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QNT 351 Complete Course

Business / Economics

3/7/13

Opening Offer: $20.00
Posted by: justhelpstudent
Date Posted: 3/7/13 1:36 PM
Due Date: 12/31/69

QNT 351 Complete CourseQNT 351 Complete CourseQNT 351 Complete CourseQNT 351 Complete Course

QNT 351 Complete Course

Business / Economics

3/7/13

Opening Offer: $22.00
Posted by: justhelpstudent
Date Posted: 3/7/13 1:35 PM
Due Date: 12/31/69

QNT 351 Complete CourseQNT 351 Complete CourseQNT 351 Complete CourseQNT 351 Complete Course

QNT 351 Complete Course

Business / Economics

3/7/13

Opening Offer: $25.00
Posted by: justhelpstudent
Date Posted: 3/7/13 1:31 PM
Due Date: 12/31/69

QNT 351 CompleteQNT 351 Complete CourseQNT 351 Complete Course CourseQNT 351 Complete Course

AED 222 week 1-9 entire course

Business / Economics

3/7/13

Opening Offer: $22.00
Posted by: justhelpstudent
Date Posted: 3/7/13 12:27 PM
Due Date: 12/31/69

AED 222 week 1-9 entire courseAED 222 week 1-9 entire courseAED 222 week 1-9 entire courseAED 222 week 1-9 entire course

AED 222 week 1-9 entire course

Business / Economics

3/7/13

Opening Offer: $18.00
Posted by: justhelpstudent
Date Posted: 3/7/13 12:25 PM
Due Date: 12/31/69

AED 222 week 1-9 entire courseAED 222 week 1-9 entire courseAED 222 week 1-9 entire courseAED 222 week 1-9 entire course

AED 222 week 1-9 entire course

Business / Economics

3/7/13

Opening Offer: $25.00
Posted by: justhelpstudent
Date Posted: 3/7/13 12:24 PM
Due Date: 12/31/69

AED 222 week 1-9 entire courseAED 222 week 1-9 entire courseAED 222 week 1-9 entire courseAED 222 week 1-9 entire course

AED 222 week 1-9 entire course

Business / Economics

3/7/13

Opening Offer: $20.00
Posted by: justhelpstudent
Date Posted: 3/7/13 12:23 PM
Due Date: 12/31/69

AED 222 week 1-9 entire courseAED 222 week 1-9 entire course

AED 222 week 1-9 entire course

Business / Economics

3/7/13

Opening Offer: $20.00
Posted by: justhelpstudent
Date Posted: 3/7/13 12:22 PM
Due Date: 12/31/69

AED 222 week 1-9 entire courseAED 222 week 1-9 entire course

The ruled surface shown in Figure 2 is..

Calculus

3/5/13

Opening Offer: $8.00
Posted by: dukefabio
Date Posted: 3/5/13 1:07 AM
Due Date: 3/4/13

The ruled surface shown in Figure 2 is generated by lin- early blending two parametric curves, a Hermite cubic spline segment G(u) and a line segment Q(u). G(u) is defined by the end-points P0 = [0;0;0]T and P1 = [5;0;0]T and the tangent vectors at these end points P0 0 = [2;2;0]T and P0 1 = [2; 2;0]T . Q(u) is de fined by the start point P2 = [0;0;5]T (u = 0) and the end point P3 = [5;0;5]T (u = 1). De- termine the x, y and z-components of the parametric equation S(u; v) = Sx(u; v); Sy(u; v); Sz(u; v)]T for this surface. Expand the component equa- tions so they are in standard form (ie. a0u 2 v 2 + a1u 2 v + a2u 2 + a3uv2 + a4v 2 + a5uv + a6u + a7v + a8).

MGT 330 Final Exam

Business / Economics

2/27/13

Opening Offer: $25.00
Posted by: prusigor23
Date Posted: 2/27/13 10:03 AM
Due Date: 2/26/13

1) Which of the following functions of management is focused on delivering strategic value?

 

A. Planning

 

B. Organizing

 

C. Leading

 

D. Controlling

 

2) Which of the following best characterizes the controlling function of management?

 

A. Motivating people to be high performers

 

B. Assigning job responsibilities and allocating resources

 

C. Monitoring performance and implementing changes as necessary

 

D. Analyzing current situations and formulating business strategies

 

3) __________ involves analyzing a situation, determining goals to be pursued, and deciding upon the actions that will be taken to achieve these goals.

 

A. Staffing

 

B. Leading

 

C. Organizing

 

D. Planning

 

4) Robert was recently hired as the workplace safety compliance officer at ABC Power Company. Robert will have the responsibility to monitor regulations from which of these government agencies?

 

A. Federal Communications Commission

 

B. Environmental Protection Agency

 

C. National Labor Relations Board

 

D. Occupational Safety and Health Administration

 

5) Which of the following is the first step in effective delegation?

 

A. Give the person the authority needed.

 

B. Define the goal succinctly.

 

C. Select the person to do the task.

 

D. Solicit ideas from subordinates.

 

6) The assignment of different tasks to different people or groups is the

 

A. strategic plan

 

B. organization structure

 

C. division of labor

 

D. value chain

 

7) Plans are

 

A. actions taken to achieve goals

 

B. targets a manager wants to reach

 

C. specific to differing industries

 

D. inappropriate when resources are scarce

 

8) The outcome of situational analysis is

 

A. the identification of alternative plans of action

 

B. the identification of contingency plans to be followed under various scenarios

 

C. the identification of planning assumptions, issues, and problems

 

D. the identification of the consequences of alternatives under consideration

 

9) What is management's function in strategic planning?

 

A. To outline the goals and objectives of the organization

 

B. To give specific directions as to how each department is operated

 

C. To begin the selection and hiring process for the organization

 

D. To set-up tight controls on how each function in the organization is to be structured

 

10) Which of the following would provide the best information for the manager on factors that influence the company's strategic, tactical, operational, and contingency plans?

 

A. Recently released government regulations

 

B. Statistical data regarding market share

 

C. SWOT analysis

 

D. Prior year's financial performance of the company

 

11) __________ plans might be referred to as "what-if" plans.

 

A. Single-use

 

B. Strategic

 

C. Contingency

 

D. Standing

 

12) A plan that focuses on ongoing activities and may become a more permanent policy or rule is a

 

A. standing plan

 

B. single-use plan

 

C. strategy

 

D. mission statement

 

13) Which type of program should management implement to have a culture of ethics that prevent, detect, and punish legal violations?

 

A. Sarbanes-Oxley Act Training

 

B. Ethics program

 

C. Compliance-based ethics program

 

D. Integrity-based ethics program

 

14) Honesty, caring, loyalty, fairness, and integrity are all examples of

 

A. citizenship

 

B. values

 

C. self-focus

 

D. ethics

 

15) As a manager, you want to create a project team to plan and implement a project designed to meet the demands of globalization. Which of the following types of organizational structure would you use to achieve higher degree of flexibility and adaptability of the team members?

 

A. Functional

 

B. Divisional

 

C. Matrix

 

D. Network

 

16) The planning process of human resources management begins with

 

A. determining the number and types of people needed to realize the organization's business plans

 

B. recruiting individuals who will assist the organization to realize its business plans

 

C. training people who will assist the organization to realize its business plans

 

D. evaluating an organization's present employees and their capabilities to fulfill the organization's business plans

 

17) Which type of organizational structure optimizes employee empowerment?

 

A. Centralized

 

B. Decentralized

 

C. Functional

 

D. Divisional

 

18) The assignment of different tasks to different people or groups is the

 

A. strategic plan

 

B. organization structure

 

C. division of labor

 

D. value chain

 

19) Which of the following is an advantage of product departmentalization?

 

A. Information needs managed more easily

 

B. Suitable for stable environments

 

C. Efficient resource utilization

 

D. Decision making and lines of communication are simple

 

20) Ruby recently accepted a job with a large insurance firm as an internal auditor. Ruby has found that her job is different than the internship she had at an accounting consulting firm. The insurance firm has strictly defined job responsibilities and lines of communication. For every decision Ruby needs to make, approval must be obtained from upper management. Overall, she has found the atmosphere to be quite formal as compared to the internship. Ruby has concluded that the insurance firm has

 

A. a high degree of centralization

 

B. decentralized authority

 

C. a matrix design

 

D. an ineffective structure

 

21) A mental image of a possible and desirable future state of the organization is a(n)

 

A. strategic plan

 

B. operational plan

 

C. goal

 

D. vision

 

22) A leader is

 

A. someone with authority over others

 

B. the top-level manager in a firm or business

 

C. a strategic-level manager

 

D. someone who influences others to attain goals

 

23) Legitimate power is described as power that exists through

 

A. control over punishments

 

B. control over rewards

 

C. the authority to tell others what to do

 

D. having expertise

 

24) Behavior that gives purpose and meaning to organizations, while envisioning and creating a positive future, is

 

A. supervisory leadership

 

B. strategic leadership

 

C. charismatic leadership

 

D. task-motivated leadership

 

25) NAFTA combined the economies of

 

A. the U.S., Canada, and Mexico

 

B. Canada, Mexico, and South America

 

C. South America, the U.S., and Latin America

 

D. Latin America, Pacific Rim, and the European Union

 

26) A pharmaceutical manufacturer actively monitors all products produced to verify their ingredients fall within rigid control ranges that ensure product effectiveness. This monitoring allows them to make adjustments should they see negative trends occurring. The manufacturer is engaging in the management function of

 

A. planning

 

B. controlling

 

C. quality assurance

 

D. regulatory compliance

 

27) Which type of control works best when there is "no one best way" to do a job and employees are empowered to make decisions?

 

A. Bureaucratic control

 

B. Market control

 

C. Clan control

 

D. Performance control

 

28) This type of control takes place while plans are carried out, and is the heart of any control system.

 

A. Feedback control.

 

B. Concurrent control

 

C. Feed forward control

 

D. Market control

 

29) Where are performance data commonly obtained?

 

A. Oral and written reports and personal observation

 

B. Supervisors, line managers, and coworkers

 

C. Top, middle, and lower management

 

D. Competitors

 

30) The last step in the control process is

 

A. taking corrective action

 

B. setting performance standards

 

C. measuring performance

 

D. comparing performance

 

MGT 230 Final Exam

Business / Economics

2/27/13

Opening Offer: $25.00
Posted by: prusigor23
Date Posted: 2/27/13 9:58 AM
Due Date: 2/26/13

1) Planning involves which of the following?

A. Analyzing current situations

B. Determining rewards for goals achievement

C. Motivating employees

D. Implementing necessary changes

 

2) _______ is specifying the goals to be achieved and deciding in advance the appropriate actions needed to achieve those goals.

A. Staffing

B. Leading

C. Organizing

D. Planning

 

3) Advances in genetic engineering and biotechnology are expected to produce some food products that will become available year-round even in northern climates. These changes will provide grocers with an opportunity to reduce their shipping costs while at the same time, offering fresher produce to their customers. These advances are an example of changes in the

A. technological environment

B. economic environment

C. political environment

D. ecological environment

 

4) _________ trends regarding how people think and behave have major implications for management of the labor force, corporate social actions, and strategic decisions about products and markets.

A. Psychological

B. Economic

C. Technological

D. Societal

 

5) Which of the following is a step in the decision-making process?

A. Generating an idea

B. Good business planning

C. Evaluating the decision

D. Delegating a task

 

6) Which is a step in the decision-making process?

A. Resolving and reducing conflict

B. Making the choice

C. Using the lack of structure

D. Delegating a task

 

7) The targets or ends the manager wants to reach are called

A. goals

B. missions

C. visions

D. strategies

 

8) In the _______________ stage of the planning process, managers should weigh the advantages, disadvantages, and potential effects of each alternative goal and plan.

A. goal and plan evaluation

B. goal and plan selection

C. implementation

D. alternate goals and plans

 

9) Tactical planning would include which of the following?

A. Profit goals

B. Design, test, and install the equipment needed to produce a new product line

C. Human resources requirements

D. Return on investment

 

10) The internal analysis component of the strategic management process assesses the organization's

A. performance levels

B. competitors

C. industry growth rate

D. product substitutions in the market

 

11) Eagle Manufacturing, Inc., is in the middle of its first day of the senior management retreat. The topic on the agenda is corporate social responsibility (CSR). Most of the group has seen this brought up before and then shot down because it generally costs Eagle's shareholders in the form of a lower stock price. But the new VP of Ethics, Gloria Wright, is about to explain why she believes CSR will actually benefit the shareholders and Eagle management alike. Her team begins the presentation with a discussion of CSR—its current definition and reconciliation of past views. Jeremiah then discusses the importance of being a good global corporate citizen by supporting the local school system. Ellen takes the floor to make the case for doing what is expected by global stakeholders even though there are no

laws requiring those actions. Finally Gloria wraps the discussion up with why Eagle should take legal and economic responsibility for the firm's performance. To Gloria's team's credit, senior management does appear to buy into the pyramid of global corporate social responsibility and performance that her team just presented.

Ellen's presentation most likely focused on the __________ responsibility of the firm.

A. economic

B. legal

C. ethical

D. social

 

12) Eagle Manufacturing, Inc., is in the middle of its first day of the senior management retreat. The topic on the agenda is corporate social responsibility (CSR). Most of the group has seen this brought up before and then shot down because it generally costs Eagle's shareholders in the form of a lower stock price. But the new VP of Ethics, Gloria Wright, is about to explain why she believes CSR will actually benefit the shareholders and Eagle management alike. Her team begins the presentation with a discussion of CSR—its current definition and reconciliation of past views. Jeremiah then discusses the importance of being a good global corporate citizen by supporting the local school system. Ellen takes the floor to make the case for doing what is expected by global stakeholders even though there are no

laws requiring those actions. Finally Gloria wraps the discussion up with why Eagle should take legal and economic responsibility for the firm's performance. To Gloria's team's credit, senior management does appear to buy into the pyramid of global corporate social responsibility and performance that her team just presented.

Gloria's team's presentation focused on the pyramid of global corporate social responsibility. To do what is desired by global stakeholders correlates with the _______ component of the pyramid.

A. philanthropic

B. ethical

C. legal

D. economic

 

13) In the study by Lawrence and Lorsch, companies in complex, dynamic environments developed _____ levels of differentiation; and

_____ levels of integration.

A. low; low

B. high; high

C. low; high

D. high; low

 

14) An aspect of the organization's internal environment created by job specialization and the division of labor is called

A. differentiation

B. integration

C. division of labor

D. specialization

 

15) An organization with departmentalization that groups units around products, customers, or geographic regions is called a

A. divisional organization

B. centralized organization

C. matrix organization

D. functional organization

 

16) Which of the following statements about matrix organizations is true?

A. A matrix organization is the same as a functional organization.

B. A matrix organization is the same as a product organization.

C. A matrix organization is a hybrid of the functional and divisional organizational forms.

D. A matrix organization is considered out-of-date compared to the organic organization.

 

17) An organization with departmentalization that groups units around products, customers, or geographic regions is called a

A. centralized organization

B. matrix organization

C. virtual organization

D. divisional organization

 

18) Sports International (SI) began business by making shoes for athletes. They soon expanded into making shoes for non-athletic purposes. They now manufacture and distribute clothing, sporting equipment, and protective sports gear worldwide. They are departmentalized by products sold to serious athletes, products sold to "weekend" athletes and products sold to sports teams. SI has

utilized which form of departmentalization?

A. Geographic

B. Customer

C. Functional

D. Matrix

 

19) The trait known as leadership motivation suggests that great leaders

A. can motivate others to work hard

B. can motivate others to become leaders

C. can motivate others to join

D. want to lead

 

20) A leadership perspective that attempts to identify what effective leaders do and the behaviors they exhibit is referred to as the

A. behavioral approach

B. trait approach

C. transformational leadership

D. strategic approach

 

21) __________ leadership invites colleagues at the same level to solve problems together.

A. Horizontal

B. Collegial

C. Lateral

D. Linear

22) Leaders who relate to others to serve their needs and enhance their personal growth while strengthening the organization are known as

A. lateral leaders

B. shared leaders

C. bridge leaders

D. servant-leaders

 

23) A shift in worker values toward personal time, quality of life, self-fulfillment, and family is occurring among

A. men

B. women

C. women and men

D. minorities

 

24) Future trends in the labor force include a

A. smaller labor force

B. more experienced labor force

C. more homogenous labor force

D. younger labor force

 

25) Behavior that gives purpose and meaning to organizations, while envisioning and creating a positive future, is known as

A. strategic leadership

B. supervisory leadership

C. organizational leadership

D. task leadership

 

26) The correspondence between actions and words that include characteristics such as honesty and credibility is known as

A. drive

B. self-confidence

C. knowledge of the business

D. integrity

 

27) Owners from two businesses have asked you which type of control system they should utilize. To help you make your decision, they have each provided a brief description of their organization. Alpha Omega, Inc., is a large corporation built in the 1950s. They produce chemical concentrates for industrial cleaning. Their organization uses a strict set of rules and regulations with their workforce. They have

the ability to track a large amount of data using statistical techniques. Mid-Atlantic Health is a regional medical center. They want to use a control system that will allow them to tie pricing of services and profits to specific services in the medical center. The control systems that should be used in the scenarios above were developed by

A. William Ouchi

B. Xerox

C. Frederick Taylor

D. Motorola

 

28) Your manager is speaking to a group of employees about a problem in your department. Employees are not complying with the rules regarding clocking in and clocking out each day. The rules in this situation are very important as employees will not receive their correct pay if the clocking procedures are not followed. There are three suggestions being considered to address this problem.

Employees will be monitored at the entrance during shift changes to make sure that each complies with the procedure.

Reports will be reviewed at the end of each pay period. The reports will contain data tracking the number of employees not complying with the procedures each shift. Employees violating the procedure will be counseled to correct the problem.

A new procedure will be developed describing an easier procedure for employees to follow. Training will be conducted so that each employee knows the policy and the procedure before it is enacted.

Option 1 describes which approach to bureaucratic control?

A. Feedback

B. Concurrent

C. Feedforward

D. Market

 

29) Suppose you are interviewing the CEO of a large company. The CEO is telling you about his or her job as a manager and how he or she spends time. Using the description below, which function of management is the CEO most likely describing in this example?

"My job, for some part of each day, is to empower our employees to think of things in new and different ways, not just to come to work and complete the tasks on a list."

A. Organizing

B. Leading

C. Controlling

D. Decision making

 

30) Suppose you are interviewing the CEO of a large company. The CEO is telling you about his or her job as a manager and how he or she spends time. Using the description below, which function of management is the CEO most likely describing in this example?

"Every six months or so, my senior management team and I meet to discuss the goals that will be achieved over the next year, three years, and beyond. We then make sure we are clear on who will take responsibility to see that the appropriate actions are undertaken to achieve our goals within the time frame we set."

A. Planning

B. Organizing

C. Leading

D. Decision making

 

ACC 561 Final Exam

Business / Economics

2/27/13

Opening Offer: $20.00
Posted by: prusigor23
Date Posted: 2/27/13 9:52 AM
Due Date: 2/26/13

1The statement of cash flows is used for all of the following except_____.

A. evaluating the creditworthiness of the organization 

B. determining a company's ability to pay its debts when they are due

C. showing the relationship of net income to changes in cash

D. revealing commitments that may restrict future courses of action


2) Nonoperating items on the income statement _____.

A. are revenues and expenses arising from adjusting entries
B. include interest income and expense
C. appear only on corporate income statements
D. appear on the income statement immediately after gross profit 

3) The difference between a single-step and multiple-step income statement is that a single-step income statement _____.

A. groups all revenues together and all expenses together, whereas a multiple-step income statement separates certain revenues and expenses from each other and presents subtotals
B. calculates net income using one method, whereas a multiple-step income statement calculates net income using two or more methods
C. calculates gross profit and operating income, whereas a multiple-step income statement does not
D. shows only 1 year's net income, whereas a multiple-step income statement shows multiple years' net income 

4) Which one of the following statements is true?

A. The statement of cash flows reports the cash receipts but not cash payments of an entity over a period of time.
B. Both the statement of cash flows and the income statement determine the net income for a company.
C. Transactions affecting the sale and the purchase or production of goods and services are reported in the financing activities section of the statement of cash flows.
D. Investing activities in the statement of cash flows include acquiring and selling long-term assets. 

5) The _____ accounting convention uses the acquisition cost minus depreciation in valuing an asset on the balance sheet.

A. continuity
B. conservatism
C. cost-benefit
D. materiality 

6) A new corporation issuing a common, no-par value stock for cash would include a journal entry a debit to _____.

A. paid-in capital and a credit to retained earnings.
B. cash and a credit to common stock.
C. retained earnings and a credit to cash.
D. cash and a credit to retained income. 

7) Which type of organization would most likely have work-in-process inventory?

A. A retail store
B. A manufacturing company
C. A service organization
D. A real-estate investment trust 

8) _____ is a measure of income or profit divided by the investment required to obtain that income or profit.

AA. Return on sales
B. Capital turnover
C. Return on investment
D. Residual income

9) The following information is available for the Peter Company:

Sales: $150,000

Invested capital: $156,250

ROI: 10%

The return on sales is _____.

A. 10.00%
B. 10.42%   (156250*10%=15625) 15625/150000*100=10.42%
C. 62.50%
D. 9.60% 

10) The following information is available for the Peter Company:

Sales: $500,000

Invested capital: $312,500

ROI: 10%

The return on sales is _____.

A. 10.00%
B. 6.250%
C. 1.000%
D. 62.50% 

11) Company A's revenues are $300 on invested capital of $240. Expenses are currently 70% of sales. If Angelo Company can reduce its capital investment by 20% in Company A, return on investment will be _____.

A. 75% B. 93.75% C. 18.75% D. 46.88%

12) When the variable costing method is used, fixed factory overhead appears on the income statement as a _____.

A. component of cost of goods sold

B. fixed expense C. production-volume variance D. component of gross profit

13) In absorption costing, costs are separated into the major categories of _____.

A. manufacturing and nonmanufacturing B. manufacturing and fixed C. fixed and variable D. variable and nonmanufacturing

14) _____ is another term for variable costing.

A. Full costing B. Direct costing C. Traditional costing D. Absorption costing

15) Budgeted service department cost rates protects the user departments from _____.

A. service department efficiencies 

B. price fluctuations C. service outages D. employee control

16) _____ is an example of the external financial-reporting purpose of the cost management systems.

A. The cost of a manufacturing process B. The product mix to optimize profitability C. The amount of inventory that should appear on the balance sheet

D. Budget reporting

17) The level of sales at which revenues equal expenses and net income is zero is called the _____.

A. margin of safety B. contribution margin C. break-even point D. marginal income point

18) Output measures of both resources and activities are _____.

A. cost drivers B. stages of production

C. fixed activities D. variable activities

19) The break-even point is where _____.

A. total sales revenue equals total cost plus desired profit. B. the contribution margin equals net income plus fixed costs.

C. total sales revenue equals total cost. D. the variable cost equals total cost.

20) _____ budgeting is when budgets are formulated with the active participation of all affected employees.

A. Financial B. Team C. Participative

D. Shared

21) _____ is the logical integration of management accounting tools to gather and report data and to evaluate performance.

A. An internal control system B. A quality control system

C. A financial-reporting system D. A management control system

22) _____ are components of a master budget.

A. A strategic plan and an operating budget B. An operating budget and a capital budget

C. A continuous budget and a static budget D. A cash budget and an activity budget

23) An important factor considered by sales forecasters is _____.

A. production employee requirements. B. expectations of the board of directors.

C. competitors' activities. D. the desired level of sales.

24) _____ models are mathematical models of the master budget that can react to any set of assumptions about sales, costs, and product mix.

A. Variance analysis B. Financial planning C. Accounting D. Futuring

25) Which of the following is an objective of budgeting?

A. Budgeting provides benchmarks against which performance can be measured. B. Budgeting provides a fixed fiscal plan that should not be changed during the year. C. Budgeting helps managers build favorable variances into the performance-evaluation process.

D. Budgeting is done exclusively by the chief fiscal officer for control purposes.

26) An organization's budget program should be used

A. to have power over employees. B. to assign blame to managers that do not meet budgetary goals. C. to help managers plan and control the organization's performance. D. to help the chief fiscal officer to allocate resources to the favored projects of the executives.

27) The activity-based costing may reveal _________, whereas traditional costing cannot.

A. high-volume products are overcosted B. low-volume products are overcosted C. both high- and low-volume products are overcosted D. both high- and low-volume products are undercosted

28) _____ is a method of approximating cost functions.

A. Cost-driver analysis B. Transaction analysis C. Product analysis D. Account analysis

29) In relation to a cost function, the term reliability refers to _____.

A. whether the costs and activities can be easily observed B. whether the cost function conforms to a given mathematical model

C. how well the cost function predicts future costs

D. how well the cost function explains past cost behavior

30) One of the simplest methods to measure a linear cost function from past data is the _____.

A. regression analysis method B. high–low method C. least squares regression method

D. visual-fit method

 

ACC 561 Final Exam 54questions A+

Business / Economics

2/27/13

Opening Offer: $25.00
Posted by: prusigor23
Date Posted: 2/27/13 9:47 AM
Due Date: 2/26/13

1) Department performance reports can be used to help department heads determine _____. A. who is primarily responsible for any deviations from plans B. how effectively and efficiently the department is operating C. how effectively the department is operating D. how efficiently the department is operating

2) Budgets _____. A. ignore areas that are presumed to be running smoothly B. are deviations from a plan C. are quantitative expressions of action plans D. provide feedback by comparing results with plans and by highlighting deviations from plans

3) Performance reports _____. A. ignore areas that are presumed to be running smoothly B. are deviations from a plan C. are quantitative expressions of action plans D. provide feedback by comparing results with plans and by highlighting deviations from plans

4) According to the Institute of Management Accountants' Statement of Ethical Professional Practice, the standard of competence includes: A. the ongoing development of the accountant's knowledge and skills B. All of these answers are correct C. disclosing all relevant information D. avoiding actual or apparent conflicts of interest

5) Which of the following is not a major factor causing changes in management accounting today? A. Declining work ethic is not a major factor. B. Increasing importance of the service sector of the economy is not a major factor. C. E-commerce is not a major factor. D. Increased global competition is not a major factor.

6) Ethical accountants are important to society because _____. A. they pay their taxes B. none of these answers is correct C. they will not go to prison and waste taxpayers' money D. the information produced is reliable

7) The primary users of management accounting information are _____. A. bankers B. suppliers C. internal decision makers D. governmental regulatory authorities

8) _____ is (are) the accounting system's effect on the decision of managers. A. Simplicity B. Computerization C. The cost-benefit balance D. Behavioral implications

9) _____ is the field of accounting that develops information for external decision makers such as stockholders, suppliers, banks, and government regulatory agencies. A. Auditing B. Financial accounting C. Management accounting D. Tax accounting

10) The _____ is also called the statement of financial position. A. income statement B. statement of cash flows C. statement of retained earnings D. balance sheet

11) _____ would not appear on the financial statements for a sole proprietorship. A. Paid-in Capital B. Unearned Sales Revenues C. Accumulated Depreciation D. Cost of Goods Sold

12) Etiwanda Company's accountant recorded a debit to Accounts Payable and a credit to Cash. This transaction will_____. A. increase Cash and decrease Accounts Payable B. decrease Cash and decrease Accounts Payable C. increase Cash and increase Accounts Payable D. decrease Cash and increase Accounts Payable

13) The use of acquisition cost less depreciation in valuing an asset on the balance sheet is the logical result of the _____ accounting convention. A. continuity B. materiality C. cost-benefit D. conservatism

14) The accounting convention of _____ permits a company to immediately expense assets (such as a garbage can) with small values and long useful lives. A. objectivity B. conservatism C. materiality D. continuity

15) The accounting convention of _____ guides the relative sophistication of the accounting system. A. conservatism B. materiality C. objectivity D. cost benefit

16) Limited liability means that_____. A. the company is required to pay only current liabilities in the current year and has no obligation to pay long term liabilities in the current year B. corporations can have liabilities up to only a certain amount due to limits on the company's borrowing capability C. the creditors of the corporation have claims on only the assets of the corporation and not the assets of the owners of the corporation D. the creditors of a corporation can receive only up to, and no more than, the amount due to them

17) The Rebecca Company acquired merchandise inventory costing $10,000 on September 1. The company will not pay for the inventory until October 1. This transaction will affect the Rebecca Company by increasing the Merchandise Inventory account by $10,000 and _____. A. increasing the Capital account by $10,000 B. decreasing the Capital account by $10,000 C. increasing the Accounts Payable account by $10,000 D. decreasing the Accounts Payable account by $10,000

18) Nonoperating items on the income statement_____. A. appear only on corporate income statements B. appear on the income statement immediately after gross profit C. are revenues and expenses arising from adjusting entries D. reflect the effects of financial management decisions

19) Which value chain function would include the cost of computer-aided design equipment and cost to develop the prototype of a product? A. The production function would include these costs. B. The marketing function would include these costs C. The distribution function would include these costs. D. The design of product, services, and processes function would include these costs.

20) Which of the following is not a cost driver of customer services costs? A. Number of service calls is not a cost driver of customer services costs. B. All of these answers are correct C. Hours spent servicing products are not a cost driver of customer services costs. D. Travel costs are not a cost driver of customer services costs.

21) Which value chain function would include advertising costs? A. The production function would include advertising costs. B. The marketing function would include advertising costs. C. The distribution function would include advertising costs. D. The customer service function would include advertising costs.

22) Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor. If total fixed costs are $435,000, then the break even volume in dollars is _____. A. $621,429 B. $435,000 C. $1,450,000 D. $1,023,529

23) Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed costs for the period are $456,840. The contribution margin per desk is _____. A. $51 B. $126 C. $195 D. $108

24) Knothole Company sells desks at $480 per desk. The costs associated with each desk are as follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed costs for the period are $456,840. The break-even volume in dollars is _____. A. $2,030,400 B. none of these answers is correct C. $456,840 D. $1,573,560

25) Managers should apply two principles to obtain accurate and useful cost functions. These principles are ____. A. reliability and validity B. believability and validity C. plausibility and believability D. plausibility and reliability

26) The _____ method of measuring cost functions is the least reliable. A. high low B. simple least squares regression C. multiple least squares regression D. visual fit

27) In relation to a cost function, the term reliability means_____. A. whether the costs and activities can be easily observed B. how well the cost function predicts future costs C. how well the cost function explains past cost behavior D. whether the cost function conforms to a given mathematical model

28) The change from traditional costing to activity-based costing may reveal that _____. A. high volume products are overcosted B. both high and low volume products are overcosted C. both high and low volume products are undercosted D. low volume products are overcosted

29) _____ is a name for a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity. A. Activity based costing B. Transaction based accounting C. Transaction costing D. Cost driver accounting

30) _____ need cost accounting systems. A. Manufacturing firms and service organizations B. Manufacturing firms and nonprofit organizations C. Manufacturing firms, service organizations, and nonprofit organizations D. Service organizations and nonprofit organizations

31) _____ models are mathematical models of the master budget that can react to any set of assumption about sales, costs, and product mix. A. Budgeting analysis B. Accounting C. Futuring D. Financial planning

32) A sales forecast is _____. A. a prediction of sales under a given set of conditions B. the same as a sales budget that will generate a desired level of sales C. all of these answers are correct D. the result of decisions to create conditions 33) A _____ gives the expected sales under a given set of conditions. A. sales prediction B. budget forecast C. sales forecast D. sales budget

34) Important factors considered by sales forecasters include all of the following except _____. A. past patterns of sales B. competitors' activities C. the desired level of sales D. marketing research studies

35) A _____ gives the expected sales under a given set of conditions. A. sales prediction B. budget forecast C. sales forecast D. sales budget

36) A sales forecast is _____. A. a prediction of sales under a given set of conditions B. the same as a sales budget that will generate a desired level of sales C. all of these answers are correct D. the result of decisions to create conditions

37) _____ probably would not be used as a measure of activity in a flexible budget. A. Sales volume B. Number of machine hours used C. Number of hours worked by salespeople D. Number of direct labor hours worked

38) _____ are components of a master budget. A. A continuous budget and a static budget B. An operating budget and a financial budget C. A strategic plan and an operating budget D. A cash budget and an activity budget

39) The master budget quantifies targets for all of the following except _____. A. markets B. production C. sales D. cost driver activity

40) Costs are allocated for all the following purposes except to _____. A. determine inventory levels B. obtain reimbursement C. predict the economic effects of planning and control decisions D. compute income and asset valuation

41) _____ is not a type of cost allocation. A. Allocation of costs of a particular organizational unit to products or services B. Reallocation of costs from service departments to production departments C. Allocation of costs to the appropriate organizational unit D. Reallocation of costs from production departments to service departments

42) The preferred guidelines for allocating service department costs include _____. A. establishing part or all of the details regarding cost allocation in advance of rendering the service B. evaluating performance using allocated costs for each service department C. identifying the direct and indirect costs D. allocating variable- and fixed-cost pools simultaneously

43) Gomez Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year _____. Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Mixing is: A. $36,000 B. $42,750 C. $42,000 D. $63,000

44) Serena Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Finishing is _____. A. $57,000 B. $31,500 C. $42,750 D. $47,250

45) Martinez Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $50,400 $33,600 $42,000 $5,600 Square footage 1,600 800 3,200 2,400 Number of employees 16 24 48 64 If the step down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Personnel to Maintenance is _____. A. $3,539 B. $4,200 C. $4,998 D. $0

46) factory overhead appears on the absorption-costing income statement as_____. A. a production volume variance B. part of cost of goods sold C. a fixed expense D. part of cost of goods sold and as a production volume variance

47) In absorption costing, costs are separated into the major categories of_____. A. fixed and variable B. manufacturing and fixed C. manufacturing and nonmanufacturing D. variable and nonmanufacturing

48) Absorption costing assigns _____ to the product. A. variable and fixed manufacturing costs B. all variable costs C. variable manufacturing costs D. all fixed and variable costs

49) Identify which of the following is not a characteristic of a management control system. A. A management control system aids and coordinates the process of making decisions. B. A management control system motivates individuals throughout the organization to act in concert. C. A management control system encourages short term profitability. D. A management control system coordinates forecasting sales and cost driver activities, budgeting, and measuring and evaluating performance.

50) _____ is (are) the most basic component of a management control system. A. The organization's long-range budget B. The stockholder's preferences C. The organization's goals D. Top management's preferences

51) _____ is the first step in designing a management control system. A. Evaluating management's performance B. Preparing financial statements C. Establishing organizational goals D. Distinguishing between profit centers and cost centers

52) Speedo Company's revenues are $300 on invested capital of $240. Expenses are currently 70% of sales. If Angelo Company can reduce its invested capital by 20%, return on investment will be _____. A. 75% B. 18.75% C. 93.75% D. 46.88%

53) Jewel Company's revenues are $300 and invested capital is $240. Expenses are currently 60% of sales. Jewel Company's current return on investment is _____. A. 50% B. 80% C. 100% D. none of these answers are correct

54) The following information is available for the Peter Company: Sales $150,000 Invested Capital 156,250 ROI 10% The return on sales is _____. A. 10.00% B. 62.50% C. 10.42% D. none of these answers is correct

 

FIN 534 quiz 8 week 9

Business / Economics

2/26/13

Opening Offer: $22.99
Posted by: orchid
Date Posted: 2/26/13 9:44 AM
Due Date: 2/25/13

.Question 1

Which of the following statements is correct?

Answer

One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.

If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should not

follow the strict residual dividend policy.

If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.

If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase their dividend payout ratios.

Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.

2 points

Question 2

In the real world, dividends

Answer

are usually more stable than earnings.

fluctuate more widely than earnings.

tend to be a lower percentage of earnings for mature firms.

are usually changed every year to reflect earnings changes, and these changes are randomly higher or lower, depending on whether earnings increased or decreased.

are usually set as a fixed percentage of earnings, e.g., at 40% of earnings, so if EPS = $2.00, then DPS will equal $0.80. Once the percentage is set, then dividend policy is on "automatic pilot" and the actual dividend depends strictly on earnings.

2 points

Question 3

Which of the following statements is correct?

Answer

Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.

One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.

An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.

If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price.

Stock repurchases make the most sense at times when a company believes its stock is undervalued.

2 points

Question 4

If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

Answer

the dividend payout ratio has remained constant.

the dividend payout ratio is increasing.

no dividends were paid during the year.

the dividend payout ratio is decreasing.

the dollar amount of investments has decreased.

2 points

Question 5

You own 100 shares of Troll Brothers' stock, which currently sells for $120 a share. The company is contemplating a 2-for-1 stock split. Which of the following best describes what your position will be after such a split takes place?

Answer

You will have 200 shares of stock, and the stock will trade at or near $120 a share.

You will have 200 shares of stock, and the stock will trade at or near $60 a share.

You will have 100 shares of stock, and the stock will trade at or near $60 a share.

You will have 50 shares of stock, and the stock will trade at or near $120 a share.

You will have 50 shares of stock, and the stock will trade at or near $60 a share.

2 points

Question 6

If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio), then the firm should pay

Answer

no dividends except out of past retained earnings.

no dividends to common stockholders.

dividends only out of funds raised by the sale of new common stock.

dividends only out of funds raised by borrowing money (i.e., issue debt).

dividends only out of funds raised by selling off fixed assets.

2 points

Question 7

Which of the following statements is correct?

Answer

Under the tax laws as they existed in 2008, a dollar received for repurchased stock must be taxed at the same rate as a dollar received as dividends.

One nice feature of dividend reinvestment plans (DRIPs) is that they reduce the taxes investors would have to pay if they received cash dividends.

Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce an increase in the dividend, and as a result share prices fall when dividend increases are announced. The reason is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities.

If a company wants to raise new equity capital rather steadily over time, a new stock dividend reinvestment plan would make sense. However, if the firm does not want or need new equity, then an open market purchase dividend reinvestment plan would probably make more sense.

Dividend reinvestment plans have not caught on in most industries, and today about 99% of all companies with DRIPs are utilities.

2 points

Question 8

Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?

Answer

Its earnings become more stable.

Its access to the capital markets increases.

Its R&D efforts pay off, and it now has more high-return investment opportunities.

Its accounts receivable decrease due to a change in its credit policy.

Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages.

2 points

Question 9

Firm M is a mature firm in a mature industry. Its annual net income and net cash flows are both consistently high and stable. However, M's growth prospects are quite limited, so its capital budget is small relative to its net income. Firm N is a relatively new firm in a new and growing industry. Its markets and products have not stabilized, so its annual operating income fluctuates considerably. However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct?

Answer

Firm M probably has a lower debt ratio than Firm N.

Firm M probably has a higher dividend payout ratio than Firm N.

If the corporate tax rate increases, the debt ratio of both firms is likely to decline.

The two firms are equally likely to pay high dividends.

Firm N is likely to have a clientele of shareholders who want to receive consistent, stable dividend income.

2 points

Question 10

Which of the following statements is correct?

Answer

One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their ownership in the company.

One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.

Stock repurchases can be used by a firm that wants to increase its debt ratio.

Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years, provided investors are aware of these investment opportunities.

One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.

2 points

Question 11

Which of the following should not influence a firm's dividend policy decision?

Answer

The firm's ability to accelerate or delay investment projects.

A strong preference by most shareholders for current cash income versus capital gains.

Constraints imposed by the firm's bond indenture.

The fact that much of the firm's equipment has been leased rather than bought and owned.

The fact that Congress is considering changes in the tax law regarding the taxation of dividends versus capital gains.

2 points

Question 12

Which of the following statements is correct?

Answer

If a firm repurchases some of its stock in the open market, then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.

An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.

Stock repurchases tend to reduce financial leverage.

If a company declares a 2-for-1 stock split, its stock price should roughly double.

One advantage of adopting the residual dividend policy is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.

2 points

Question 13

Which of the following statements is NOT correct?

Answer

Stock repurchases can be used by a firm as part of a plan to change its capital structure.

After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise.

Investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.

Companies can repurchase shares to distribute large inflows of cash, say from the sale of a division, to stockholders without paying cash dividends.

Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.

2 points

Question 14

Which of the following actions will best enable a company to raise additional equity capital?

Answer

Refund long-term debt with lower cost short-term debt.

Declare a stock split.

Begin an open-market purchase dividend reinvestment plan.

Initiate a stock repurchase program.

Begin a new-stock dividend reinvestment plan.

2 points

Question 15

Which of the following statements is correct?

Answer

The tax code encourages companies to pay dividends rather than retain earnings.

If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.

The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.

Large stock repurchases financed by debt tend to increase earnings per share, but they also increase the firm's financial risk.

A dollar paid out to repurchase stock is taxed at the same rate as a dollar paid out in dividends. Thus, both companies and investors are indifferent between distributing cash through dividends and stock repurchase programs.

2 points

Question 16

Based on the information below, what is Ezzel Enterprises' optimal capital structure?

Answer

Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50.

Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90.

Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20.

Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40.

Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00.

2 points

Question 17

Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?

Answer

An increase in the corporate tax rate.

An increase in the personal tax rate.

An increase in the company's operating leverage.

The Federal Reserve tightens interest rates in an effort to fight inflation.

The company's stock price hits a new high.

2 points

Question 18

If debt financing is used, which of the following is CORRECT?

Answer

The percentage change in net operating income will be greater than a given percentage change in net income.

The percentage change in net operating income will be equal to a given percentage change in net income.

The percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.

The percentage change in net income will be greater than the percentage change in net operating income.

The percentage change in sales will be greater than the percentage change in EBIT, which in turn will be greater than the percentage change in net income.

2 points

Question 19

Which of the following statements is CORRECT? As a firm increases the operating leverage used to produce a given quantity of output, this will

Answer

normally lead to an increase in its fixed assets turnover ratio.

normally lead to a decrease in its business risk.

normally lead to a decrease in the standard deviation of its expected EBIT.

normally lead to a decrease in the variability of its expected EPS.

normally lead to a reduction in its fixed assets turnover ratio.

2 points

Question 20

Business risk is affected by a firm's operations. Which of the following is NOT associated with (or does not contribute to) business risk?

Answer

Demand variability.

Sales price variability.

The extent to which operating costs are fixed.

The extent to which interest rates on the firm's debt fluctuate.

Input price variability.

2 points

Question 21

Firms U and L each have the same amount of assets, and both have a basic earning power ratio of 20%. Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity. Firm L's debt has a before-tax cost of 8%. Both firms have positive net income. Which of the following statements is CORRECT?

Answer

The two companies have the same times interest earned (TIE) ratio.

Firm L has a lower ROA than Firm U.

Firm L has a lower ROE than Firm U.

Firm L has the higher times interest earned (TIE) ratio.

Firm L has a higher EBIT than Firm U.

2 points

Question 22

Which of the following statements is CORRECT, holding other things constant?

Answer

Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs, hence they tend to use relatively little debt.

An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.

If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.

An increase in the company's degree of operating leverage is likely to encourage a company to use more debt in its capital structure.

An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.

2 points

Question 23

Which of the following statements is CORRECT?

Answer

Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC.

Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC.

Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing. However, this action still may raise the company's WACC.

Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing. However, this action still may lower the company's WACC.

Since a firm's beta coefficient it not affected by its use of financial leverage, leverage does not affect the cost of equity.

2 points

Question 24

Volga Publishing is considering a proposed increase in its debt ratio, which would also increase the company's interest expense. The plan would involve issuing new bonds and using the proceeds to buy back shares of its common stock. The company's CFO thinks the plan will not change total assets or operating income, but that it will increase earnings per share (EPS). Assuming the CFO's estimates are correct, which of the following statements is CORRECT?

Answer

Since the proposed plan increases Volga's financial risk, the company's stock price still might fall even if EPS increases.

If the plan reduces the WACC, the stock price is also likely to decline.

Since the plan is expected to increase EPS, this implies that net income is also expected to increase.

If the plan does increase the EPS, the stock price will automatically increase at the same rate.

Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the interest rate on the currently outstanding bonds.

2 points

Question 25

The firm's target capital structure should be consistent with which of the following statements?

Answer

Maximize the earnings per share (EPS).

Minimize the cost of debt (rd).

Obtain the highest possible bond rating.

Minimize the cost of equity (rs).

Minimize the weighted average cost of capital (WACC).

2 points

Question 26

Which of the following statements is CORRECT?

Answer

If corporate tax rates were decreased while other things were held constant, and if the Modigliani-Miller tax-adjusted tradeoff theory of capital structure were correct, this would tend to cause corporations to decrease their use of debt.

A change in the personal tax rate should not affect firms' capital structure decisions.

"Business risk" is differentiated from "financial risk" by the fact that financial risk reflects only the use of debt, while business risk reflects both the use of debt and such factors as sales variability, cost variability, and operating leverage.

The optimal capital structure is the one that simultaneously (1) maximizes the price of the firm's stock, (2) minimizes its WACC, and (3) maximizes its EPS.

If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.

2 points

Question 27

Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of debt, rd. However, Company HD has a higher debt ratio and thus more interest expense than Company LD. Which of the following statements is CORRECT?

Answer

Company HD has a higher net income than Company LD.

Company HD has a lower ROA than Company LD.

Company HD has a lower ROE than Company LD.

The two companies have the same ROA.

The two companies have the same ROE.

2 points

Question 28

Which of the following statements is CORRECT?

Answer

As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.

The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.

The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price.

The optimal capital structure simultaneously minimizes the cost of debt, the cost of equity, and the WACC.

The optimal capital structure simultaneously maximizes stock price and minimizes the WACC.

2 points

Question 29

Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

Answer

An increase in costs incurred when filing for bankruptcy.

An increase in the corporate tax rate.

An increase in the personal tax rate.

The Federal Reserve tightens interest rates in an effort to fight inflation.

The company's stock price hits a new low.

2 points

Question 30

Which of the following statements is CORRECT?

Answer

The capital structure that maximizes expected EPS also maximizes the price per share of common stock.

The capital structure that minimizes the interest rate on debt also maximizes the expected EPS.

The capital structure that minimizes the required return on equity also maximizes the stock price.

The capital structure that minimizes the WACC also maximizes the price per share of common stock.

The capital structure that gives the firm the best credit rating also maximizes the stock price.

 

 

FIN 534 quiz 7 week 8

Business / Economics

2/26/13

Opening Offer: $22.99
Posted by: orchid
Date Posted: 2/26/13 9:39 AM
Due Date: 2/25/13

.A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase?

Answer

The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

The company increases its dividend payout ratio.

The company begins to pay employees monthly rather than weekly.

The company's profit margin increases.

The company decides to stop taking discounts on purchased materials.

Which of the following statements is CORRECT?

Answer

Once a firm has defined its purpose, scope, and objectives, it must develop a strategy or strategies for achieving its goals. The statement of corporate strategies sets forth detailed plans rather than broad approaches for achieving a firm's goals.

A firm's corporate purpose states the general philosophy of the business and provides managers with specific operational objectives.

Operating plans provide management with detailed implementation guidance, consistent with the corporate strategy, to help meet the corporate objectives. These operating plans can be developed for any time horizon, but many companies use a 5-year horizon.

A firm's mission statement defines its lines of business and geographic area of operations.

The corporate scope is a condensed version of the entire set of strategic plans.

Last year Wei Guan Inc. had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity. In millions, by how much could Wei Guan's sales increase before it is required to increase its fixed assets?

Answer

$170.09

$179.04

$188.46

$197.88

$207.78

Last year Godinho Corp. had $250 million of sales, and it had $75 million of fixed assets that were being operated at 80% of capacity. In millions, how large could sales have been if the company had operated at full capacity?

Answer

$312.5

$328.1

$344.5

$361.8

$379.8

The term "additional funds needed (AFN)" is generally defined as follows:

Answer

Funds that are obtained automatically from routine business transactions.

Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.

The amount of assets required per dollar of sales.

The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.

A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.

Spontaneous funds are generally defined as follows:

Answer

Assets required per dollar of sales.

A forecasting approach in which the forecasted percentage of sales for each item is held constant.

Funds that a firm must raise externally through short-term or long-term borrowing and/or by selling new common or preferred stock.

Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include immediate increases in accounts payable, accrued wages, and accrued taxes.

The amount of cash raised in a given year minus the amount of cash needed to finance the additional capital expenditures and working capital needed to support the firm's growth.

Which of the following statements is CORRECT?

Answer

Any forecast of financial requirements involves determining how much money the firm will need, and this need is determined by adding together increases in assets and spontaneous liabilities and then subtracting operating income.

The AFN equation for forecasting funds requirements requires only a forecast of the firm's balance sheet. Although a forecasted income statement may help clarify the results, income statement data are not essential because funds needed relate only to the balance sheet.

Dividends are paid with cash taken from the accumulated retained earnings account, hence dividend policy does not affect the AFN forecast.

A negative AFN indicates that retained earnings and spontaneous liabilities are far more than sufficient to finance the additional assets needed.

If the ratios of assets to sales and spontaneous liabilities to sales do not remain constant, then the AFN equation will provide more accurate forecasts than the forecasted financial statements method.

Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year. All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)?

Answer

A sharp increase in its forecasted sales.

A switch to a just-in-time inventory system and outsourcing production.

The company reduces its dividend payout ratio.

The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35.

The company discovers that it has excess capacity in its fixed assets.

Which of the following is NOT a key element in strategic planning as it is described in the text?

Answer

The mission statement.

The statement of the corporation's scope.

The statement of cash flows.

The statement of corporate objectives.

The corporation's strategies.

Which of the following statements is CORRECT?

Answer

Since accounts payable and accrued liabilities must eventually be paid off, as these accounts increase, AFN as calculated by the AFN equation must also increase.

Suppose a firm is operating its fixed assets at below 100% of capacity, but it has no excess current assets. Based on the AFN equation, its AFN will be larger than if it had been operating with excess capacity in both fixed and current assets.

If a firm retains all of its earnings, then it cannot require any additional funds to support sales growth.

Additional funds needed (AFN) are typically raised using a combination of notes payable, long-term debt, and common stock. Such funds are non-spontaneous in the sense that they require explicit financing decisions to obtain them.

If a firm has a positive free cash flow, then it must have either a zero or a negative AFN.

Which of the following statements is CORRECT?

Answer

When we use the AFN equation, we assume that the ratios of assets and liabilities to sales (A0*/S0 and L0*/S0) vary from year to year in a stable, predictable manner.

When fixed assets are added in large, discrete units as a company grows, the assumption of constant ratios is more appropriate than if assets are relatively small and can be added in small increments as sales grow.

Firms whose fixed assets are "lumpy" frequently have excess capacity, and this should be accounted for in the financial forecasting process.

For a firm that uses lumpy assets, it is impossible to have small increases in sales without expanding fixed assets.

There are economies of scale in the use of many kinds of assets. When economies occur the ratios are likely to remain constant over time as the size of the firm increases. The Economic Ordering Quantity model for establishing inventory levels demonstrates this relationship.

Which of the following is NOT one of the steps taken in the financial planning process?

Answer

Forecast the funds that will be generated internally. If internal funds are insufficient to cover the required new investment, then identify sources from which the required external capital can be raised.

Monitor operations after implementing the plan to spot any deviations and then take corrective actions.

Determine the amount of capital that will be needed to support the plan.

Develop a set of forecasted financial statements under alternative versions of the operating plan in order to analyze the effects of different operating procedures on projected profits and financial ratios.

Consult with key competitors about the optimal set of prices to charge, i.e., the prices that will maximize profits for our firm and its competitors.

Last year Handorf-Zhu Inc. had $850 million of sales, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?

Answer

54.30%

57.16%

60.17%

63.33%

66.67%

Which of the following assumptions is embodied in the AFN equation?

Answer

None of the firm's ratios will change.

Accounts payable and accruals are tied directly to sales.

Common stock and long-term debt are tied directly to sales.

Fixed assets, but not current assets, are tied directly to sales.

Last year's total assets were not optimal for last year's sales.

Which of the following statements is CORRECT?

Answer

The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds. In other words, it is the growth rate at which the firm's AFN equals zero.

If a firm's assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm's AFN to be negative.

If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm's actual AFN must, mathematically, exceed the previously calculated AFN.

Higher sales usually require higher asset levels, and this leads to what we call AFN. However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio.

Dividend policy does not affect the requirement for external funds based on the AFN equation.

Which of the following statements is NOT CORRECT?

Answer

The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends.

The corporate valuation model discounts free cash flows by the required return on equity.

The corporate valuation model can be used to find the value of a division.

An important step in applying the corporate valuation model is forecasting the firm's pro forma financial statements.

Free cash flows are assumed to grow at a constant rate beyond a specified date in order to find the horizon, or terminal, value.

Leak Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11% and FCF is expected to grow at a rate of 5% after Year 2, what is the Year 0 value of operations, in millions? Assume that the ROIC is expected to remain constant in Year 2 and beyond (and do not make any half-year adjustments).

Year: 1 2

Free cash flow: -$50 $100

Answer

$1,456

$1,529

$1,606

$1,686

$1,770

Akyol Corporation is undergoing a restructuring, and its free cash flows are expected to be unstable during the next few years. However, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5 equals $50 million, and the FCF growth rate is expected to be constant at 6% beyond that point. If the weighted average cost of capital is 12%, what is the horizon value (in millions) at t = 5?

Answer

$719

$757

$797

$839

$883

Based on the corporate valuation model, the value of a company's operations is $900 million. Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of the stock's price per share?

Answer

$23.00

$25.56

$28.40

$31.24

$34.36

Suppose Leonard, Nixon, & Shull Corporation's projected free cash flow for next year is $100,000, and FCF is expected to grow at a constant rate of 6%. If the company's weighted average cost of capital is 11%, what is the value of its operations?

Answer

$1,714,750

$1,805,000

$1,900,000

$2,000,000

$2,100,000

Based on the corporate valuation model, Bernile Inc.'s value of operations is $750 million. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long-term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of retained earnings. What is the best estimate for the firm's value of equity, in millions?

Answer

$429

$451

$475

$500

$525

Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?

Answer

$158

$167

$175

$184

$193

Which of the following does NOT always increase a company's market value?

Answer

Increasing the expected growth rate of sales.

Increasing the expected operating profitability (NOPAT/Sales).

Decreasing the capital requirements (Capital/Sales).

Decreasing the weighted average cost of capital.

Increasing the expected rate of return on invested capital.

Based on the corporate valuation model, the value of a company's operations is $1,200 million. The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 million in accounts payable, $120 million in notes payable, $300 million in long-term debt, $50 million in preferred stock, $180 million in retained earnings, and $800 million in total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of the stock's price per share?

Answer

$24.90

$27.67

$30.43

$33.48

$36.82

Simonyan Inc. forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon value, in millions at t = 3?

Answer

$840

$882

$926

$972

$1,021

Based on the corporate valuation model, Hunsader's value of operations is $300 million. The balance sheet shows $20 million of short-term investments that are unrelated to operations, $50 million of accounts payable, $90 million of notes payable, $30 million of long-term debt, $40 million of preferred stock, and $100 million of common equity. The company has 10 million shares of stock outstanding. What is the best estimate of the stock's price per share?

Answer

$13.72

$14.44

$15.20

$16.00

$16.80

A company forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13%, and the FCFs are expected to continue growing at a 5% rate after Year 3. Assuming that the ROIC is expected to remain constant in Year 3 and beyond, what is the Year 0 value of operations, in millions?

Year: 1 2 3

Free cash flow: -$15 $10 $40

Answer

$315

$331

$348

$367

$386

Suppose Yon Sun Corporation's free cash flow during the just-ended year (t = 0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions?

Answer

$948

$998

$1,050

$1,103

$1,158

Which of the following is NOT normally regarded as being a good reason to establish an ESOP?

Answer

To increase worker productivity.

To enable the firm to borrow at a below-market interest rate.

To make it easier to grant stock options to employees.

To help prevent a hostile takeover.

To help retain valued employees.

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

Answer

Abnormally high executive compensation.

Targeted share repurchases.

Shareholder rights provisions.

Restricted voting rights.

Poison pills.

 

 

FIN 534 quiz 6 week 7

Business / Economics

2/26/13

Opening Offer: $22.99
Posted by: orchid
Date Posted: 2/26/13 9:33 AM
Due Date: 2/25/13

.Question 1

Which of the following statements is CORRECT?

Answer

One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project's full life whereas IRR does not.

One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC, whereas IRR assumes that cash flows are reinvested at the IRR. The NPV assumption is generally more appropriate.

One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project's full life whereas MIRR does not.

One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is based on undiscounted cash flows.

Since cash flows under the IRR and MIRR are both discounted at the same rate (the WACC), these two methods always rank mutually exclusive projects in the same order.

2 points

Question 2

Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A has an IRR of 11%, while Project B's IRR is 14%. When the WACC is 8%, the projects have the same NPV. Given this information, which of the following statements is CORRECT?

Answer

If the WACC is 13%, Project A's NPV will be higher than Project B's.

f the WACC is 9%, Project A's NPV will be higher than Project B's.

If the WACC is 6%, Project B's NPV will be higher than Project A's.

If the WACC is greater than 14%, Project A's IRR will exceed Project B's.

If the WACC is 9%, Project B's NPV will be higher than Project A's.

Question 3

Four of the following statements are truly disadvantages of the regular payback method, but one is not a disadvantage of this method. Which one is NOT

a disadvantage of the payback method?

Answer

Lacks an objective, market-determined benchmark for making decisions.

Ignores cash flows beyond the payback period.

Does not directly account for the time value of money.

Does not provide any indication regarding a project's liquidity or risk.

Does not take account of differences in size among projects.

2 points

Question 4

Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S has an IRR of 15%, while Project L's IRR is 12%. The two projects have the same NPV when the WACC is 7%. Which of the following statements is CORRECT?

Answer

If the WACC is 10%, both projects will have positive NPVs.

If the WACC is 6%, Project S will have the higher NPV.

If the WACC is 13%, Project S will have the lower NPV.

If the WACC is 10%, both projects will have a negative NPV.

Project S's NPV is more sensitive to changes in WACC than Project L's.

Question 5

Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusive projects that are being considered is 12%. Project S has an IRR of 20% while Project L's IRR is 15%. The projects have the same NPV at the 12% current WACC. However, you believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?

Answer

You should reject both projects because they will both have negative NPVs under the new conditions.

You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.

You should recommend Project L, because at the new WACC it will have the higher NPV.

You should recommend Project S, because at the new WACC it will have the higher NPV.

You should recommend Project L because it will have both a higher IRR and a higher NPV under the new conditions.

2 points

Question 6

Which of the following statements is CORRECT?

Answer

The MIRR and NPV decision criteria can never conflict.

The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.

One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more reasonable reinvestment rate assumption.

The higher the WACC, the shorter the discounted payback period.

The MIRR method assumes that cash flows are reinvested at the crossover rate.

Question 7

Which of the following statements is CORRECT?

Answer

The NPV, IRR, MIRR, and discounted payback (using a payback requirement of 3 years or less) methods always lead to the same accept/reject decisions for independent projects.

For mutually exclusive projects with normal cash flows, the NPV and MIRR methods can never conflict, but their results could conflict with the discounted payback and the regular IRR methods.

Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR over the regular IRR.

If a firm uses the discounted payback method with a required payback of 4 years, then it will accept more projects than if it used a regular payback of 4 years.

The percentage difference between the MIRR and the IRR is equal to the project's WACC.

2 points

Question 8

Which of the following statements is CORRECT?

Answer

The shorter a project's payback period, the less desirable the project is normally considered to be by this criterion.

One drawback of the regular payback is that this method does not take account of cash flows beyond the payback period.

If a project's payback is positive, then the project should be accepted because it must have a positive NPV.

The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.

One drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback.

Question 9

Which of the following statements is CORRECT?

Answer

The IRR method appeals to some managers because it gives an estimate of the rate of return on projects rather than a dollar amount, which the NPV method provides.

The discounted payback method eliminates all of the problems associated with the payback method.

When evaluating independent projects, the NPV and IRR methods often yield conflicting results regarding a project's acceptability.

To find the MIRR, we discount the TV at the IRR.

A project's NPV profile must intersect the X-axis at the project's WACC.

2 points

Question 10

Which of the following statements is CORRECT?

Answer

The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR.

The NPV method assumes that cash flows will be reinvested at the risk-free rate, while the IRR method assumes reinvestment at the IRR.

The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the risk-free rate.

The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period.

The IRR method does not consider all relevant cash flows, particularly cash flows beyond the payback period.

Question 11

Assume that the economy is in a mild recession, and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L's IRR is 15%. The projects have the same NPV at the 8% current WACC. However, you believe that the economy is about to recover, and money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?

Answer

You should reject both projects because they will both have negative NPVs under the new conditions.

You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.

You should recommend Project L, because at the new WACC it will have the higher NPV.

You should recommend Project S, because at the new WACC it will have the higher NPV.

You should recommend Project S because it has the higher IRR and will continue to have the higher IRR even at the new WACC.

2 points

Question 12

Which of the following statements is CORRECT?

Answer

One defect of the IRR method is that it does not take account of cash flows over a project's full life.

One defect of the IRR method is that it does not take account of the time value of money.

One defect of the IRR method is that it does not take account of the cost of capital.

One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future.

One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.

Question 13

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Answer

A project's NPV is generally found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting the TV at the IRR to find its PV.

The higher the WACC used to calculate the NPV, the lower the calculated NPV will be.

If a project's NPV is greater than zero, then its IRR must be less than the WACC.

If a project's NPV is greater than zero, then its IRR must be less than zero.

The NPVs of relatively risky projects should be found using relatively low WACCs.

2 points

Question 14

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Answer

The longer a project's payback period, the more desirable the project is normally considered to be by this criterion.

One drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money.

If a project's payback is positive, then the project should be rejected because it must have a negative NPV.

The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.

If a company uses the same payback requirement to evaluate all projects, say it requires a payback of 4 years or less, then the company will tend to reject projects with relatively short lives and accept long-lived projects, and this will cause its risk to increase over time.

Question 15

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Answer

A project's regular IRR is found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting this TV at the WACC.

A project's regular IRR is found by discounting the cash inflows at the WACC to find the present value (PV), then compounding this PV to find the IRR.

If a project's IRR is greater than the WACC, then its NPV must be negative.

To find a project's IRR, we must solve for the discount rate that causes the PV of the inflows to equal the PV of the project's costs.

To find a project's IRR, we must find a discount rate that is equal to the WACC.

2 points

Question 16

Which of the following statements is CORRECT?

Answer

An externality is a situation where a project would have an adverse effect on some other part of the firm's overall operations. If the project would have a favorable effect on other operations, then this is not an externality.

An example of an externality is a situation where a bank opens a new office, and that new office causes deposits in the bank's other offices to increase.

The NPV method automatically deals correctly with externalities, even if the externalities are not specifically identified, but the IRR method does not. This is another reason to favor the NPV.

Both the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified. However, the payback method does not.

Identifying an externality can never lead to an increase in the calculated NPV.

Question 17

Which of the following statements is CORRECT?

Answer

A sunk cost is any cost that must be expended in order to complete a project and bring it into operation.

A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.

A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.

Sunk costs were formerly hard to deal with but now that the NPV method is widely used, it is possible to simply include sunk costs in the cash flows and then calculate the PV of the project.

A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.

2 points

Question 18

Which of the following statements is CORRECT?

Answer

An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted.

Sunk costs must be considered if the IRR method is used but not if the firm relies on the NPV method.

A good example of a sunk cost is a situation where a bank opens a new office, and that new office leads to a decline in deposits of the bank's other offices.

A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project.

If sunk costs are considered and reflected in a project's cash flows, then the project's calculated NPV will be higher than it otherwise would be.

Question 19

Which of the following statements is CORRECT?

Answer

In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to an upward

bias in the NPV.

In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to a downward

bias in the NPV.

The existence of any type of "externality" will reduce the calculated NPV versus the NPV that would exist without the externality.

If one of the assets to be used by a potential project is already owned by the firm, and if that asset could be sold or leased to another firm if the new project were not undertaken, then the net after-tax proceeds that could be obtained should be charged as a cost to the project under consideration.

If one of the assets to be used by a potential project is already owned by the firm but is not being used, then any costs associated with that asset is a sunk cost and should be ignored.

2 points

Question 20

Which of the following statements is CORRECT?

Answer

Sensitivity analysis is a good way to measure market risk because it explicitly takes into account diversification effects.

One advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of specific effects occurring, whereas scenario analysis cannot account for probabilities.

Well-diversified stockholders do not need to consider market risk when determining required rates of return.

Market risk is important, but it does not have a direct effect on stock prices because it only affects beta.

Simulation analysis is a computerized version of scenario analysis where input variables are selected randomly on the basis of their probability distributions.

Question 21

Which of the following factors should be included in the cash flows used to estimate a project's NPV?

Answer

All costs associated with the project that have been incurred prior to the time the analysis is being conducted.

Interest on funds borrowed to help finance the project.

The end-of-project recovery of any working capital required to operate the project.

Cannibalization effects, but only if those effects increase the project's projected cash flows.

Expenditures to date on research and development related to the project, provided those costs have already been expensed for tax purposes.

2 points

Question 22

Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?

Answer

The new project is expected to reduce sales of one of the company's existing products by 5%.

Since the firm's director of capital budgeting spent some of her time last year to evaluate the new project, a portion of her salary for that year should be charged to the project's initial cost.

The company has spent and expensed $1 million on R&D associated with the new project.

The company spent and expensed $10 million on a marketing study before its current analysis regarding whether to accept or reject the project.

The firm would borrow all the money used to finance the new project, and the interest on this debt would be $1.5 million per year.

Question 23

The relative risk of a proposed project is best accounted for by which of the following procedures?

Answer

Adjusting the discount rate upward if the project is judged to have above-average risk.

Adjusting the discount rate downward if the project is judged to have above-average risk.

Reducing the NPV by 10% for risky projects.

Picking a risk factor equal to the average discount rate.

Ignoring risk because project risk cannot be measured accurately.

2 points

Question 24

Rowell Company spent $3 million two years ago to build a plant for a new product. It then decided not to go forward with the project, so the building is available for sale or for a new product. Rowell owns the building free and clear--there is no mortgage on it. Which of the following statements is CORRECT?

Answer

Since the building has been paid for, it can be used by another project with no additional cost. Therefore, it should not be reflected in the cash flows for any new project.

If the building could be sold, then the after-tax proceeds that would be generated by any such sale should be charged as a cost to any new project that would use it.

This is an example of an externality, because the very existence of the building affects the cash flows for any new project that Rowell might consider.

Since the building was built in the past, its cost is a sunk cost and thus need not be considered when new projects are being evaluated, even if it would be used by those new projects.

If there is a mortgage loan on the building, then the interest on that loan would have to be charged to any new project that used the building.

Question 25

Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects?

Answer

Project A, which has average risk and an IRR = 9%.

Project B, which has below-average risk and an IRR = 8.5%.

Project C, which has above-average risk and an IRR = 11%.

Without information about the projects' NPVs we cannot determine which project(s) should be accepted.

All of these projects should be accepted.

2 points

Question 26

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

Answer

Using some of the firm's high-quality factory floor space that is currently unused to produce the proposed new product. This space could be used for other products if it is not used for the project under consideration.

Revenues from an existing product would be lost as a result of customers switching to the new product.

Shipping and installation costs associated with a machine that would be used to produce the new product.

The cost of a study relating to the market for the new product that was completed last year. The results of this research were positive, and they led to the tentative decision to go ahead with the new product. The cost of the research was incurred and expensed for tax purposes last year.

It is learned that land the company owns and would use for the new project, if it is accepted, could be sold to another firm.

Question 27

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

Answer

A firm has a parcel of land that can be used for a new plant site or be sold, rented, or used for agricultural purposes.

A new product will generate new sales, but some of those new sales will be from customers who switch from one of the firm's current products.

A firm must obtain new equipment for the project, and $1 million is required for shipping and installing the new machinery.

A firm has spent $2 million on R&D associated with a new product. These costs have been expensed for tax purposes, and they cannot be recovered regardless of whether the new project is accepted or rejected.

A firm can produce a new product, and the existence of that product will stimulate sales of some of the firm's other products.

2 points

Question 28

A company is considering a new project. The CFO plans to calculate the project's NPV by estimating the relevant cash flows for each year of the project's life (i.e., the initial investment cost, the annual operating cash flows, and the terminal cash flow), then discounting those cash flows at the company's overall WACC. Which one of the following factors should the CFO be sure to INCLUDE in the cash flows when estimating the relevant cash flows?

Answer

All sunk costs that have been incurred relating to the project.

All interest expenses on debt used to help finance the project.

The investment in working capital required to operate the project, even if that investment will be recovered at the end of the project's life.

Sunk costs that have been incurred relating to the project, but only if those costs were incurred prior to the current year.

Effects of the project on other divisions of the firm, but only if those effects lower the project's own direct cash flows.

Question 29

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

Answer

Changes in net working capital attributable to the project.

Previous expenditures associated with a market test to determine the feasibility of the project, provided those costs have been expensed for tax purposes.

The value of a building owned by the firm that will be used for this project.

A decline in the sales of an existing product, provided that decline is directly attributable to this project.

The salvage value of assets used for the project that will be recovered at the end of the project's life.

2 points

Question 30

Which of the following statements is CORRECT?

Answer

Using accelerated depreciation rather than straight line would normally have no effect on a project's total projected cash flows but it would affect the timing of the cash flows and thus the NPV.

Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.

Corporations must use the same depreciation method (e.g., straight line or accelerated) for stockholder reporting and tax purposes.

Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.

Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project's projected NPV.

 

fontdTiy3h2sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 23px; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; background-position: initial initial; background-repeat: initial initial;">Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.

 

Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project's projected NPV.

 

FIN 534 quiz 4 Week 5

Business / Economics

2/26/13

Opening Offer: $22.99
Posted by: orchid
Date Posted: 2/26/13 9:27 AM
Due Date: 2/25/13

1) Which of the following statements is CORRECT?

Answer

a)A two-stock portfolio will always have a lower standard deviation than a one-stock portfolio.

b)A portfolio that consists of 40 stocks that are not highly correlated with "the market" will probably be less risky than a portfolio of 40 stocks that are highly correlated with the market, assuming the stocks all have the same standard deviations.

c)A two-stock portfolio will always have a lower beta than a one-stock portfolio.

d)If portfolios are formed by randomly selecting stocks, a 10-stock portfolio will always have a lower beta than a one-stock portfolio.

e)A stock with an above-average standard deviation must also have an above-average beta.

2 points

 

Question 2

 

Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y. Both stocks have an expected return of 15%, betas of 1.6, and standard deviations of 30%. The returns of the two stocks are independent, so the correlation coefficient between them, rXY, is zero. Which of the following statements best describes the characteristics of your 2-stock portfolio?

Answer

a)Your portfolio has a standard deviation of 30%, and its expected return is 15%.

b)Your portfolio has a standard deviation less than 30%, and its beta is greater than 1.6.

c)Your portfolio has a beta equal to 1.6, andits expected return is 15%.

d)Your portfolio has a beta greater than 1.6, and its expected return is greater than 15%.

e)Your portfolio has a standard deviation greater than 30% and a beta equal to 1.6.

 

Question 3

 

Assume that in recent years both expected inflation and the market risk premium (rM− rRF) have declined. Assume also that all stocks have positive betas. Which of the following would be most likely to have occurred as a result of these changes?

Answer

The required returns on all stocks have fallen, but the decline has been greater for stocks with lower betas.

The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.

The average required return on the market, rM, has remained constant, but the required returns have fallen for stocks that have betas greater than 1.0.

Required returns have increased for stocks with betas greater than 1.0 but have declined for stocks with betas less than 1.0.

The required returns on all stocks have fallen by the same amount

 

Question 4

1. Which of the following statements is CORRECT?

Answer

The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.

If you found a stock with a zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio.

The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. However, this historical beta may differ from the beta that exists in the future.

The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.

It is theoretically possible for a stock to have a beta of 1.0. If a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the risk-free (default-free) rate of return, rRF.

2 points

 

Question 5

1. Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?

Answer

Variance; correlation coefficient.

Standard deviation; correlation coefficient.

Beta; variance.

Coefficient of variation; beta.

Beta; beta.

2 points

 

Question 6

1. Bob has a $50,000 stock portfolio with a beta of 1.2, an expected return of 10.8%, and a standard deviation of 25%. Becky also has a $50,000 portfolio, but it has a beta of 0.8, an expected return of 9.2%, and a standard deviation that is also 25%. The correlation coefficient, r, between Bob's and Becky's portfolios is zero. If Bob and Becky marry and combine their portfolios, which of the following best describes their combined $100,000 portfolio?

Answer

The combined portfolio's expected return will be less than the simple weighted average of the expected returns of the two individual portfolios, 10.0%.

The combined portfolio's beta will be equal to a simple weighted average of the betas of the two individual portfolios, 1.0; its expected return will be equal to a simple weighted average of the expected returns of the two individual portfolios, 10.0%; and its standard deviation will be less than the simple average of the two portfolios' standard deviations, 25%.

The combined portfolio's expected return will be greater than the simple weighted average of the expected returns of the two individual portfolios, 10.0%.

The combined portfolio's standard deviation will be greater than the simple average of the two portfolios' standard deviations, 25%.

The combined portfolio's standard deviation will be equal to a simple average of the two portfolios' standard deviations, 25%.

2 points

 

Question 7

1. Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of the following statements must be true, according to the CAPM?

Answer

If you invest $50,000 in Stock X and $50,000 in Stock Y, your 2-stock portfolio would have a beta significantly lower than 1.0, provided the returns on the two stocks are not perfectly correlated.

Stock Y's realized return during the coming year will be higher than Stock X's return.

If the expected rate of inflation increases but the market risk premium is unchanged, the required returns on the two stocks should increase by the same amount.

Stock Y's return has a higher standard deviation than Stock X.

If the market risk premium declines, but the risk-free rate is unchanged, Stock X will have a larger decline in its required return than will Stock Y.

 

Question 8

1. Which of the following statements is CORRECT?

Answer

A large portfolio of randomly selected stocks will always have a standard deviation of returns that is less than the standard deviation of a portfolio with fewer stocks, regardless of how the stocks in the smaller portfolio are selected.

Diversifiable risk can be reduced by forming a large portfolio, but normally even highly-diversified portfolios are subject to market (or systematic) risk.

A large portfolio of randomly selected stocks will have a standard deviation of returns that is greater than the standard deviation of a 1-stock portfolio if that one stock has a beta less than 1.0.

A large portfolio of stocks whose betas are greater than 1.0 will have less market risk than a single stock with a beta = 0.8.

If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.

2 points

 

Question 9

1. Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the following statements must be true about these securities? (Assume market equilibrium.)

Answer

When held in isolation, Stock A has more risk than Stock B.

Stock B must be a more desirable addition to a portfolio than A.

Stock A must be a more desirable addition to a portfolio than B.

The expected return on Stock A should be greater than that on B.

The expected return on Stock B should be greater than that on A.

2 points

 

Question 10

1. Which of the following statements is CORRECT?

Answer

A stock's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only that one stock.

If an investor buys enough stocks, he or she can, through diversification, eliminate all of the diversifiable risk inherent in owning stocks. Therefore, if a portfolio contained all publicly traded stocks, it would be essentially riskless.

The required return on a firm's common stock is, in theory, determined solely by its market risk. If the market risk is known, and if that risk is expected to remain constant, then no other information is required to specify the firm's required return.

Portfolio diversification reduces the variability of returns (as measured by the standard deviation) of each individual stock held in a portfolio.

A security's beta measures its non-diversifiable, or market, risk relative to that of an average stock.

2 points

 

Question 11

1. During the coming year, the market risk premium (rM − rRF), is expected to fall, while the risk-free rate, rRF, is expected to remain the same. Given this forecast, which of the following statements is CORRECT?

Answer

The required return will increase for stocks with a beta less than 1.0 and will decrease for stocks with a beta greater than 1.0.

The required return on all stocks will remain unchanged.

The required return will fall for all stocks, but it will fall more for stocks with higher betas.

The required return for all stocks will fall by the same amount.

The required return will fall for all stocks, but it will fall less for stocks with higher betas.

2 points

 

Question 12

1. Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2. Portfolio P has equal amounts invested in each of the three stocks. Each of the stocks has a standard deviation of 25%. The returns on the three stocks are independent of one another (i.e., the correlation coefficients all equal zero). Assume that there is an increase in the market risk premium, but the risk-free rate remains unchanged. Which of the following statements is CORRECT?

Answer

The required return of all stocks will remain unchanged since there was no change in their betas.

The required return on Stock A will increase by less than the increase in the market risk premium, while the required return on Stock C will increase by more than the increase in the market risk premium.

The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C) will increase while the returns of safer stocks (such as Stock A) will decrease.

The required returns on all three stocks will increase by the amount of the increase in the market risk premium.

The required return on the average stock will remain unchanged, but the returns on riskier stocks (such as Stock C) will decrease while the returns on safer stocks (such as Stock A) will increase.

Question 13

1. Inflation, recession, and high interest rates are economic events that are best characterized as being

Answer

systematic risk factors that can be diversified away.

company-specific risk factors that can be diversified away.

among the factors that are responsible for market risk.

risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers.

irrelevant except to governmental authorities like the Federal Reserve.

2 points

 

Question 14

1. Which of the following statements is CORRECT?

Answer

If a company with a high beta merges with a low-beta company, the best estimate of the new merged company's beta is 1.0.

Logically, it is easier to estimate the betas associated with capital budgeting projects than the betas associated with stocks, especially if the projects are closely associated with research and development activities.

The beta of an "average stock," which is also "the market beta," can change over time, sometimes drastically.

If a newly issued stock does not have a past history that can be used for calculating beta, then we should always estimate that its beta will turn out to be 1.0. This is especially true if the company finances with more debt than the average firm.

During a period when a company is undergoing a change such as increasing its use of leverage or taking on riskier projects, the calculated historical beta may be drastically different from the beta that will exist in the future.

2 points

 

Question 15

1. Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSE?

Answer

The fact that a security or project may not have a past history that can be used as the basis for calculating beta.

Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the "true" or "expected future" beta.

The beta of an "average stock," or "the market," can change over time, sometimes drastically.

Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.

All of the statements above are true.

2 points

 

Question 16

1. If a stock's dividend is expected

to grow at a constant rate of 5% a year, which of the following statements is CORRECT? The stock is in equilibrium.

Answer

The expected return on the stock is 5% a year.

The stock's dividend yield is 5%.

The price of the stock is expected to decline in the future.

The stock's required return must be equal to or less than 5%.

The stock's price one year from now is expected to be 5% above the current price.

2 points

 

Question 17

1. Which of the following statements is CORRECT, assuming stocks are in equilibrium?

Answer

The dividend yield on a constant growth stock must equal its expected total return minus its expected capital gains yield.

Assume that the required return on a given stock is 13%. If the stock's dividend is growing at a constant rate of 5%, its expected dividend yield is 5% as well.

A stock's dividend yield can never exceed its expected growth rate.

A required condition for one to use the constant growth model is that the stock's expected growth rate exceeds its required rate of return.

Other things held constant, the higher a company's beta coefficient, the lower its required rate of return.

 

Question 18

1. Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of

the following statements is CORRECT?

X Y

Price $30 $30

Expected growth (constant) 6% 4%

Required return 12% 10%

Answer

Stock X has a higher dividend yield than Stock Y.

Stock Y has a higher dividend yield than Stock X.

One year from now, Stock X's price is expected to be higher than Stock Y's price.

Stock X has the higher expected year-end dividend.

Stock Y has a higher capital gains yield.

2 points

 

Question 19

1. Companies can issue different classes of common stock. Which of the following statements concerning stock classes is CORRECT?

Answer

All common stocks fall into one of three classes: A, B, and C.

All common stocks, regardless of class, must have the same voting rights.

All firms have several classes of common stock.

All common stock, regardless of class, must pay the same dividend.

Some class or classes of common stock are entitled to more votes per share than other classes.

2 points

 

Question 20

1. The required returns of Stocks X and Y are rX = 10% and rY = 12%. Which of the following statements is CORRECT?

Answer

If the market is in equilibrium, and if Stock Y has the lower expected dividend yield, then it must have the higher expected growth rate.

If Stock Y and Stock X have the same dividend yield, then Stock Y must have a lower expected capital gains yield than Stock X.

If Stock X and Stock Y have the same current dividend and the same expected dividend growth rate, then Stock Y must sell for a higher price.

The stocks must sell for the same price.

Stock Y must have a higher dividend yield than Stock X.

2 points

 

Question 21

1. Which of the following statements is CORRECT?

Answer

The constant growth model is often appropriate for evaluating start-up companies that do not have a stable history of growth but are expected to reach stable growth within the next few years.

If a stock has a required rate of return rs = 12% and its dividend is expected to grow at a constant rate of 5%, this implies that the stock's dividend yield is also 5%.

The stock valuation model, P0 = D1/(rs - g), can be used to value firms whose dividends are expected to decline at a constant rate, i.e., to grow at a negative rate.

The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.

The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain constant over time.

2 points

 

Question 22

1. Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

A B

Required return 10% 12%

Market price $25 $40

Expected growth 7% 9%

Answer

These two stocks should have the same price.

These two stocks must have the same dividend yield.

These two stocks should have the same expected return.

These two stocks must have the same expected capital gains yield.

These two stocks must have the same expected year-end dividend.

 

Question 23

1. The preemptive right is important to shareholders because it

Answer

allows managers to buy additional shares below the current market price.

will result in higher dividends per share.

is included in every corporate charter.

protects the current shareholders against a dilution of their ownership interests.

protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.

2 points

 

Question 24

1. Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return. Which of the following statements is CORRECT?

Answer

The two stocks must have the same dividend per share.

If one stock has a higher dividend yield, it must also have a lower dividend growth rate.

If one stock has a higher dividend yield, it must also have a higher dividend growth rate.

The two stocks must have the same dividend growth rate.

The two stocks must have the same dividend yield.

2 points

 

Question 25

1. The expected return on Natter Corporation's stock is 14%. The stock's dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share. Which of the following statements is CORRECT?

Answer

The stock's dividend yield is 7%.

The stock's dividend yield is 8%.

The current dividend per share is $4.00.

The stock price is expected to be $54 a share one year from now.

The stock price is expected to be $57 a share one year from now.

2 points

 

Question 26

1. If in the opinion of a given investor a stock's expected return exceeds its required return, this suggests that the investor thinks

Answer

the stock is experiencing supernormal growth.

the stock should be sold.

the stock is a good buy.

management is probably not trying to maximize the price per share.

dividends are not likely to be declared.

2 points

 

Question 27

1. Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

A B

Price $ 25 $40

Expected growth 7% 9%

Expected return 10% 12%

Answer

The two stocks should have the same expected dividend.

The two stocks could not be in equilibrium with the numbers given in the question.

A's expected dividend is $0.50.

B's expected dividend is $0.75.

A's expected dividend is $0.75 and B's expected dividend is $1.20.

2 points

 

Question 28

1. Which of the following statements is CORRECT?

Answer

If a company has two classes of common stock, Class A and Class B, the stocks may pay different dividends, but under all state charters the two classes must have the same voting rights.

The preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company.

The preemptive right is a provision in the corporate charter that gives common stockholders the right to purchase (on a pro rata basis) new issues of the firm's common stock.

The stock valuation model, P0= D1/(rs - g), cannot be used for firms that have negative growth rates.

The stock valuation model, P0= D1/(rs - g), can be used only for firms whose growth rates exceed their required returns.

Question 29

 

1. For a stock to be in equilibrium, that is, for there to be no long-term pressure for its price to depart from its current level, then

Answer

the expected future return must be less than the most recent past realized return.

The past realized return must be equal to the expected return during the same period.

the required return must equal the realized return in all periods.

the expected return must be equal to both the required future return and the past realized return.

the expected future returns must be equal to the required return.

2 points

 

Question 30

1. If markets are in equilibrium, which of the following conditions will exist?

Answer

Each stock's expected return should equal its realized return as seen by the marginal investor.

Each stock's expected return should equal its required return as seen by the marginal investor.

All stocks should have the same expected return as seen by the marginal investor.

The expected and required returns on stocks and bonds should be equal.

All stocks should have the same realized return during the coming year.

 

 

FIN 534 quiz 8 week 9

Business / Economics

2/26/13

Opening Offer: $22.99
Posted by: rews
Date Posted: 2/26/13 5:13 AM
Due Date: 2/25/13

Question 1

Which of the following statements is correct?

Answer

One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.

If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should not

follow the strict residual dividend policy.

If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.

If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase their dividend payout ratios.

Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.

2 points

Question 2

In the real world, dividends

Answer

are usually more stable than earnings.

fluctuate more widely than earnings.

tend to be a lower percentage of earnings for mature firms.

are usually changed every year to reflect earnings changes, and these changes are randomly higher or lower, depending on whether earnings increased or decreased.

are usually set as a fixed percentage of earnings, e.g., at 40% of earnings, so if EPS = $2.00, then DPS will equal $0.80. Once the percentage is set, then dividend policy is on "automatic pilot" and the actual dividend depends strictly on earnings.

2 points

Question 3

Which of the following statements is correct?

Answer

Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.

One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.

An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.

If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price.

Stock repurchases make the most sense at times when a company believes its stock is undervalued.

2 points

Question 4

If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

Answer

the dividend payout ratio has remained constant.

the dividend payout ratio is increasing.

no dividends were paid during the year.

the dividend payout ratio is decreasing.

the dollar amount of investments has decreased.

2 points

Question 5

You own 100 shares of Troll Brothers' stock, which currently sells for $120 a share. The company is contemplating a 2-for-1 stock split. Which of the following best describes what your position will be after such a split takes place?

Answer

You will have 200 shares of stock, and the stock will trade at or near $120 a share.

You will have 200 shares of stock, and the stock will trade at or near $60 a share.

You will have 100 shares of stock, and the stock will trade at or near $60 a share.

You will have 50 shares of stock, and the stock will trade at or near $120 a share.

You will have 50 shares of stock, and the stock will trade at or near $60 a share.

2 points

Question 6

If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio), then the firm should pay

Answer

no dividends except out of past retained earnings.

no dividends to common stockholders.

dividends only out of funds raised by the sale of new common stock.

dividends only out of funds raised by borrowing money (i.e., issue debt).

dividends only out of funds raised by selling off fixed assets.

2 points

Question 7

Which of the following statements is correct?

Answer

Under the tax laws as they existed in 2008, a dollar received for repurchased stock must be taxed at the same rate as a dollar received as dividends.

One nice feature of dividend reinvestment plans (DRIPs) is that they reduce the taxes investors would have to pay if they received cash dividends.

Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce an increase in the dividend, and as a result share prices fall when dividend increases are announced. The reason is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities.

If a company wants to raise new equity capital rather steadily over time, a new stock dividend reinvestment plan would make sense. However, if the firm does not want or need new equity, then an open market purchase dividend reinvestment plan would probably make more sense.

Dividend reinvestment plans have not caught on in most industries, and today about 99% of all companies with DRIPs are utilities.

2 points

Question 8

Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?

Answer

Its earnings become more stable.

Its access to the capital markets increases.

Its R&D efforts pay off, and it now has more high-return investment opportunities.

Its accounts receivable decrease due to a change in its credit policy.

Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages.

2 points

Question 9

Firm M is a mature firm in a mature industry. Its annual net income and net cash flows are both consistently high and stable. However, M's growth prospects are quite limited, so its capital budget is small relative to its net income. Firm N is a relatively new firm in a new and growing industry. Its markets and products have not stabilized, so its annual operating income fluctuates considerably. However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct?

Answer

Firm M probably has a lower debt ratio than Firm N.

Firm M probably has a higher dividend payout ratio than Firm N.

If the corporate tax rate increases, the debt ratio of both firms is likely to decline.

The two firms are equally likely to pay high dividends.

Firm N is likely to have a clientele of shareholders who want to receive consistent, stable dividend income.

2 points

Question 10

Which of the following statements is correct?

Answer

One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their ownership in the company.

One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.

Stock repurchases can be used by a firm that wants to increase its debt ratio.

Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years, provided investors are aware of these investment opportunities.

One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.

2 points

Question 11

Which of the following should not influence a firm's dividend policy decision?

Answer

The firm's ability to accelerate or delay investment projects.

A strong preference by most shareholders for current cash income versus capital gains.

Constraints imposed by the firm's bond indenture.

The fact that much of the firm's equipment has been leased rather than bought and owned.

The fact that Congress is considering changes in the tax law regarding the taxation of dividends versus capital gains.

2 points

Question 12

Which of the following statements is correct?

Answer

If a firm repurchases some of its stock in the open market, then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.

An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.

Stock repurchases tend to reduce financial leverage.

If a company declares a 2-for-1 stock split, its stock price should roughly double.

One advantage of adopting the residual dividend policy is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.

2 points

Question 13

Which of the following statements is NOT correct?

Answer

Stock repurchases can be used by a firm as part of a plan to change its capital structure.

After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise.

Investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.

Companies can repurchase shares to distribute large inflows of cash, say from the sale of a division, to stockholders without paying cash dividends.

Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.

2 points

Question 14

Which of the following actions will best enable a company to raise additional equity capital?

Answer

Refund long-term debt with lower cost short-term debt.

Declare a stock split.

Begin an open-market purchase dividend reinvestment plan.

Initiate a stock repurchase program.

Begin a new-stock dividend reinvestment plan.

2 points

Question 15

Which of the following statements is correct?

Answer

The tax code encourages companies to pay dividends rather than retain earnings.

If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.

The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.

Large stock repurchases financed by debt tend to increase earnings per share, but they also increase the firm's financial risk.

A dollar paid out to repurchase stock is taxed at the same rate as a dollar paid out in dividends. Thus, both companies and investors are indifferent between distributing cash through dividends and stock repurchase programs.

2 points

Question 16

Based on the information below, what is Ezzel Enterprises' optimal capital structure?

Answer

Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50.

Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90.

Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20.

Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40.

Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00.

2 points

Question 17

Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?

Answer

An increase in the corporate tax rate.

An increase in the personal tax rate.

An increase in the company's operating leverage.

The Federal Reserve tightens interest rates in an effort to fight inflation.

The company's stock price hits a new high.

2 points

Question 18

If debt financing is used, which of the following is CORRECT?

Answer

The percentage change in net operating income will be greater than a given percentage change in net income.

The percentage change in net operating income will be equal to a given percentage change in net income.

The percentage change in net income relative to the percentage change in net operating income will depend on the interest rate charged on debt.

The percentage change in net income will be greater than the percentage change in net operating income.

The percentage change in sales will be greater than the percentage change in EBIT, which in turn will be greater than the percentage change in net income.

2 points

Question 19

Which of the following statements is CORRECT? As a firm increases the operating leverage used to produce a given quantity of output, this will

Answer

normally lead to an increase in its fixed assets turnover ratio.

normally lead to a decrease in its business risk.

normally lead to a decrease in the standard deviation of its expected EBIT.

normally lead to a decrease in the variability of its expected EPS.

normally lead to a reduction in its fixed assets turnover ratio.

2 points

Question 20

Business risk is affected by a firm's operations. Which of the following is NOT associated with (or does not contribute to) business risk?

Answer

Demand variability.

Sales price variability.

The extent to which operating costs are fixed.

The extent to which interest rates on the firm's debt fluctuate.

Input price variability.

2 points

Question 21

Firms U and L each have the same amount of assets, and both have a basic earning power ratio of 20%. Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity. Firm L's debt has a before-tax cost of 8%. Both firms have positive net income. Which of the following statements is CORRECT?

Answer

The two companies have the same times interest earned (TIE) ratio.

Firm L has a lower ROA than Firm U.

Firm L has a lower ROE than Firm U.

Firm L has the higher times interest earned (TIE) ratio.

Firm L has a higher EBIT than Firm U.

2 points

Question 22

Which of the following statements is CORRECT, holding other things constant?

Answer

Firms whose assets are relatively liquid tend to have relatively low bankruptcy costs, hence they tend to use relatively little debt.

An increase in the personal tax rate is likely to increase the debt ratio of the average corporation.

If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.

An increase in the company's degree of operating leverage is likely to encourage a company to use more debt in its capital structure.

An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.

2 points

Question 23

Which of the following statements is CORRECT?

Answer

Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC.

Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC.

Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing. However, this action still may raise the company's WACC.

Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing. However, this action still may lower the company's WACC.

Since a firm's beta coefficient it not affected by its use of financial leverage, leverage does not affect the cost of equity.

2 points

Question 24

Volga Publishing is considering a proposed increase in its debt ratio, which would also increase the company's interest expense. The plan would involve issuing new bonds and using the proceeds to buy back shares of its common stock. The company's CFO thinks the plan will not change total assets or operating income, but that it will increase earnings per share (EPS). Assuming the CFO's estimates are correct, which of the following statements is CORRECT?

Answer

Since the proposed plan increases Volga's financial risk, the company's stock price still might fall even if EPS increases.

If the plan reduces the WACC, the stock price is also likely to decline.

Since the plan is expected to increase EPS, this implies that net income is also expected to increase.

If the plan does increase the EPS, the stock price will automatically increase at the same rate.

Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the interest rate on the currently outstanding bonds.

2 points

Question 25

The firm's target capital structure should be consistent with which of the following statements?

Answer

Maximize the earnings per share (EPS).

Minimize the cost of debt (rd).

Obtain the highest possible bond rating.

Minimize the cost of equity (rs).

Minimize the weighted average cost of capital (WACC).

2 points

Question 26

Which of the following statements is CORRECT?

Answer

If corporate tax rates were decreased while other things were held constant, and if the Modigliani-Miller tax-adjusted tradeoff theory of capital structure were correct, this would tend to cause corporations to decrease their use of debt.

A change in the personal tax rate should not affect firms' capital structure decisions.

"Business risk" is differentiated from "financial risk" by the fact that financial risk reflects only the use of debt, while business risk reflects both the use of debt and such factors as sales variability, cost variability, and operating leverage.

The optimal capital structure is the one that simultaneously (1) maximizes the price of the firm's stock, (2) minimizes its WACC, and (3) maximizes its EPS.

If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.

2 points

Question 27

Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of debt, rd. However, Company HD has a higher debt ratio and thus more interest expense than Company LD. Which of the following statements is CORRECT?

Answer

Company HD has a higher net income than Company LD.

Company HD has a lower ROA than Company LD.

Company HD has a lower ROE than Company LD.

The two companies have the same ROA.

The two companies have the same ROE.

2 points

Question 28

Which of the following statements is CORRECT?

Answer

As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.

The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.

The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price.

The optimal capital structure simultaneously minimizes the cost of debt, the cost of equity, and the WACC.

The optimal capital structure simultaneously maximizes stock price and minimizes the WACC.

2 points

Question 29

Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

Answer

An increase in costs incurred when filing for bankruptcy.

An increase in the corporate tax rate.

An increase in the personal tax rate.

The Federal Reserve tightens interest rates in an effort to fight inflation.

The company's stock price hits a new low.

2 points

Question 30

Which of the following statements is CORRECT?

Answer

The capital structure that maximizes expected EPS also maximizes the price per share of common stock.

The capital structure that minimizes the interest rate on debt also maximizes the expected EPS.

The capital structure that minimizes the required return on equity also maximizes the stock price.

The capital structure that minimizes the WACC also maximizes the price per share of common stock.

The capital structure that gives the firm the best credit rating also maximizes the stock price.

 

MAT 540 Quiz 1

Mathematics

2/20/13

Opening Offer: $12.00
Posted by: nathanwebster1989
Date Posted: 2/20/13 3:48 PM
Due Date: 2/19/13

1. The term decision analysis refers to testing how a problem solution reacts to changes in one or more of the model parameters. (Points : 2) True False

 

 2. Fixed costs depend on the number of items produced. (Points : 2) True False

 

 3. Total cost equal the fixed cost plus the variable cost per unit divided by volume. (Points : 2) True False    

Total cost= fixed cost+(variable cost per unit multiplied by volume)

 

 4. Profit is the difference between total revenue and total cost. (Points : 2) True False

Profit = Revenue - Cost.

 

 5. An experiment is an activity that results in one of several possible outcomes. (Points : 2) True False 

 

6. Variable costs are independent of volume and remain constant. (Points : 2) True False

 

 7. The events in an experiment are mutually exclusive if only one can occur at a time. (Points : 2) True False

 

 8. The probabilities of mutually exclusive events sum to zero. (Points : 2) True False

 

9. A model is a functional relationship and include: (Points : 2)

variables

parameters

equations

all of the above

10. Which of the following is an equation or an inequality that expresses a resource restriction in a mathematical model? (Points : 2)

decision variable.

data

an objective function.

 a constraint.

a parameter.

 

11. In a given experiment, the probabilities of all mutually exclusive events sum to one. (Points : 2) True False

 

12. Which of the following is not an alternative name for management science? (Points : 2) decision sciences quantitative methods quantitative analysis operations research

decision support systems

 

13. The steps of the scientific method are: (Points : 2)

problem definition, model construction, observation, model solution, implementation. observation, problem definition, model construction, model solution, implementation.

model construction, problem definition, observation, model solution, implementation. observation, implementation, problem definition, model construction, model solution.

 

14. A frequency distribution is an organization of numerical data about the events in an experiment. (Points : 2) True False

 

15. A set of events is collectively exhaustive when it includes _______ the events that can occur in an experiment. (Points : 2)

 some of one of all any of

 

16. Objective probabilities that can be stated prior to the occurrence of an event are (Points : 2) subjective a priori

classical or a priori

none of the above

 

17. Which of the following is incorrect with respect to the use of models in decision making? (Points : 2)

they improve understanding of the problem

they promote subjectivity in decision making

they are generally easy to use

they provide a systematic approach to problem solving

 

18. In a given experiment the probabilities of mutually exclusive events sum to (Points : 2)

0

 0.5

1      

none of the above

 

19. A ___________ probability is the probability that two or more events that are not mutually exclusive can occur simultaneously. (Points : 2)

joint

marginal

subjective

binomial

 

20. ____________ techniques include uncertainty and assume that there can be more than one model solution. (Points : 2)

Deterministic

Probabilistic

Distribution

Probability

FIN 534 quiz 7 week 8

Business / Economics

2/17/13

Opening Offer: $22.99
Posted by: rews
Date Posted: 2/17/13 8:42 AM
Due Date: 2/16/13

A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to increase?

Answer

The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

The company increases its dividend payout ratio.

The company begins to pay employees monthly rather than weekly.

The company's profit margin increases.

The company decides to stop taking discounts on purchased materials.

Which of the following statements is CORRECT?

Answer

Once a firm has defined its purpose, scope, and objectives, it must develop a strategy or strategies for achieving its goals. The statement of corporate strategies sets forth detailed plans rather than broad approaches for achieving a firm's goals.

A firm's corporate purpose states the general philosophy of the business and provides managers with specific operational objectives.

Operating plans provide management with detailed implementation guidance, consistent with the corporate strategy, to help meet the corporate objectives. These operating plans can be developed for any time horizon, but many companies use a 5-year horizon.

A firm's mission statement defines its lines of business and geographic area of operations.

The corporate scope is a condensed version of the entire set of strategic plans.

Last year Wei Guan Inc. had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity. In millions, by how much could Wei Guan's sales increase before it is required to increase its fixed assets?

Answer

$170.09

$179.04

$188.46

$197.88

$207.78

Last year Godinho Corp. had $250 million of sales, and it had $75 million of fixed assets that were being operated at 80% of capacity. In millions, how large could sales have been if the company had operated at full capacity?

Answer

$312.5

$328.1

$344.5

$361.8

$379.8

The term "additional funds needed (AFN)" is generally defined as follows:

Answer

Funds that are obtained automatically from routine business transactions.

Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.

The amount of assets required per dollar of sales.

The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.

A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.

Spontaneous funds are generally defined as follows:

Answer

Assets required per dollar of sales.

A forecasting approach in which the forecasted percentage of sales for each item is held constant.

Funds that a firm must raise externally through short-term or long-term borrowing and/or by selling new common or preferred stock.

Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include immediate increases in accounts payable, accrued wages, and accrued taxes.

The amount of cash raised in a given year minus the amount of cash needed to finance the additional capital expenditures and working capital needed to support the firm's growth.

Which of the following statements is CORRECT?

Answer

Any forecast of financial requirements involves determining how much money the firm will need, and this need is determined by adding together increases in assets and spontaneous liabilities and then subtracting operating income.

The AFN equation for forecasting funds requirements requires only a forecast of the firm's balance sheet. Although a forecasted income statement may help clarify the results, income statement data are not essential because funds needed relate only to the balance sheet.

Dividends are paid with cash taken from the accumulated retained earnings account, hence dividend policy does not affect the AFN forecast.

A negative AFN indicates that retained earnings and spontaneous liabilities are far more than sufficient to finance the additional assets needed.

If the ratios of assets to sales and spontaneous liabilities to sales do not remain constant, then the AFN equation will provide more accurate forecasts than the forecasted financial statements method.

Jefferson City Computers has developed a forecasting model to estimate its AFN for the upcoming year. All else being equal, which of the following factors is most likely to lead to an increase of the additional funds needed (AFN)?

Answer

A sharp increase in its forecasted sales.

A switch to a just-in-time inventory system and outsourcing production.

The company reduces its dividend payout ratio.

The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35.

The company discovers that it has excess capacity in its fixed assets.

Which of the following is NOT a key element in strategic planning as it is described in the text?

Answer

The mission statement.

The statement of the corporation's scope.

The statement of cash flows.

The statement of corporate objectives.

The corporation's strategies.

Which of the following statements is CORRECT?

Answer

Since accounts payable and accrued liabilities must eventually be paid off, as these accounts increase, AFN as calculated by the AFN equation must also increase.

Suppose a firm is operating its fixed assets at below 100% of capacity, but it has no excess current assets. Based on the AFN equation, its AFN will be larger than if it had been operating with excess capacity in both fixed and current assets.

If a firm retains all of its earnings, then it cannot require any additional funds to support sales growth.

Additional funds needed (AFN) are typically raised using a combination of notes payable, long-term debt, and common stock. Such funds are non-spontaneous in the sense that they require explicit financing decisions to obtain them.

If a firm has a positive free cash flow, then it must have either a zero or a negative AFN.

Which of the following statements is CORRECT?

Answer

When we use the AFN equation, we assume that the ratios of assets and liabilities to sales (A0*/S0 and L0*/S0) vary from year to year in a stable, predictable manner.

When fixed assets are added in large, discrete units as a company grows, the assumption of constant ratios is more appropriate than if assets are relatively small and can be added in small increments as sales grow.

Firms whose fixed assets are "lumpy" frequently have excess capacity, and this should be accounted for in the financial forecasting process.

For a firm that uses lumpy assets, it is impossible to have small increases in sales without expanding fixed assets.

There are economies of scale in the use of many kinds of assets. When economies occur the ratios are likely to remain constant over time as the size of the firm increases. The Economic Ordering Quantity model for establishing inventory levels demonstrates this relationship.

Which of the following is NOT one of the steps taken in the financial planning process?

Answer

Forecast the funds that will be generated internally. If internal funds are insufficient to cover the required new investment, then identify sources from which the required external capital can be raised.

Monitor operations after implementing the plan to spot any deviations and then take corrective actions.

Determine the amount of capital that will be needed to support the plan.

Develop a set of forecasted financial statements under alternative versions of the operating plan in order to analyze the effects of different operating procedures on projected profits and financial ratios.

Consult with key competitors about the optimal set of prices to charge, i.e., the prices that will maximize profits for our firm and its competitors.

Last year Handorf-Zhu Inc. had $850 million of sales, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?

Answer

54.30%

57.16%

60.17%

63.33%

66.67%

Which of the following assumptions is embodied in the AFN equation?

Answer

None of the firm's ratios will change.

Accounts payable and accruals are tied directly to sales.

Common stock and long-term debt are tied directly to sales.

Fixed assets, but not current assets, are tied directly to sales.

Last year's total assets were not optimal for last year's sales.

Which of the following statements is CORRECT?

Answer

The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds. In other words, it is the growth rate at which the firm's AFN equals zero.

If a firm's assets are growing at a positive rate, but its retained earnings are not increasing, then it would be impossible for the firm's AFN to be negative.

If a firm increases its dividend payout ratio in anticipation of higher earnings, but sales and earnings actually decrease, then the firm's actual AFN must, mathematically, exceed the previously calculated AFN.

Higher sales usually require higher asset levels, and this leads to what we call AFN. However, the AFN will be zero if the firm chooses to retain all of its profits, i.e., to have a zero dividend payout ratio.

Dividend policy does not affect the requirement for external funds based on the AFN equation.

Which of the following statements is NOT CORRECT?

Answer

The corporate valuation model can be used both for companies that pay dividends and those that do not pay dividends.

The corporate valuation model discounts free cash flows by the required return on equity.

The corporate valuation model can be used to find the value of a division.

An important step in applying the corporate valuation model is forecasting the firm's pro forma financial statements.

Free cash flows are assumed to grow at a constant rate beyond a specified date in order to find the horizon, or terminal, value.

Leak Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11% and FCF is expected to grow at a rate of 5% after Year 2, what is the Year 0 value of operations, in millions? Assume that the ROIC is expected to remain constant in Year 2 and beyond (and do not make any half-year adjustments).

Year: 1 2

Free cash flow: -$50 $100

Answer

$1,456

$1,529

$1,606

$1,686

$1,770

Akyol Corporation is undergoing a restructuring, and its free cash flows are expected to be unstable during the next few years. However, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5 equals $50 million, and the FCF growth rate is expected to be constant at 6% beyond that point. If the weighted average cost of capital is 12%, what is the horizon value (in millions) at t = 5?

Answer

$719

$757

$797

$839

$883

Based on the corporate valuation model, the value of a company's operations is $900 million. Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of the stock's price per share?

Answer

$23.00

$25.56

$28.40

$31.24

$34.36

Suppose Leonard, Nixon, & Shull Corporation's projected free cash flow for next year is $100,000, and FCF is expected to grow at a constant rate of 6%. If the company's weighted average cost of capital is 11%, what is the value of its operations?

Answer

$1,714,750

$1,805,000

$1,900,000

$2,000,000

$2,100,000

Based on the corporate valuation model, Bernile Inc.'s value of operations is $750 million. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long-term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of retained earnings. What is the best estimate for the firm's value of equity, in millions?

Answer

$429

$451

$475

$500

$525

Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?

Answer

$158

$167

$175

$184

$193

Which of the following does NOT always increase a company's market value?

Answer

Increasing the expected growth rate of sales.

Increasing the expected operating profitability (NOPAT/Sales).

Decreasing the capital requirements (Capital/Sales).

Decreasing the weighted average cost of capital.

Increasing the expected rate of return on invested capital.

Based on the corporate valuation model, the value of a company's operations is $1,200 million. The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 million in accounts payable, $120 million in notes payable, $300 million in long-term debt, $50 million in preferred stock, $180 million in retained earnings, and $800 million in total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of the stock's price per share?

Answer

$24.90

$27.67

$30.43

$33.48

$36.82

Simonyan Inc. forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon value, in millions at t = 3?

Answer

$840

$882

$926

$972

$1,021

Based on the corporate valuation model, Hunsader's value of operations is $300 million. The balance sheet shows $20 million of short-term investments that are unrelated to operations, $50 million of accounts payable, $90 million of notes payable, $30 million of long-term debt, $40 million of preferred stock, and $100 million of common equity. The company has 10 million shares of stock outstanding. What is the best estimate of the stock's price per share?

Answer

$13.72

$14.44

$15.20

$16.00

$16.80

A company forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13%, and the FCFs are expected to continue growing at a 5% rate after Year 3. Assuming that the ROIC is expected to remain constant in Year 3 and beyond, what is the Year 0 value of operations, in millions?

Year: 1 2 3

Free cash flow: -$15 $10 $40

Answer

$315

$331

$348

$367

$386

Suppose Yon Sun Corporation's free cash flow during the just-ended year (t = 0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions?

Answer

$948

$998

$1,050

$1,103

$1,158

Which of the following is NOT normally regarded as being a good reason to establish an ESOP?

Answer

To increase worker productivity.

To enable the firm to borrow at a below-market interest rate.

To make it easier to grant stock options to employees.

To help prevent a hostile takeover.

To help retain valued employees.

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

Answer

Abnormally high executive compensation.

Targeted share repurchases.

Shareholder rights provisions.

Restricted voting rights.

Poison pills.

 

FIN 534 quiz 6 week 7

Business / Economics

2/17/13

Opening Offer: $22.99
Posted by: rews
Date Posted: 2/17/13 8:22 AM
Due Date: 2/16/13

.Question 1

Which of the following statements is CORRECT?

Answer

One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project's full life whereas IRR does not.

One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC, whereas IRR assumes that cash flows are reinvested at the IRR. The NPV assumption is generally more appropriate.

One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project's full life whereas MIRR does not.

One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is based on undiscounted cash flows.

Since cash flows under the IRR and MIRR are both discounted at the same rate (the WACC), these two methods always rank mutually exclusive projects in the same order.

2 points

Question 2

Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash flows. Project A has an IRR of 11%, while Project B's IRR is 14%. When the WACC is 8%, the projects have the same NPV. Given this information, which of the following statements is CORRECT?

Answer

If the WACC is 13%, Project A's NPV will be higher than Project B's.

f the WACC is 9%, Project A's NPV will be higher than Project B's.

If the WACC is 6%, Project B's NPV will be higher than Project A's.

If the WACC is greater than 14%, Project A's IRR will exceed Project B's.

If the WACC is 9%, Project B's NPV will be higher than Project A's.

Question 3

Four of the following statements are truly disadvantages of the regular payback method, but one is not a disadvantage of this method. Which one is NOT

a disadvantage of the payback method?

Answer

Lacks an objective, market-determined benchmark for making decisions.

Ignores cash flows beyond the payback period.

Does not directly account for the time value of money.

Does not provide any indication regarding a project's liquidity or risk.

Does not take account of differences in size among projects.

2 points

Question 4

Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S has an IRR of 15%, while Project L's IRR is 12%. The two projects have the same NPV when the WACC is 7%. Which of the following statements is CORRECT?

Answer

If the WACC is 10%, both projects will have positive NPVs.

If the WACC is 6%, Project S will have the higher NPV.

If the WACC is 13%, Project S will have the lower NPV.

If the WACC is 10%, both projects will have a negative NPV.

Project S's NPV is more sensitive to changes in WACC than Project L's.

Question 5

Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusive projects that are being considered is 12%. Project S has an IRR of 20% while Project L's IRR is 15%. The projects have the same NPV at the 12% current WACC. However, you believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?

Answer

You should reject both projects because they will both have negative NPVs under the new conditions.

You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.

You should recommend Project L, because at the new WACC it will have the higher NPV.

You should recommend Project S, because at the new WACC it will have the higher NPV.

You should recommend Project L because it will have both a higher IRR and a higher NPV under the new conditions.

2 points

Question 6

Which of the following statements is CORRECT?

Answer

The MIRR and NPV decision criteria can never conflict.

The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.

One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more reasonable reinvestment rate assumption.

The higher the WACC, the shorter the discounted payback period.

The MIRR method assumes that cash flows are reinvested at the crossover rate.

Question 7

Which of the following statements is CORRECT?

Answer

The NPV, IRR, MIRR, and discounted payback (using a payback requirement of 3 years or less) methods always lead to the same accept/reject decisions for independent projects.

For mutually exclusive projects with normal cash flows, the NPV and MIRR methods can never conflict, but their results could conflict with the discounted payback and the regular IRR methods.

Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR over the regular IRR.

If a firm uses the discounted payback method with a required payback of 4 years, then it will accept more projects than if it used a regular payback of 4 years.

The percentage difference between the MIRR and the IRR is equal to the project's WACC.

2 points

Question 8

Which of the following statements is CORRECT?

Answer

The shorter a project's payback period, the less desirable the project is normally considered to be by this criterion.

One drawback of the regular payback is that this method does not take account of cash flows beyond the payback period.

If a project's payback is positive, then the project should be accepted because it must have a positive NPV.

The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.

One drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback.

Question 9

Which of the following statements is CORRECT?

Answer

The IRR method appeals to some managers because it gives an estimate of the rate of return on projects rather than a dollar amount, which the NPV method provides.

The discounted payback method eliminates all of the problems associated with the payback method.

When evaluating independent projects, the NPV and IRR methods often yield conflicting results regarding a project's acceptability.

To find the MIRR, we discount the TV at the IRR.

A project's NPV profile must intersect the X-axis at the project's WACC.

2 points

Question 10

Which of the following statements is CORRECT?

Answer

The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR.

The NPV method assumes that cash flows will be reinvested at the risk-free rate, while the IRR method assumes reinvestment at the IRR.

The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the risk-free rate.

The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period.

The IRR method does not consider all relevant cash flows, particularly cash flows beyond the payback period.

Question 11

Assume that the economy is in a mild recession, and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L's IRR is 15%. The projects have the same NPV at the 8% current WACC. However, you believe that the economy is about to recover, and money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?

Answer

You should reject both projects because they will both have negative NPVs under the new conditions.

You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market.

You should recommend Project L, because at the new WACC it will have the higher NPV.

You should recommend Project S, because at the new WACC it will have the higher NPV.

You should recommend Project S because it has the higher IRR and will continue to have the higher IRR even at the new WACC.

2 points

Question 12

Which of the following statements is CORRECT?

Answer

One defect of the IRR method is that it does not take account of cash flows over a project's full life.

One defect of the IRR method is that it does not take account of the time value of money.

One defect of the IRR method is that it does not take account of the cost of capital.

One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future.

One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.

Question 13

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Answer

A project's NPV is generally found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting the TV at the IRR to find its PV.

The higher the WACC used to calculate the NPV, the lower the calculated NPV will be.

If a project's NPV is greater than zero, then its IRR must be less than the WACC.

If a project's NPV is greater than zero, then its IRR must be less than zero.

The NPVs of relatively risky projects should be found using relatively low WACCs.

2 points

Question 14

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Answer

The longer a project's payback period, the more desirable the project is normally considered to be by this criterion.

One drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money.

If a project's payback is positive, then the project should be rejected because it must have a negative NPV.

The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.

If a company uses the same payback requirement to evaluate all projects, say it requires a payback of 4 years or less, then the company will tend to reject projects with relatively short lives and accept long-lived projects, and this will cause its risk to increase over time.

Question 15

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Answer

A project's regular IRR is found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting this TV at the WACC.

A project's regular IRR is found by discounting the cash inflows at the WACC to find the present value (PV), then compounding this PV to find the IRR.

If a project's IRR is greater than the WACC, then its NPV must be negative.

To find a project's IRR, we must solve for the discount rate that causes the PV of the inflows to equal the PV of the project's costs.

To find a project's IRR, we must find a discount rate that is equal to the WACC.

2 points

Question 16

Which of the following statements is CORRECT?

Answer

An externality is a situation where a project would have an adverse effect on some other part of the firm's overall operations. If the project would have a favorable effect on other operations, then this is not an externality.

An example of an externality is a situation where a bank opens a new office, and that new office causes deposits in the bank's other offices to increase.

The NPV method automatically deals correctly with externalities, even if the externalities are not specifically identified, but the IRR method does not. This is another reason to favor the NPV.

Both the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified. However, the payback method does not.

Identifying an externality can never lead to an increase in the calculated NPV.

Question 17

Which of the following statements is CORRECT?

Answer

A sunk cost is any cost that must be expended in order to complete a project and bring it into operation.

A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.

A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.

Sunk costs were formerly hard to deal with but now that the NPV method is widely used, it is possible to simply include sunk costs in the cash flows and then calculate the PV of the project.

A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores.

2 points

Question 18

Which of the following statements is CORRECT?

Answer

An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted.

Sunk costs must be considered if the IRR method is used but not if the firm relies on the NPV method.

A good example of a sunk cost is a situation where a bank opens a new office, and that new office leads to a decline in deposits of the bank's other offices.

A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project.

If sunk costs are considered and reflected in a project's cash flows, then the project's calculated NPV will be higher than it otherwise would be.

Question 19

Which of the following statements is CORRECT?

Answer

In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to an upward

bias in the NPV.

In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to a downward

bias in the NPV.

The existence of any type of "externality" will reduce the calculated NPV versus the NPV that would exist without the externality.

If one of the assets to be used by a potential project is already owned by the firm, and if that asset could be sold or leased to another firm if the new project were not undertaken, then the net after-tax proceeds that could be obtained should be charged as a cost to the project under consideration.

If one of the assets to be used by a potential project is already owned by the firm but is not being used, then any costs associated with that asset is a sunk cost and should be ignored.

2 points

Question 20

Which of the following statements is CORRECT?

Answer

Sensitivity analysis is a good way to measure market risk because it explicitly takes into account diversification effects.

One advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of specific effects occurring, whereas scenario analysis cannot account for probabilities.

Well-diversified stockholders do not need to consider market risk when determining required rates of return.

Market risk is important, but it does not have a direct effect on stock prices because it only affects beta.

Simulation analysis is a computerized version of scenario analysis where input variables are selected randomly on the basis of their probability distributions.

Question 21

Which of the following factors should be included in the cash flows used to estimate a project's NPV?

Answer

All costs associated with the project that have been incurred prior to the time the analysis is being conducted.

Interest on funds borrowed to help finance the project.

The end-of-project recovery of any working capital required to operate the project.

Cannibalization effects, but only if those effects increase the project's projected cash flows.

Expenditures to date on research and development related to the project, provided those costs have already been expensed for tax purposes.

2 points

Question 22

Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?

Answer

The new project is expected to reduce sales of one of the company's existing products by 5%.

Since the firm's director of capital budgeting spent some of her time last year to evaluate the new project, a portion of her salary for that year should be charged to the project's initial cost.

The company has spent and expensed $1 million on R&D associated with the new project.

The company spent and expensed $10 million on a marketing study before its current analysis regarding whether to accept or reject the project.

The firm would borrow all the money used to finance the new project, and the interest on this debt would be $1.5 million per year.

Question 23

The relative risk of a proposed project is best accounted for by which of the following procedures?

Answer

Adjusting the discount rate upward if the project is judged to have above-average risk.

Adjusting the discount rate downward if the project is judged to have above-average risk.

Reducing the NPV by 10% for risky projects.

Picking a risk factor equal to the average discount rate.

Ignoring risk because project risk cannot be measured accurately.

2 points

Question 24

Rowell Company spent $3 million two years ago to build a plant for a new product. It then decided not to go forward with the project, so the building is available for sale or for a new product. Rowell owns the building free and clear--there is no mortgage on it. Which of the following statements is CORRECT?

Answer

Since the building has been paid for, it can be used by another project with no additional cost. Therefore, it should not be reflected in the cash flows for any new project.

If the building could be sold, then the after-tax proceeds that would be generated by any such sale should be charged as a cost to any new project that would use it.

This is an example of an externality, because the very existence of the building affects the cash flows for any new project that Rowell might consider.

Since the building was built in the past, its cost is a sunk cost and thus need not be considered when new projects are being evaluated, even if it would be used by those new projects.

If there is a mortgage loan on the building, then the interest on that loan would have to be charged to any new project that used the building.

Question 25

Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects?

Answer

Project A, which has average risk and an IRR = 9%.

Project B, which has below-average risk and an IRR = 8.5%.

Project C, which has above-average risk and an IRR = 11%.

Without information about the projects' NPVs we cannot determine which project(s) should be accepted.

All of these projects should be accepted.

2 points

Question 26

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

Answer

Using some of the firm's high-quality factory floor space that is currently unused to produce the proposed new product. This space could be used for other products if it is not used for the project under consideration.

Revenues from an existing product would be lost as a result of customers switching to the new product.

Shipping and installation costs associated with a machine that would be used to produce the new product.

The cost of a study relating to the market for the new product that was completed last year. The results of this research were positive, and they led to the tentative decision to go ahead with the new product. The cost of the research was incurred and expensed for tax purposes last year.

It is learned that land the company owns and would use for the new project, if it is accepted, could be sold to another firm.

Question 27

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

Answer

A firm has a parcel of land that can be used for a new plant site or be sold, rented, or used for agricultural purposes.

A new product will generate new sales, but some of those new sales will be from customers who switch from one of the firm's current products.

A firm must obtain new equipment for the project, and $1 million is required for shipping and installing the new machinery.

A firm has spent $2 million on R&D associated with a new product. These costs have been expensed for tax purposes, and they cannot be recovered regardless of whether the new project is accepted or rejected.

A firm can produce a new product, and the existence of that product will stimulate sales of some of the firm's other products.

2 points

Question 28

A company is considering a new project. The CFO plans to calculate the project's NPV by estimating the relevant cash flows for each year of the project's life (i.e., the initial investment cost, the annual operating cash flows, and the terminal cash flow), then discounting those cash flows at the company's overall WACC. Which one of the following factors should the CFO be sure to INCLUDE in the cash flows when estimating the relevant cash flows?

Answer

All sunk costs that have been incurred relating to the project.

All interest expenses on debt used to help finance the project.

The investment in working capital required to operate the project, even if that investment will be recovered at the end of the project's life.

Sunk costs that have been incurred relating to the project, but only if those costs were incurred prior to the current year.

Effects of the project on other divisions of the firm, but only if those effects lower the project's own direct cash flows.

Question 29

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

Answer

Changes in net working capital attributable to the project.

Previous expenditures associated with a market test to determine the feasibility of the project, provided those costs have been expensed for tax purposes.

The value of a building owned by the firm that will be used for this project.

A decline in the sales of an existing product, provided that decline is directly attributable to this project.

The salvage value of assets used for the project that will be recovered at the end of the project's life.

2 points

Question 30

Which of the following statements is CORRECT?

Answer

Using accelerated depreciation rather than straight line would normally have no effect on a project's total projected cash flows but it would affect the timing of the cash flows and thus the NPV.

Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.

Corporations must use the same depreciation method (e.g., straight line or accelerated) for stockholder reporting and tax purposes.

Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.

Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project's projected NPV.

 

fontd�Tiy�3h2sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 23px; orphans: 2; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; -webkit-text-size-adjust: auto; -webkit-text-stroke-width: 0px; background-position: initial initial; background-repeat: initial initial;">Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.

 

Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project's projected NPV.

MGT 330 Final Exam

Business / Economics

2/15/13

Opening Offer: $27.00
Posted by: nathanwebster1989
Date Posted: 2/15/13 2:39 PM
Due Date: 2/14/13

1) Which of the following functions of management is focused on delivering strategic value?

 A. Planning

 B. Organizing

 C. Leading

 D. Controlling

 

2) Which of the following best characterizes the controlling function of management?

A. Motivating people to be high performers

B. Assigning job responsibilities and allocating resources

C. Monitoring performance and implementing changes as necessary

D. Analyzing current situations and formulating business strategies

 

3) __________ involves analyzing a situation, determining goals to be pursued, and deciding upon the actions that will be taken to achieve these goals.

A. Staffing

B. Leading

C. Organizing

D. Planning

 

4) Robert was recently hired as the workplace safety compliance officer at ABC Power Company. Robert will have the responsibility to monitor regulations from which of these government agencies?

A. Federal Communications Commission

B. Environmental Protection Agency

C. National Labor Relations Board

D. Occupational Safety and Health Administration

 

5) Which of the following is the first step in effective delegation?

A. Give the person the authority needed.

B. Define the goal succinctly.

C. Select the person to do the task.

D. Solicit ideas from subordinates.

 

6) The assignment of different tasks to different people or groups is the

A. strategic plan

B. organization structure

C. division of labor

D. value chain

 

7) Plans are

A. actions taken to achieve goals

B. targets a manager wants to reach

C. specific to differing industries

D. inappropriate when resources are scarce

 

8) The outcome of situational analysis is

A. the identification of alternative plans of action

B. the identification of contingency plans to be followed under various scenarios

C. the identification of planning assumptions, issues, and problems

D. the identification of the consequences of alternatives under consideration

 

9) What is management's function in strategic planning?

A. To outline the goals and objectives of the organization

B. To give specific directions as to how each department is operated

C. To begin the selection and hiring process for the organization

D. To set-up tight controls on how each function in the organization is to be structured

 

10) Which of the following would provide the best information for the manager on factors that influence the company's strategic, tactical, operational, and contingency plans?

A. Recently released government regulations

B. Statistical data regarding market share

C. SWOT analysis

D. Prior year's financial performance of the company

 

11) __________ plans might be referred to as "what-if" plans.

A. Single-use

B. Strategic

C. Contingency

D. Standing

 

12) A plan that focuses on ongoing activities and may become a more permanent policy or rule is a

A. standing plan

B. single-use plan

C. strategy

D. mission statement

 

13) Which type of program should management implement to have a culture of ethics that prevent, detect, and punish legal violations?

A. Sarbanes-Oxley Act Training

B. Ethics program

C. Compliance-based ethics program

D. Integrity-based ethics program

 

14) Honesty, caring, loyalty, fairness, and integrity are all examples of

A. citizenship

B. values

C. self-focus

D. ethics

 

15) As a manager, you want to create a project team to plan and implement a project designed to meet the demands of globalization. Which of the following types of organizational structure would you use to achieve higher degree of flexibility and adaptability of the team members?

A. Functional

B. Divisional

C. Matrix

D. Network

 

16) The planning process of human resources management begins with

A. determining the number and types of people needed to realize the organization's business plans

B. recruiting individuals who will assist the organization to realize its business plans

C. training people who will assist the organization to realize its business plans

D. evaluating an organization's present employees and their capabilities to fulfill the organization's business plans

 

17) Which type of organizational structure optimizes employee empowerment?

A. Centralized

B. Decentralized

C. Functional

D. Divisional

 

18) The assignment of different tasks to different people or groups is the

A. strategic plan

B. organization structure

C. division of labor

D. value chain

 

19) Which of the following is an advantage of product departmentalization?

A. Information needs managed more easily

B. Suitable for stable environments

C. Efficient resource utilization

D. Decision making and lines of communication are simple

 

20) Ruby recently accepted a job with a large insurance firm as an internal auditor. Ruby has found that her job is different than the internship she had at an accounting consulting firm. The insurance firm has strictly defined job responsibilities and lines of communication. For every decision Ruby needs to make, approval must be obtained from upper management. Overall, she has found the atmosphere to be quite formal as compared to the internship. Ruby has concluded that the insurance firm has

A. a high degree of centralization

B. decentralized authority

C. a matrix design

D. an ineffective structure

 

21) A mental image of a possible and desirable future state of the organization is a(n)

A. strategic plan

B. operational plan

C. goal

D. vision

 

22) A leader is

A. someone with authority over others

B. the top-level manager in a firm or business

C. a strategic-level manager

D. someone who influences others to attain goals

 

23) Legitimate power is described as power that exists through

A. control over punishments

B. control over rewards

C. the authority to tell others what to do

D. having expertise

 

24) Behavior that gives purpose and meaning to organizations, while envisioning and creating a positive future, is

A. supervisory leadership

B. strategic leadership

C. charismatic leadership

D. task-motivated leadership

 

25) NAFTA combined the economies of

A. the U.S., Canada, and Mexico

B. Canada, Mexico, and South America

C. South America, the U.S., and Latin America

D. Latin America, Pacific Rim, and the European Union

 

26) A pharmaceutical manufacturer actively monitors all products produced to verify their ingredients fall within rigid control ranges that ensure product effectiveness. This monitoring allows them to make adjustments should they see negative trends occurring. The manufacturer is engaging in the management function of

A. planning

B. controlling

C. quality assurance

D. regulatory compliance

 

27) Which type of control works best when there is "no one best way" to do a job and employees are empowered to make decisions?

A. Bureaucratic control

B. Market control

C. Clan control

D. Performance control

 

28) This type of control takes place while plans are carried out, and is the heart of any control system.

A. Feedback control.

B. Concurrent control

C. Feed forward control

D. Market control

 

29) Where are performance data commonly obtained?

A. Oral and written reports and personal observation

B. Supervisors, line managers, and coworkers

C. Top, middle, and lower management

D. Competitors

 

30) The last step in the control process is

A. taking corrective action

B. setting performance standards

C. measuring performance

D. comparing performance

MGT 230 Final Exam

Business / Economics

2/15/13

Opening Offer: $27.00
Posted by: nathanwebster1989
Date Posted: 2/15/13 2:27 PM
Due Date: 2/14/13

1) Planning involves which of the following?

A. Analyzing current situations

B. Determining rewards for goals achievement

C. Motivating employees

D. Implementing necessary changes

 

2) _______ is specifying the goals to be achieved and deciding in advance the appropriate actions needed to achieve those goals.

A. Staffing

B. Leading

C. Organizing

D. Planning

 

3) Advances in genetic engineering and biotechnology are expected to produce some food products that will become available year-round even in northern climates. These changes will provide grocers with an opportunity to reduce their shipping costs while at the same time, offering fresher produce to their customers. These advances are an example of changes in the

A. technological environment

B. economic environment

C. political environment

D. ecological environment

 

4) _________ trends regarding how people think and behave have major implications for management of the labor force, corporate social actions, and strategic decisions about products and markets.

A. Psychological

B. Economic

C. Technological

D. Societal

 

5) Which of the following is a step in the decision-making process?

A. Generating an idea

B. Good business planning

C. Evaluating the decision

D. Delegating a task

 

6) Which is a step in the decision-making process?

A. Resolving and reducing conflict

B. Making the choice

C. Using the lack of structure

D. Delegating a task

 

7) The targets or ends the manager wants to reach are called

A. goals

B. missions

C. visions

D. strategies

 

8) In the _______________ stage of the planning process, managers should weigh the advantages, disadvantages, and potential effects of each alternative goal and plan.

A. goal and plan evaluation

B. goal and plan selection

C. implementation

D. alternate goals and plans

 

9) Tactical planning would include which of the following?

A. Profit goals

B. Design, test, and install the equipment needed to produce a new product line

C. Human resources requirements

D. Return on investment

 

10) The internal analysis component of the strategic management process assesses the organization's

A. performance levels

B. competitors

C. industry growth rate

D. product substitutions in the market

 

11) Eagle Manufacturing, Inc., is in the middle of its first day of the senior management retreat. The topic on the agenda is corporate social responsibility (CSR). Most of the group has seen this brought up before and then shot down because it generally costs Eagle's shareholders in the form of a lower stock price. But the new VP of Ethics, Gloria Wright, is about to explain why she believes CSR will actually benefit the shareholders and Eagle management alike. Her team begins the presentation with a discussion of CSR—its current definition and reconciliation of past views. Jeremiah then discusses the importance of being a good global corporate citizen by supporting the local school system. Ellen takes the floor to make the case for doing what is expected by global stakeholders even though there are no

laws requiring those actions. Finally Gloria wraps the discussion up with why Eagle should take legal and economic responsibility for the firm's performance. To Gloria's team's credit, senior management does appear to buy into the pyramid of global corporate social responsibility and performance that her team just presented.

Ellen's presentation most likely focused on the __________ responsibility of the firm.

A. economic

B. legal

C. ethical

D. social

 

12) Eagle Manufacturing, Inc., is in the middle of its first day of the senior management retreat. The topic on the agenda is corporate social responsibility (CSR). Most of the group has seen this brought up before and then shot down because it generally costs Eagle's shareholders in the form of a lower stock price. But the new VP of Ethics, Gloria Wright, is about to explain why she believes CSR will actually benefit the shareholders and Eagle management alike. Her team begins the presentation with a discussion of CSR—its current definition and reconciliation of past views. Jeremiah then discusses the importance of being a good global corporate citizen by supporting the local school system. Ellen takes the floor to make the case for doing what is expected by global stakeholders even though there are no

laws requiring those actions. Finally Gloria wraps the discussion up with why Eagle should take legal and economic responsibility for the firm's performance. To Gloria's team's credit, senior management does appear to buy into the pyramid of global corporate social responsibility and performance that her team just presented.

Gloria's team's presentation focused on the pyramid of global corporate social responsibility. To do what is desired by global stakeholders correlates with the _______ component of the pyramid.

A. philanthropic

B. ethical

C. legal

D. economic

 

13) In the study by Lawrence and Lorsch, companies in complex, dynamic environments developed _____ levels of differentiation; and

_____ levels of integration.

A. low; low

B. high; high

C. low; high

D. high; low

 

14) An aspect of the organization's internal environment created by job specialization and the division of labor is called

A. differentiation

B. integration

C. division of labor

D. specialization

 

15) An organization with departmentalization that groups units around products, customers, or geographic regions is called a

A. divisional organization

B. centralized organization

C. matrix organization

D. functional organization

 

16) Which of the following statements about matrix organizations is true?

A. A matrix organization is the same as a functional organization.

B. A matrix organization is the same as a product organization.

C. A matrix organization is a hybrid of the functional and divisional organizational forms.

D. A matrix organization is considered out-of-date compared to the organic organization.

 

17) An organization with departmentalization that groups units around products, customers, or geographic regions is called a

A. centralized organization

B. matrix organization

C. virtual organization

D. divisional organization

 

18) Sports International (SI) began business by making shoes for athletes. They soon expanded into making shoes for non-athletic purposes. They now manufacture and distribute clothing, sporting equipment, and protective sports gear worldwide. They are departmentalized by products sold to serious athletes, products sold to "weekend" athletes and products sold to sports teams. SI has

utilized which form of departmentalization?

A. Geographic

B. Customer

C. Functional

D. Matrix

 

19) The trait known as leadership motivation suggests that great leaders

A. can motivate others to work hard

B. can motivate others to become leaders

C. can motivate others to join

D. want to lead

 

20) A leadership perspective that attempts to identify what effective leaders do and the behaviors they exhibit is referred to as the

A. behavioral approach

B. trait approach

C. transformational leadership

D. strategic approach

 

21) __________ leadership invites colleagues at the same level to solve problems together.

A. Horizontal

B. Collegial

C. Lateral

D. Linear

22) Leaders who relate to others to serve their needs and enhance their personal growth while strengthening the organization are known as

A. lateral leaders

B. shared leaders

C. bridge leaders

D. servant-leaders

 

23) A shift in worker values toward personal time, quality of life, self-fulfillment, and family is occurring among

A. men

B. women

C. women and men

D. minorities

 

24) Future trends in the labor force include a

A. smaller labor force

B. more experienced labor force

C. more homogenous labor force

D. younger labor force

 

25) Behavior that gives purpose and meaning to organizations, while envisioning and creating a positive future, is known as

A. strategic leadership

B. supervisory leadership

C. organizational leadership

D. task leadership

 

26) The correspondence between actions and words that include characteristics such as honesty and credibility is known as

A. drive

B. self-confidence

C. knowledge of the business

D. integrity

 

27) Owners from two businesses have asked you which type of control system they should utilize. To help you make your decision, they have each provided a brief description of their organization. Alpha Omega, Inc., is a large corporation built in the 1950s. They produce chemical concentrates for industrial cleaning. Their organization uses a strict set of rules and regulations with their workforce. They have

the ability to track a large amount of data using statistical techniques. Mid-Atlantic Health is a regional medical center. They want to use a control system that will allow them to tie pricing of services and profits to specific services in the medical center. The control systems that should be used in the scenarios above were developed by

A. William Ouchi

B. Xerox

C. Frederick Taylor

D. Motorola

 

28) Your manager is speaking to a group of employees about a problem in your department. Employees are not complying with the rules regarding clocking in and clocking out each day. The rules in this situation are very important as employees will not receive their correct pay if the clocking procedures are not followed. There are three suggestions being considered to address this problem.

Employees will be monitored at the entrance during shift changes to make sure that each complies with the procedure.

Reports will be reviewed at the end of each pay period. The reports will contain data tracking the number of employees not complying with the procedures each shift. Employees violating the procedure will be counseled to correct the problem.

A new procedure will be developed describing an easier procedure for employees to follow. Training will be conducted so that each employee knows the policy and the procedure before it is enacted.

Option 1 describes which approach to bureaucratic control?

A. Feedback

B. Concurrent

C. Feedforward

D. Market

 

29) Suppose you are interviewing the CEO of a large company. The CEO is telling you about his or her job as a manager and how he or she spends time. Using the description below, which function of management is the CEO most likely describing in this example?

"My job, for some part of each day, is to empower our employees to think of things in new and different ways, not just to come to work and complete the tasks on a list."

A. Organizing

B. Leading

C. Controlling

D. Decision making

 

30) Suppose you are interviewing the CEO of a large company. The CEO is telling you about his or her job as a manager and how he or she spends time. Using the description below, which function of management is the CEO most likely describing in this example?

"Every six months or so, my senior management team and I meet to discuss the goals that will be achieved over the next year, three years, and beyond. We then make sure we are clear on who will take responsibility to see that the appropriate actions are undertaken to achieve our goals within the time frame we set."

A. Planning

B. Organizing

C. Leading

D. Decision making

LAW 421 Final Exam

Business / Economics

2/15/13

Opening Offer: $27.00
Posted by: nathanwebster1989
Date Posted: 2/15/13 2:13 PM
Due Date: 2/14/13

1) Which of the following does not result in a decision rendered by the hearing officer?

A.  Arbitration

B.  Mediation

C.  Med-arb

D.  Using expert evaluators

                            

 2) Jurisprudence is defined as

A.  adjudication of law suits

B.  the enactment of laws by a government body

C.  the science and philosophy of law

D.  the duties and obligations owed by a citizen

 

 3) The state of Kansas has enacted a new law requiring all commercial trucks driving on Kansas roads to have special mud flaps installed. These mud flaps have been proven to make driving in the rain significantly safer due to reduced mist created by trucks driving in the rain, although data regarding accidents and injuries has not yet been determined. Any truck entering Kansas must have these flaps installed or will be subject to a significant fine and delay. The cost for purchase and installation of these flaps is $1,000 per truck. In short, trucks must have these flaps or go around the state. This Kansas law

A.  is valid because it only applies to Kansas roads and such a law is entirely intrastate

B.  is valid because Kansas's right to protect its citizens under its police powers will override any outside challenges to this law

C.  is invalid because this law is intended to regulate interstate commerce, an enumerated federal power

D.  is invalid because although on its face it's an intrastate law, this statute will have a significant economic effect on interstate commerce causing an undue burden

 

4) The power of preemption is derived from

A.  the power of judicial review

B.  the Commerce Clause

C.  the Necessary and Proper Clause

D.  the Supremacy Clause

 

5) What is the main problem with international courts?

A.  Finding judges who understand the complexities of international law

B.  Creating a body of law that reflects multiple legal systems

C.  Enforcing a ruling on sovereign nations is difficult

D.  Lack of recognition from the U.N. and WTO

 

6) Under the U.S. legal system, subject to some exceptions, costs of litigation regarding both the plaintiff and defendant

A.  are all paid by the loser

B.  are all paid by the winner

C.  are paid for by each side with the plaintiff and defendant paying for their own legal costs

D.  are totaled by the court and then for fairness, split in half with each side paying an equal amount

 

7) Generally, torts law is governed by

A.  state statutory law

B.  state common law

C.  federal statutory law

D.  constitutional law

 

8) Assumption of risk is a defense to

A.  conversion

B.  negligence

C.  defamation

D.  battery

 

9) The three stripes on Adidas clothing represents a

A.  trademark

B.  trade dress

C.  trade secret

D.  patent

 

10) The color or shape of an item, if distinctive, is a

A.  trademark

B.  trade dress

C.  copyright

D.  patent

 

11) Cybersquatting describes the practice of

A.  registering multiple domain names and then selling them back to companies at inflated prices

B.  hacking into a company's website to install a virus or Trojan horse designed to steal information but allow the site to continue operation

C.  using mechanical devises to access a company's website multiple times to the point that traffic to the site is slowed or blocked

D.  hacking into a company's website to install a virus designed to cause the company's website to totally cease operation

 

12) The Digital Millennium Copyright Act (1998) provided each of the following protections EXCEPT

A.  manufacturers of CD-Writers were required to pay 2% of their sales into a fund to be distributed to copyright holders because the CD-Writers could easily copy music and other copyrighted works

B.  civil and criminal penalties were established for those who sell or manufacture products or services that circumvent antipiracy software

C.  restrictions were placed on analog recorders and camcorders that lack antipiracy features

D.  ISPs were relieved of liability for copyright infringement by their users as long as the ISP had no knowledge of the infringement

 

 13) When Maria comes home from work, she finds that her yard has been mowed and trimmed. An hour later, a man comes to her door to collect payment for the yard work. Maria refuses to pay him because she has never seen him before nor had she hired him to do the work. Which of the following is accurate?

A.  This is an implied, unilateral contract, so she must pay.

B.  Maria has received unjust enrichment so a quasi contract is formed, so she must pay.

C.  The court would make Maria pay the reasonable cost of the work to be fair to both parties.

D.  Maria would not have to pay anything.

 

14) Where a promise can only be accepted by the performance of the person to whom it is offered is an example of a/an

A.  bilateral contract

B.  unilateral contract

C.  implied contract

D.  quasi contract

 

15) Each of the following is a discharge by mutual consent EXCEPT

A.  accord and satisfaction

B.  novation

C.  rescission

D.  frustration of purpose

 

16) Harry sees an AK-47 automatic assault rifle in a gun shop window. He inquires about the price and is told that it is $2,500. Harry signs a contract promising to pay the $2,500 on Friday, taking possession of the rifle when payment is made. On Thursday, a law is enacted making the ownership, sale, or possession of an automatic rifle illegal. This contract

A.  automatically terminates due to impossibility

B.  automatically terminates due to impracticability

C.  automatically terminates due to frustration of purpose

D.  is enforceable and not affected by the new law because it was entered into before the law took effect

 

17) Which of the following is rarely awarded in contracts cases?

A.  Consequential damages

B.  Compensatory damages

C.  Punitive damages

D.  Liquidated damages

 

18) Which of the following is classified as an equitable remedy?

A.  Consequential damages

B.  Reformation

C.  Restitution

D.  Liquidated damages

 

19) Which of the following would not be considered tangible?

A.  A car

B.  Oxygen

C.  The right of ownership

D.  The pen or pencil you are using

 

20) With regard to consideration in a sales contract, the UCC differs from the common law in that

A.  consideration in a sales contract may be modified without additional consideration

B.  consideration exchanged must be equal or very closely equal in sales contracts

C.  consideration is not required in sales contracts

D.  consideration in a sales contract may be modified as long as additional consideration is provided

 

21) The UCC will permit an incomplete or slightly ambiguous contract to be enforced using each of the following criteria EXCEPT

A.  past commercial conduct

B.  industry standards or norms

C.  judicial input of any terms necessary to maintain fairness

D.  correspondence or verbal exchanges between the parties

 

22) Two merchant companies have entered into a contract for the sale of goods but have had no prior dealings, which would establish a course of conduct between them. The UCC will allow gap fillers to apply to their contract regarding missing terms in each of the following situations EXCEPT

A.  they have failed to specify when payment for the goods is to be made

B.  they have failed to specify where delivery of the goods is to be made

C.  they have failed to specify the quality or grade of the goods to be delivered

D.  they have failed to specify the price of the goods to be delivered

 

23) When a buyer rejects nonconforming goods and purchases the appropriate goods from a different seller, this is an example of which of the following:

A.  Cover

B.  Specific Performance

C.  Lawsuit for Money Damages

D.  Revoking Acceptance

 

24) Which of these is not a requirement for disclaiming a warranty?

A.  Statutory authorization

B.  A conspicuous writing

C.  Explaining why the warranty is being disclaimed

D.  Including the word merchantability if merchantability is to be disclaimed

 

25) "What if everyone took these same actions" is a question sometimes called the

A.  universalization approach

B.  utilitarian approach

C.  functionality approach

D.  morality approach

 

26) The utilitarian approach to moral philosophy was founded by

A.  Jeremy Bentham

B.  Immanuel Kant

C.  Cicero

D.  Kenneth Lay

 

27) Stan is an investment manager. He has received money from various investors with a promise of very high returns on their investments. The invested money is not supplying enough capital in order to pay the returns promised, so he has started using new investor's money to pay older investors. By advertising and by word of mouth, people are anxious to invest with Stan because of the money being paid, and with the influx of new investors, he is able to continue operating. Stan is

A.  operating an insider trading operation

B.  racketeering

C.  guilty of conspiracy to defraud

D.  operating a Ponzi scheme

 

28) Ben is the manager of a branch of a large bank. He has regularly taken money from customer's accounts for his own use and changed the bank records to cover his actions. Ben is guilty of

A.  a conspiracy

B.  a Ponzi scheme

C.  racketeering

D.  embezzlement

 

29) The Sarbanes-Oxley Act (2002) imposed stricter regulations on how corporations do business through regulations in each of the following areas EXCEPT

A.  tax compliance

B.  financial reporting

C.  corporate governance

D.  auditing

 

30) Joan is the CFO of Para Corp. and is a year from retirement. In order to guarantee herself a very substantial bonus and to boost her retirement package, she knowingly certifies false financial reports making the company appear to be much more profitable than it really is. She further takes steps to assure that the financial report was not reviewed through internal controls maintained by Para Corp. Under the provisions of the Sarbanes-Oxley Act (2002), if her fraud is NOT part of a larger scheme, what criminal penalties are possible for Joan?

A.  $1 million in fines and up to 10 years in prison

B.  $2 million in fines and up to 12 years in prison

C.  $5 million in fines and up to 15 years in prison

D.  $10 million in fines and up to 20 years in prison

 

fin 534

Business / Economics

2/8/13

Opening Offer: $2.00
Posted by: byronpatt
Date Posted: 2/8/13 4:13 PM
Due Date: 2/7/13

Stocks X and Y have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of
the following statements is CORRECT?

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