earned and the ___________ tax rate is the total tax bill divided by taxable income.
A.marginal; flat
B.marginal; average
C.flat; marginal
D.flat; average
E.average; marginal


8. A bond with a face value of $1,000 has annual coupon payments of $100 and was issued 7 years ago. The bond currently sells for $1,000 and has 8 years left to maturity. This bond's _______________ must be 10%.
I. yield to maturity
II. current yield
III. coupon rate
A.I only
B.I and II only
C.III only
D.II and III only
E.I, II and III


9. A bond with an annual coupon of $100 originally sold at par for $1,000. The current market interest rate on this bond is 9%. Assuming no change in risk, this bond would sell at a _________ in order to compensate ______________.
A.premium; the purchaser for the above market coupon rate
B.discount; the purchaser for the above market coupon rate
C.premium; the seller for the above market coupon rate
D.discount; the seller for the above market coupon rate
E.discount; the issuer for the higher cost of borrowing


10. Dizzy Corp. has bonds outstanding bearing a coupon rate of 15%. The bonds pay coupons semiannually, have two years remaining to maturity, and are currently priced at $980 per bond. What is the yield to maturity on the bonds?
A.15.00%
B.15.99%
C.16.21%
D.16.25%
E.16.57%


11. What would you pay for a share of ABC Corporation stock today if it is going to pay a $2 dividend and be worth $110 in one year? You require a 12% return on your equity investments.
A.$ 95
B.$100
C.$110
D.$115
E.$120


F301 Finance Name______________________
Test # 1, Spring 1999
Division of Business & Economics
Indiana University Northwest

Choose the one one alternative that best completes the statement or answers the
question.




12. AskMe, Inc. had a net fixed asset balance of $6.5 million on January 1, 1996 and $11 million on December 31, 1996. If depreciation for the 12-month period was $750,000, what was the firm's investment in new fixed assets?
A.$3.75 million
B.$4.25 million
C.$4.50 million
D.$5.25 million
E.$6.75 million


13. A firm's balance sheet shows current assets of $95, net fixed assets of $250, long-term debt of $40 and owners equity of $200. What is the value of the firm's current liabilities if they are the only remaining balance sheet item?
A.-$ 50
B.$ 50
C.$105
D.$145
E.$545


14. Your monthly mortgage payment on your house is $593.90. It is a 30 year mortgage at 7.8% compounded monthly. How much did you borrow?
A.$75,000
B.$77,500
C.$80,000
D.$82,500
E.$85,000


15. J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 7%. If the bond has a life of 30 years, pays annual coupons, and the yield to maturity is 6.8%, what will the bond sell for?
A.$975.18
B.$1,000.00
C.$1,025.32
D.$1,087.25
E.$1,111.81


16. Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm's stock at the end of four years (P*B4 ) is
I. D
*B5 /(r - g)
II. P
*B0 (1 + g)*P4
III. D
*B0 (1 + g)/(r - g)
A.I only
B.II only
C.I and II only
D.I and III only
E.I, II, and III


17. Dividends on the common stock of Stable Inc. are expected to grow at a constant rate forever. If you are given Stable's last dividend amount, its dividend growth rate, and a discount rate, you can compute __________.
I. the price today
II. the price at the end of five years from now
III. the dividend that is expected to be paid ten years from now
A.I only
B.I and II only
C.I and III only
D.II and III only
E.I, II, and III


18. What is the future value in 10 years of $1,000 payments received at the beginning of each year for the next 10 years? Assume an interest rate of 5.625%.
A.$12,259.63
B.$12,949.23
C.$13,679.45
D.$14,495.48
E.$14,782.15


19. You are going to withdraw $1,000 at the end of each year for the next three years from an account that pays interest at a rate of 8% compounded annually. How much must there be in the account today in order for the account to reduce to a balance of zero after the last withdrawal?
A.$793.83
B.$2,577.10
C.$2,602.29
D.$2,713.75
E.$2,775.67


20. You are going to withdraw $1,000 at the end of each year for the next three years from an account that pays interest at a rate of 8% compounded annually. The account balance will reduce to zero when the last withdrawal is made. How much interest will you earn on the account over the three year life?
A.$0.00
B.$240.00
C.$422.90
D.$576.24
E.$3,000.00



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