FIN5200 Corporate Finance - A capital intensity ratio of 1.03 means

FIN 5200 AU Corporate Finance Exam Practice

Title: Corporate Finance

#1 A capital intensity ratio of 1.03 means a firm has $1.03 in:

a. sales for every $1 in total assets.

b. total assets for every $1 in sales.

c. equity for every $1 in total debt.

d. long-term assets for every $1 in short-term assets.

e. total debt for every $1 in equity.

#2 A firm has a return on equity of 16.2 percent, a debt-equity ratio of 44 percent, a capital intensity ratio of 1.08, a current ratio of 1.25, and current assets of $138,000. What is the profit margin?

a. 15.19%

b. 9.72%

c. 12.15%

d. 7.48%

e. 13.69%

#3 A firm has sales of $22,400, net income of $3,600, net fixed assets of $18,700, inventory of $2,800, and total current assets of $6,300. What is the common-size statement value of inventory?

a. 9.84%

b. 13.67%

c. 10.07%

d. 12.50%

e. 11.20%

#4 A public firm's market capitalization is equal to the:

a. firm's stock price multiplied by the number of shares authorized.

b. price per share multiplied by number of shares outstanding.

c. total book value of assets less book value of debt.

d. par value of common equity.

e. the maximum value an acquirer would pay for the firm in an acquisition.

#5 A supplier, who requires payment within ten days, should be most concerned with which one of the following ratios when granting credit?

a. total debt

b. quick

c. cash

d. debt-equity

e. current

#6 An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

a. inventory

b. accounts payable

c. cash

d. accounts receivable

e. fixed assets 

#7 Assume BGL Enterprises increases its operating efficiency by lowering its costs while holding its sales constant. As a result, given all else constant, the:

a. return on assets will decrease.

b. equity multiplier will decrease.

c. profit margin will decline.

d. return on equity will increase.

e. price-earnings ratio will increase.

#8

#9 Cado Industries has total debt of $6,800 and a debt-equity ratio of .36. What is the value of the total assets?

a. $25,360

b. $23,520

c. $18,889

d. $25,689

e. $24,480

#10 Catherine's Consulting has net income of $4,400 and total equity of $39,450. The debt-equity ratio is 1 and the plowback ratio is 40 percent. What is the return on assets?

a. 6.24%

b. 5.58%

c. 5.72%

d. 6.09%

e. 5.23%

#11 A 3-year project is expected to produce a cash flow of $82,400 in the first year and $148,600 in the second year. The project has a present value of $303,764.34 at a discount rate of 12.75 percent. What is the expected cash flow in the third year of the project?

a. $163,700

b. $164,400

c. $164,900

d. $163,100

e. $163,800

#12 A car dealer is willing to lease you a car for $319 a month for 60 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9 percent, compounded monthly, what is the current value of the lease?

a. $16,689.54

b. $17,906.14

c. $17,882.75

d. $16,235.42

e. $17,014.34

#13 A credit card compounds interest monthly and has an effective annual rate of 12.67 percent. What is the annual percentage rate?

a. 11.93%

b. 12.35%

c. 12.00%

d. 11.87%

e. 11.99%

#14 A flow of unending and equal payments that occur at regular intervals of time is called a(n):

a. annuity due.

b. perpetuity.

c. indemnity.

d. amortization table.

e. amortized cash flow stream.

#15 A growing perpetuity is currently valued $6,225.81. The next annuity payment will be $386 and the discount rate is 9 percent. What is the annuity’s rate of growth?

a. 2.80%

b. 2.95%

c. 2.50%

d. 3.10%

e. 2.45%

#16  A perpetuity differs from an annuity because:

a. annuity payments occur at irregular intervals of time.

b. perpetuity payments vary with the market rate of interest.

c. perpetuity payments vary with the rate of inflation.

d. perpetuity payments never cease.

e. perpetuity payments are variable while annuity payments are constant.

#17 A project is expected to produce cash flows of $48,000, $39,000, and $15,000 over the next three years, respectively. After three years, the project will be worthless. What is the present value of this project if the applicable discount rate is 15.25 percent?

a. $80,809.09

b. $89,201.76

c. $93,132.48

d. $73,457.96

e. $97,808.17

#18Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first annuity payment made on the date of purchase. What is the value of the annuity on the purchase date given a discount rate of 7 percent?

a. $52,970.07

b. $56,677.98

c. $66,916.21

d. $56,191.91

e. $54,282.98

#19The annual percentage rate:

a. equals the effective annual rate when the interest on an account is designated as simple interest.

b. is higher than the effective annual rate when interest is compounded quarterly.

c. is the actual cost of a loan with monthly payments.

d. is the interest rate charged per period divided by (1 + n), when n is the number of periods per year.

e. considers interest on interest.

#20The net present value of a project is equal to the:

a. present value of the future cash flows minus the initial cost.

b. future value of the future cash flows minus the initial cost.

c. present value of the future cash flows.

d. sum of the project’s anticipated cash flows.

e. future value of the future cash flows minus the present value of the initial cost.