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FIN 534 – Homework Chapter 4

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 4:54 PM

1. A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT?

a. The annual payments would be larger if the interest rate were lower.

b. If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan.

c. The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower.

d. The last payment would have a higher proportion of interest than the first payment.

e. The proportion of interest versus principal repayment would be the same for each of the 7 payments.

2. Which of the following statements is CORRECT?

a. If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.

b. If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost.

c. To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise.

d. If you solve for I and get a negative number, then you must have made a mistake.

e. If CF0 is positive and all the other CFs are negative, then you cannot solve for I.

3. Riverside Bank offers to lend you $50,000 at a nominal rate of 6.5%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Midwest Bank also offers to lend you the $50,000, but it will charge an annual rate of 7.0%, with no interest due until the end of the year. How much higher or lower is the effective annual rate charged by Midwest versus the rate charged by Riverside?

a. 0.52%

b. 0.44%

c. 0.36%

d. 0.30%

e. 0.24%

4. Steve and Ed are cousins who were both born on the same day, and both turned 25 today. Their grandfather began putting $2,500 per year into a trust fund for Steve on his 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estate's trustee) will make 40 more $2,500 payments until a 46th and final payment is made on Steve's 65th birthday. The grandfather set things up this way because he wants Steve to work, not be a "trust fund baby," but he also wants to ensure that Steve is provided for in his old age.

Until now, the grandfather has been disappointed with Ed, hence has not given him anything. However, they recently reconciled, and the grandfather decided to make an equivalent provision for Ed. He will make the first payment to a trust for Ed today, and he has instructed his trustee to make 40 additional equal annual payments until Ed turns 65, when the 41st and final payment will be made. If both trusts earn an annual return of 8%, how much must the grandfather put into Ed's trust today and each subsequent year to enable him to have the same retirement nest egg as Steve after the last payment is made on their 65th birthday?

a. $3,726

b. $3,912

c. $4,107

d. $4,313

e. $4,528

5. John and Daphne are saving for their daughter Ellen's college education. Ellen just turned 10 at (t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $14,500 a year, but they are expected to increase at a rate of 3.5% a year. Ellen should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11).

So far, John and Daphne have accumulated $15,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $5,000 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Ellen's anticipated college costs?

a. $1,965.21

b. $2,068.64

c. $2,177.51

d. $2,292.12

e. $2,412.76

FIN 534 – Homework Chapter 5

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 4:55 PM

1 . Three $1,000 face value bonds that mature in 10 years have the same level of risk, hence their YTMs are equal. Bond A has an 8% annual coupon, Bond B has a 10% annual coupon, and Bond C has a 12% annual coupon. Bond B sells at par. Assuming interest rates remain constant for the next 10 years, which of the following statements is CORRECT?

a. Bond A's current yield will increase each year.

b. Since the bonds have the same YTM, they should all have the same price, and since interest rates are not expected to change, their prices should all remain at their current levels until maturity.

c. Bond C sells at a premium (its price is greater than par), and its price is expected to increase over the next year.

d. Bond A sells at a discount (its price is less than par), and its price is expected to increase over the next year.

e. Over the next year, Bond A's price is expected to decrease, Bond B's price is expected to stay the same, and Bond C's price is expected to increase.

2. Which of the following statements is CORRECT?

a. Two bonds have the same maturity and the same coupon rate. However, one is callable and the other is not. The difference in prices between the bonds will be greater if the current market interest rate is below the coupon rate than if it is above the coupon rate.

b. A callable 10-year, 10% bond should sell at a higher price than an otherwise similar noncallable bond.

c. Corporate treasurers dislike issuing callable bonds because these bonds may require the company to raise additional funds earlier than would be true if noncallable bonds with the same maturity were used.

d. Two bonds have the same maturity and the same coupon rate. However, one is callable and the other is not. The difference in prices between the bonds will be greater if the current market interest rate is above the coupon rate than if it is below the coupon rate.

e. The actual life of a callable bond will always be equal to or less than the actual life of a noncallable bond with the same maturity. Therefore, if the yield curve is upward sloping, the required rate of return will be lower on the callable bond.

3. Which of the following statements is CORRECT?

a. Assume that two bonds have equal maturities and are of equal risk, but one bond sells at par while the other sells at a premium above par. The premium bond must have a lower current yield and a higher capital gains yield than the par bond.

b. A bond's current yield must always be either equal to its yield to maturity or between its yield to maturity and its coupon rate.

c. If a bond sells at par, then its current yield will be less than its yield to maturity.

d. If a bond sells for less than par, then its yield to maturity is less than its coupon rate.

e. A discount bond's price declines each year until it matures, when its value equals its par value.

4. Suppose a new company decides to raise a total of $200 million, with $100 million as common equity and $100 million as long-term debt. The debt can be mortgage bonds or debentures, but by an iron-clad provision in its charter, the company can never raise any additional debt beyond the original $100 million. Given these conditions, which of the following statements is CORRECT?

a. The higher the percentage of debt represented by mortgage bonds, the riskier both types of bonds will be and, consequently, the higher the firm's total dollar interest charges will be.

b. If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds, we could be certain that the firm's total interest expense would be lower than if the debt were raised by issuing $100 million of debentures.

c. In this situation, we cannot tell for sure how, or whether, the firm's total interest expense on the $100 million of debt would be affected by the mix of debentures versus first mortgage bonds. The interest rate on each of the two types of bonds would increase as the percentage of mortgage bonds used was increased, but the result might well be such that the firm's total interest charges would not be affected materially by the mix between the two.

d. The higher the percentage of debentures, the greater the risk borne by each debenture, and thus the higher the required rate of return on the debentures.

e. If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds, we could be certain that the firm's total interest expense would be lower than if the debt were raised by issuing $100 million of first mortgage bonds.

5. Cosmic Communications Inc. is planning two new issues of 25-year bonds. Bond Par will be sold at its $1,000 par value, and it will have a 10% semiannual coupon. Bond OID will be an Original Issue Discount bond, and it will also have a 25-year maturity and a $1,000 par value, but its semiannual coupon will be only 6.25%. If both bonds are to provide investors with the same effective yield, how many of the OID bonds must Cosmic issue to raise $3,000,000? Disregard flotation costs, and round your final answer up to a whole number of bonds.

a. 4,228

b. 4,337

c. 4,448

d. 4,562

e. 4,676

FIN 534 – Homework Chapter 6

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 4:57 PM

1. Which of the following statements is CORRECT?

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

b. If you were restricted to investing in publicly traded common stocks, yet you wanted to minimize the riskiness of your portfolio as measured by its beta, then according to the CAPM theory you should invest an equal amount of money in each stock in the market. That is, if there were 10,000 traded stocks in the world, the least risky possible portfolio would include some shares of each one.

c. If you formed a portfolio that consisted of all stocks with betas less than 1.0, which is about half of all stocks, the portfolio would itself have a beta coefficient that is equal to the weighted average beta of the stocks in the portfolio, and that portfolio would have less risk than a portfolio that consisted of all stocks in the market.

d. Market risk can be eliminated by forming a large portfolio, and if some Treasury bonds are held in the portfolio, the portfolio can be made to be completely riskless.

e. A portfolio that consists of all stocks in the market would have a required return that is equal to the riskless rate.

2. Jane has a portfolio of 20 average stocks, and Dick has a portfolio of 2 average stocks. Assuming the market is in equilibrium, which of the following statements is CORRECT?

a. Jane's portfolio will have less diversifiable risk and also less market risk than Dick's portfolio.

b. The required return on Jane's portfolio will be lower than that on Dick's portfolio because Jane's portfolio will have less total risk.

c. Dick's portfolio will have more diversifiable risk, the same market risk, and thus more total risk than Jane's portfolio, but the required (and expected) returns will be the same on both portfolios.

d. If the two portfolios have the same beta, their required returns will be the same, but Jane's portfolio will have less market risk than Dick's.

e. The expected return on Jane's portfolio must be lower than the expected return on Dick's portfolio because Jane is more diversified.

3. Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. Portfolio P consists of 50% X and 50% Y. Given this information, which of the following statements is CORRECT?

a. Portfolio P has a standard deviation of 20%.

b. The required return on Portfolio P is equal to the market risk premium (rM − rRF).

c. Portfolio P has a beta of 0.7.

d. Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate, rRF.

e. Portfolio P has the same required return as the market (rM).

4. Which of the following statements is CORRECT?

a. When diversifiable risk has been diversified away, the inherent risk that remains is market risk, which is constant for all stocks in the market.

b. Portfolio diversification reduces the variability of returns on an individual stock.

c. Risk refers to the chance that some unfavorable event will occur, and a probability distribution is completely described by a listing of the likelihoods of unfavorable events.

d. The SML relates a stock's required return to its market risk. The slope and intercept of this line cannot be controlled by the firms' managers, but managers can influence their firms' positions on the line by such actions as changing the firm's capital structure or the type of assets it employs.

e. A stock with a beta of -1.0 has zero market risk if held in a 1-stock portfolio.

5. Which of the following statements is CORRECT?

a. If Mutual Fund A held equal amounts of 100 stocks, each of which had a beta of 1.0, and Mutual Fund B held equal amounts of 10 stocks with betas of 1.0, then the two mutual funds would both have betas of 1.0. Thus, they would be equally risky from an investor's standpoint, assuming the investor's only asset is one or the other of the mutual funds.

b. If investors become more risk averse but rRF does not change, then the required rate of return on high-beta stocks will rise and the required return on low-beta stocks will decline, but the required return on an average-risk stock will not change.

c. An investor who holds just one stock will generally be exposed to more risk than an investor who holds a portfolio of stocks, assuming the stocks are all equally risky. Since the holder of the 1-stock portfolio is exposed to more risk, he or she can expect to earn a higher rate of return to compensate for the greater risk.

d. There is no reason to think that the slope of the yield curve would have any effect on the slope of the SML.

e. Assume that the required rate of return on the market, rM, is given and fixed at 10%. If the yield curve were upward sloping, then the Security Market Line (SML) would have a steeper slope if 1-year Treasury securities were used as the risk-free rate than if 30-year Treasury bonds were used for rRF.

FIN 534 – Homework Chapter 7

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 5:00 PM

1. Which of the following statements is CORRECT?

a. The constant growth model takes into consideration the capital gains investors expect to earn on a stock.

b. Two firms with the same expected dividend and growth rates must also have the same stock price.

c. It is appropriate to use the constant growth model to estimate a stock's value even if its growth rate is never expected to become constant.

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

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

2. 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 $25

Expected growth (constant) 10% 5%

Required return 15% 15%

a. Stock A's expected dividend at t = 1 is only half that of Stock B.

b. Stock A has a higher dividend yield than Stock B.

c. Currently the two stocks have the same price, but over time Stock B's price will pass that of A.

d. Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.

e. The two stocks should not sell at the same price. If their prices are equal, then a disequilibrium must exist.

3. Which of the following statements is CORRECT?

a. A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.

b. Preferred stock is normally expected to provide steadier, more reliable income to investors than the same firm's common stock, and, as a result, the expected after-tax yield on the preferred is lower than the after-tax expected return on the common stock.

c. The preemptive right is a provision in all corporate charters that gives preferred stockholders the right to purchase (on a pro rata basis) new issues of preferred stock.

d. One of the disadvantages to a corporation of owning preferred stock is that 70% of the dividends received represent taxable income to the corporate recipient, whereas interest income earned on bonds would be tax free.

e. One of the advantages to financing with preferred stock is that 70% of the dividends paid out are tax deductible to the issuer.

4. Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company's last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?

a. $26.77

b. $27.89

c. $29.05

d. $30.21

e. $31.42

5. Your boss, Sally Maloney, treasurer of Fred Clark Enterprises (FCE), asked you to help her estimate the intrinsic value of the company's stock. FCE just paid a dividend of $1.00, and the stock now sells for $15.00 per share. Sally asked a number of security analysts what they believe FCE's future dividends will be, based on their analysis of the company. The consensus is that the dividend will be increased by 10% during Years 1 to 3, and it will be increased at a rate of 5% per year in Year 4 and thereafter. Sally asked you to use that information to estimate the required rate of return on the stock, rs, and she provided you with the following template for use in the analysis.

Sally told you that the growth rates in the template were just put in as a trial, and that you must replace them with the analysts' forecasted rates to get the correct forecasted dividends and then the estimated TV. She also notes that the estimated value for rs, at the top of the template, is also just a guess, and you must replace it with a value that will cause the Calculated Price shown at the bottom to equal the Actual Market Price. She suggests that, after you have put in the correct dividends, you can manually calculate the price, using a series of guesses as to the Estimated rs. The value of rs that causes the calculated price to equal the actual price is the correct one. She notes, though, that this trial-and-error process would be quite tedious, and that the correct rs could be found much faster with a simple Excel model, especially if you use Goal Seek. What is the value of rs?

a. 11.84%

b. 12.21%

c. 12.58%

d. 12.97%

e. 13.36%

FIN 534 – Homework Chapter 8

Business / Economics

4/21/12

Price: $7.50
Posted by: argument
Date Posted: 4/21/12 5:01 PM

1. Which of the following statements is CORRECT?

a. Put options give investors the right to buy a stock at a certain strike price before a specified date.

b. Call options give investors the right to sell a stock at a certain strike price before a specified date.

c. Options typically sell for less than their exercise value.

d. LEAPS are very short-term options that were created relatively recently and now trade in the market.

e. An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend.

2. Which of the following statements is CORRECT?

a. If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock's price exceeds the strike price by about 10%, because this permits the option holder to lock in an immediate profit.

b. Call options generally sell at a price less than their exercise value.

c. If a stock becomes riskier (more volatile), call options on the stock are likely to decline in value.

d. Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be.

e. Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.

3. Which of the following statements is CORRECT?

a. An option's value is determined by its exercise value, which is the market price of the stock less its striking price. Thus, an option can't sell for more than its exercise value.

b. As the stock's price rises, the time value portion of an option on a stock increases because the difference between the price of the stock and the fixed strike price increases.

c. Issuing options provides companies with a low cost method of raising capital.

d. The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price.

e. The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.

4. The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?

a. $2.43

b. $2.70

c. $2.99

d. $3.29

e. $3.62

5. An analyst wants to use the Black-Scholes model to value call options on the stock of Ledbetter Inc. based on the following data:

The price of the stock is $40.

The strike price of the option is $40.

The option matures in 3 months (t = 0.25).

The standard deviation of the stock's returns is 0.40, and the variance is 0.16.

The risk-free rate is 6%.

Given this information, the analyst then calculated the following necessary components of the Black-Scholes model:

d1 = 0.175

d2 = -0.025

N(d1) = 0.56946

N(d2) = 0.49003

N(d1) and N(d2) represent areas under a standard normal distribution function. Using the Black- Scholes model, what is the value of the call option?

a. $2.81

b. $3.12

c. $3.47

d. $3.82

e. $4.20

FIN 534 – Homework Chapter 9

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 5:03 PM

1. Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be so large that it would have to issue new common stock. Since new stock has a higher cost than retained earnings, Bankston would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock?

a. Increase the dividend payout ratio for the upcoming year.

b. Increase the percentage of debt in the target capital structure.

c. Increase the proposed capital budget.

d. Reduce the amount of short-term bank debt in order to increase the current ratio.

e. Reduce the percentage of debt in the target capital structure.

2. LaPango Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?

a. Project B, which is of below-average risk and has a return of 8.5%.

b. Project C, which is of above-average risk and has a return of 11%.

c. Project A, which is of average risk and has a return of 9%.

d. None of the projects should be accepted.

e. All of the projects should be accepted.

3. Which of the following statements is CORRECT?

a. When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are deductible by the paying corporation.

b. All else equal, an increase in a company's stock price will increase its marginal cost of retained earnings, rs.

c. All else equal, an increase in a company's stock price will increase its marginal cost of new common equity, re.

d. Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.

e. If a company's tax rate increases but the YTM on its noncallable bonds remains the same, the after-tax cost of its debt will fall.

4. Which of the following statements is CORRECT?

a. Since debt capital can cause a company to go bankrupt but equity capital cannot, debt is riskier than equity, and thus the after-tax cost of debt is always greater than the cost of equity.

b. The tax-adjusted cost of debt is always greater than the interest rate on debt, provided the company does in fact pay taxes.

c. If a company assigns the same cost of capital to all of its projects regardless of each project's risk, then the company is likely to reject some safe projects that it actually should accept and to accept some risky projects that it should reject.

d. Because no flotation costs are required to obtain capital as retained earnings, the cost of retained earnings is generally lower than the after-tax cost of debt.

e. Higher flotation costs tend to reduce the cost of equity capital.

5. Cranberry Corp. has two divisions of equal size: a computer manufacturing division and a data processing division. Its CFO believes that stand-alone data processor companies typically have a WACC of 8%, while stand-alone computer manufacturers typically have a 12% WACC. He also believes that the data processing and manufacturing divisions have the same risk as their typical peers. Consequently, he estimates that the composite, or corporate, WACC is 10%. A consultant has suggested using an 8% hurdle rate for the data processing division and a 12% hurdle rate for the manufacturing division. However, the CFO disagrees, and he has assigned a 10% WACC to all projects in both divisions. Which of the following statements is CORRECT?

a. While the decision to use just one WACC will result in its accepting more projects in the manufacturing division and fewer projects in its data processing division than if it followed the consultant's recommendation, this should not affect the firm's intrinsic value.

b. The decision not to adjust for risk means, in effect, that it is favoring the data processing division. Therefore, that division is likely to become a larger part of the consolidated company over time.

c. The decision not to adjust for risk means that the company will accept too many projects in the manufacturing division and too few in the data processing division. This will lead to a reduction in the firm's intrinsic value over time.

d. The decision not to risk-adjust means that the company will accept too many projects in the data processing business and too few projects in the manufacturing business. This will lead to a reduction in its intrinsic value over time.

e. The decision not to risk adjust means that the company will accept too many projects in the manufacturing business and too few projects in the data processing business. This may affect the firm's capital structure but it will not affect its intrinsic value

FIN 534 – Homework Chapter 10

Business / Economics

4/21/12

Price: $6.50
Posted by: argument
Date Posted: 4/21/12 5:04 PM

1. Which of the following statements is CORRECT?

a. The internal rate of return method (IRR) is generally regarded by academics as being the best single method for evaluating capital budgeting projects.

b. The payback method is generally regarded by academics as being the best single method for evaluating capital budgeting projects.

c. The discounted payback method is generally regarded by academics as being the best single method for evaluating capital budgeting projects.

d. The net present value method (NPV) is generally regarded by academics as being the best single method for evaluating capital budgeting projects.

e. The modified internal rate of return method (MIRR) is generally regarded by academics as being the best single method for evaluating capital budgeting projects.

2. Projects A and B have identical expected lives and identical initial cash outflows (costs). However, most of one project's cash flows come in the early years, while most of the other project's cash flows occur in the later years. The two NPV profiles are given below:

Which of the following statements is CORRECT?

a. More of Project A's cash flows occur in the later years.

b. More of Project B's cash flows occur in the later years.

c. We must have information on the cost of capital in order to determine which project has the larger early cash flows.

d. The NPV profile graph is inconsistent with the statement made in the problem.

e. The crossover rate, i.e., the rate at which Projects A and B have the same NPV, is greater than either project's IRR.

3. Suppose a firm relies exclusively on the payback method when making capital budgeting decisions, and it sets a 4-year payback regardless of economic conditions. Other things held constant, which of the following statements is most likely to be true?

a. It will accept too many short-term projects and reject too many long-term projects (as judged by the NPV).

b. It will accept too many long-term projects and reject too many short-term projects (as judged by the NPV).

c. The firm will accept too many projects in all economic states because a 4-year payback is too low.

d. The firm will accept too few projects in all economic states because a 4-year payback is too high.

e. If the 4-year payback results in accepting just the right set of projects under average economic conditions, then this payback will result in too few long-term projects when the economy is weak.

4. You are on the staff of Camden Inc. The CFO believes project acceptance should be based on the NPV, but Steve Camden, the president, insists that no project should be accepted unless its IRR exceeds the project's risk-adjusted WACC. Now you must make a recommendation on a project that has a cost of $15,000 and two cash flows: $110,000 at the end of Year 1 and -$100,000 at the end of Year 2. The president and the CFO both agree that the appropriate WACC for this project is 10%. At 10%, the NPV is $2,355.37, but you find two IRRs, one at 6.33% and one at 527%, and a MIRR of 11.32%. Which of the following statements best describes your optimal recommendation, i.e., the analysis and recommendation that is best for the company and least likely to get you in trouble with either the CFO or the president?

a. You should recommend that the project be rejected because its NPV is negative and its IRR is less than the WACC.

b. You should recommend that the project be rejected because, although its NPV is positive, it has an IRR that is less than the WACC.

c. You should recommend that the project be accepted because (1) its NPV is positive and (2) although it has two IRRs, in this case it would be better to focus on the MIRR, which exceeds the WACC. You should explain this to the president and tell him that the firm's value will increase if the project is accepted.

d. You should recommend that the project be rejected. Although its NPV is positive it has two IRRs, one of which is less than the WACC, which indicates that the firm's value will decline if the project is accepted.

e. You should recommend that the project be rejected because, although its NPV is positive, its MIRR is less than the WACC, and that indicates that the firm's value will decline if it is accepted.

5. A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?

WACC: 6.00%

Year 0 1 2 3 4

CFS -$1,025 $380 $380 $380 $380

CFL -$2,150 $765 $765 $765 $765

a. $188.68

b. $198.61

c. $209.07

d. $219.52

e. $230.49

FIN 534 – Homework Chapter 11

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 5:23 PM

1. Which of the following statements is CORRECT?

a. 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.

b. 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 decline.

c. 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.

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

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

2. Taussig Technologies is considering two potential projects, X and Y. In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data:

Project X Project Y

Expected NPV $350,000 $350,000

Standard deviation (σNPV) $100,000 $150,000

Project beta (vs. market) 1.4 0.8

Correlation of the project cash flows with cash flows from currently existing projects. Cash flows are not correlated with the cash flows from existing projects. Cash flows are highly correlated with the cash flows from existing projects.

Which of the following statements is CORRECT?

a. Project X has more stand-alone risk than Project Y.

b. Project X has more corporate (or within-firm) risk than Project Y.

c. Project X has more market risk than Project Y.

d. Project X has the same level of corporate risk as Project Y.

e. Project X has less market risk than Project Y.

3. Which of the following statements is CORRECT?

a. If an asset is sold for less than its book value at the end of a project's life, it will generate a loss for the firm, hence its terminal cash flow will be negative.

b. Only incremental cash flows are relevant in project analysis, the proper incremental cash flows are the reported accounting profits, and thus reported accounting income should be used as the basis for investor and managerial decisions.

c. It is unrealistic to believe that any increases in net working capital required at the start of an expansion project can be recovered at the project's completion. Working capital like inventory is almost always used up in operations. Thus, cash flows associated with working capital should be included only at the start of a project's life.

d. If equipment is expected to be sold for more than its book value at the end of a project's life, this will result in a profit. In this case, despite taxes on the profit, the end-of-project cash flow will be greater than if the asset had been sold at book value, other things held constant.

e. Changes in net working capital refer to changes in current assets and current liabilities, not to changes in long-term assets and liabilities. Therefore, changes in net working capital should not be considered in a capital budgeting analysis.

4. Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?

Risk-adjusted WACC 10.0%

Net investment cost (depreciable basis) $65,000

Straight-line deprec. rate 33.3333%

Sales revenues, each year $65,500

Operating costs (excl. deprec.), each year $25,000

Tax rate 35.0%

a. $15,740

b. $16,569

c. $17,441

d. $18,359

e. $19,325

5. Florida Car Wash is considering a new project whose data are shown below. The equipment to be used has a 3-year tax life, would be depreciated on a straight-line basis over the project's 3-year life, and would have a zero salvage value after Year 3. No new working capital would be required. Revenues and other operating costs will be constant over the project's life, and this is just one of the firm's many projects, so any losses on it can be used to offset profits in other units. If the number of cars washed declined by 40% from the expected level, by how much would the project's NPV decline? (Hint: Note that cash flows are constant at the Year 1 level, whatever that level is.)

WACC 10.0%

Net investment cost (depreciable basis) $60,000

Number of cars washed 2,800

Average price per car $25.00

Fixed op. cost (excl. deprec.) $10,000

Variable op. cost/unit (i.e., VC per car washed) $5.375

Annual depreciation $20,000

Tax rate 35.0%

a. $28,939

b. $30,462

c. $32,066

d. $33,753

e. $35,530

FIN 534 – Homework Chapter 12

Business / Economics

4/21/12

Price: $7.50
Posted by: argument
Date Posted: 4/21/12 5:25 PM

1. Which of the following statements is CORRECT?

a. Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings.

b. The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales.

c. Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated.

d. The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.

e. The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.

2. Which of the following statements is CORRECT?

a. 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.

b. 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.

c. 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.

d. 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.

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

3. Which of the following statements is CORRECT?

a. 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.

b. 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.

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

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

e. 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.

4. Last year Jain Technologies had $250 million of sales and $100 million of fixed assets, so its FA/Sales ratio was 40%. However, its fixed assets were used at only 75% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set?

a. 28.5%

b. 30.0%

c. 31.5%

d. 33.1%

e. 34.7%

5. Howton & Howton Worldwide (HHW) is planning its operations for the coming year, and the CEO wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 50%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions.

Last year's sales = S0 $300.0 Last year's accounts payable $50.0

Sales growth rate = g 40% Last year's notes payable $15.0

Last year's total assets = A0* $500.0 Last year's accruals $20.0

Last year's profit margin = PM 20.0% Initial payout ratio 10.0%

a. $31.9

b. $33.6

c. $35.3

d. $37.0

e. $38.9

FIN 534 – Homework Chapter 13

Business / Economics

4/21/12

Price: $8.00
Posted by: argument
Date Posted: 4/21/12 5:28 PM

1. 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?

a. $1,714,750

b. $1,805,000

c. $1,900,000

d. $2,000,000

e. $2,100,000

2. 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

a. $1,456

b. $1,529

c. $1,606

d. $1,686

e. $1,770

3. 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?

a. $24.90

b. $27.67

c. $30.43

d. $33.48

e. $36.82

4. 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?

a. $23.00

b. $25.56

c. $28.40

d. $31.24

e. $34.36

5. Vasudevan Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 13% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year 0 value of operations, in millions?

Year: 1 2 3

Free cash flow: -$20 $42 $45

a. $586

b. $617

c. $648

d. $680

e. $714

FIN 534 – Homework Chapter 14

Business / Economics

4/21/12

Price: $7.00
Posted by: argument
Date Posted: 4/21/12 5:31 PM

1. Which of the following statements about dividend policies is CORRECT?

a. Modigliani and Miller argue that investors prefer dividends to capital gains because dividends are more certain than capital gains. They call this the ―bird-in-the hand‖ effect.

b. One reason that companies tend to avoid stock repurchases is that dividend payments are taxed at a lower rate than gains on stock repurchases.

c. One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.

d. One key advantage of a residual dividend policy is that it enables a company to follow a stable dividend policy.

e. The clientele effect suggests that companies should follow a stable dividend policy.

2. Which of the following statements is CORRECT?

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

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

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

d. 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.

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

3. Which of the following statements is CORRECT?

a. When firms are deciding on the size of stock splits—say whether to declare a 2-for-1 split or a 3-for-1 split, it is best to declare the smaller one, in this case the 2-for-1 split, because then the after-split price will be higher than if the 3-for-1 split had been used.

b. Back before the SEC was created in the 1930s, companies would declare reverse splits in order to boost their stock prices. However, this was determined to be a deceptive practice, and it is illegal today.

c. Stock splits create more administrative problems for investors than stock dividends, especially determining the tax basis of their shares when they decide to sell them, so today stock dividends are used far more often than stock splits.

d. When a company declares a stock split, the price of the stock typically declines—by about 50% after a 2-for-1 split—and this necessarily reduces the total market value of the equity.

e. If a firm's stock price is quite high relative to most stocks—say $500 per share—then it can declare a stock split of say 10-for-1 so as to bring the price down to something close to $50.

4. Which of the following statements is CORRECT?

a. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.

b. The clientele effect can explain why so many firms change their dividend policies so often.

c. One advantage of adopting the residual dividend policy is that this policy makes it easier for corporations to develop a specific and well-identified dividend clientele.

d. New-stock dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the firm's total amount of book equity.

e. Investors who receive stock dividends must pay taxes on the value of the new shares in the year the stock dividends are received.

5. DeAngelo Corp.'s projected net income is $150.0 million, its target capital structure is 25% debt and 75% equity, and its target payout ratio is 65%. DeAngelo has more positive NPV projects than it can finance without issuing new stock, but its board of directors had decreed that it cannot issue any new shares in the foreseeable future. The CFO now wants to determine how the maximum capital budget would be affected by changes in capital structure policy and/or the target dividend payout policy. Versus the current policy, how much larger could the capital budget be if (1) the target debt ratio were raised to 75%, other things held constant, (2) the target payout ratio were lowered to 20%, other things held constant, and (3) the debt ratio and payout were both changed by the indicated amounts.

Increase in Capital Budget

Increase Debt Lower Payout Do Both to 75% to 20%___________________

a. $114.0 $73.3 $333.9

b. $120.0 $77.2 $351.5

c. $126.4 $81.2 $370.0

d. $133.0 $85.5 $389.5

e. $140.0 $90.0 $410.0

FIN 534 – Homework Chapter 15

Business / Economics

4/21/12

Price: $6.00
Posted by: argument
Date Posted: 4/21/12 5:35 PM

1. Which of the following statements best describes the optimal capital structure?

a. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's earnings per share (EPS).

b. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's stock price.

c. The optimal capital structure is the mix of debt, equity, and preferred stock that minimizes the company's cost of equity.

d. The optimal capital structure is the mix of debt, equity, and preferred stock that minimizes the company's cost of debt.

e. The optimal capital structure is the mix of debt, equity, and preferred stock that minimizes the company's cost of preferred stock.

2. Which of the following statements is CORRECT?

a. A firm can use retained earnings without paying a flotation cost. Therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.

b. The capital structure that minimizes a firm's weighted average cost of capital is also the capital structure that maximizes its stock price.

c. The capital structure that minimizes the firm's weighted average cost of capital is also the capital structure that maximizes its earnings per share.

d. If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.

e. Other things held constant, if corporate tax rates declined, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.

3. Which of the following statements is CORRECT?

a. In general, a firm with low operating leverage also has a small proportion of its total costs in the form of fixed costs.

b. There is no reason to think that changes in the personal tax rate would affect firms' capital structure decisions.

c. A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else equal.

d. If a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its WACC by increasing its use of debt.

e. Suppose a firm has less than its optimal amount of debt. Increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity financing.

4. Companies HD and LD have identical amounts of assets, operating income (EBIT), tax rates, and business risk. Company HD, however, has a much higher debt ratio than LD. Company HD's basic earning power ratio (BEP) exceeds its cost of debt (rd). Which of the following statements is CORRECT?

a. Company HD has a higher return on assets (ROA) than Company LD.

b. Company HD has a higher times interest earned (TIE) ratio than Company LD.

c. Company HD has a higher return on equity (ROE) than Company LD, and its risk, as measured by the standard deviation of ROE, is also higher than LD's.

d. The two companies have the same ROE.

e. Company HD's ROE would be higher if it had no debt.

5. Which of the following statements is CORRECT?

a. Generally, debt-to-total-assets ratios do not vary much among different industries, although they do vary among firms within a given industry.

b. Electric utilities generally have very high common equity ratios because their revenues are more volatile than those of firms in most other industries.

c. Drug companies (prescription, not illegal!) generally have high debt-to-equity ratios because their earnings are very stable and, thus, they can cover the high interest costs associated with high debt levels.

d. Wide variations in capital structures exist both between industries and among individual firms within given industries. These differences are caused by differing business risks and also managerial attitudes.

e. Since most stocks sell at or very close to their book values, book value capital structures are almost always adequate for use in estimating firms' costs of capital.

FIN 534 – Homework Chapter 16

Business / Economics

4/21/12

Price: $7.50
Posted by: argument
Date Posted: 4/21/12 5:39 PM

1. Swim Suits Unlimited is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):

Peak Off-Peak

Cash $ 50 $ 30

Marketable securities 0 20

Accounts receivable 40 20

Inventories 100 50

Net fixed assets 500 500

Total assets $690 $620

Payables and accruals $ 30 $ 10

Short-term bank debt 50 0

Long-term debt 300 300

Common equity 310 310

Total claims $690 $620

From this data we may conclude that

a. Swim Suits' current asset financing policy calls for exactly matching asset and liability maturities.

b. Swim Suits' current asset financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt.

c. Swim Suits follows a relatively conservative approach to current asset financing; that is, some of its short-term needs are met by permanent capital.

d. Without income statement data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.

e. Without cash flow data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.

2. Which of the following statements is CORRECT?

a. A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. Such a firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to finance the 10% growth rate.

b. In managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its DSO) sufficiently.

c. Because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales.

d. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio.

e. Other things held constant, if a firm can shorten its DSO, this will lead to a higher current ratio.

3. Halka Company is a no-growth firm. Its sales fluctuate seasonally, causing total assets to vary from $320,000 to $410,000, but fixed assets remain constant at $260,000. If the firm follows a maturity matching (or moderate) working capital financing policy, what is the most likely total of long-term debt plus equity capital?

a. $260,642

b. $274,360

c. $288,800

d. $304,000

e. $320,000

4. Your consulting firm was recently hired to improve the performance of Shin-Soenen Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is the firm's present cash conversion cycle?

Average inventory = $75,000

Annual sales = $600,000

Annual cost of goods sold = $360,000

Average accounts receivable = $160,000

Average accounts payable = $25,000

a. 120.6 days

b. 126.9 days

c. 133.6 days

d. 140.6 days

e. 148.0 days

5. Affleck Inc.'s business is booming, and it needs to raise more capital. The company purchases supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.)

a. 10.59%

b. 11.15%

c. 11.74%

d. 12.36%

e. 13.01%

FIN 534 – Homework Chapter 17

Business / Economics

4/21/12

Price: $7.50
Posted by: argument
Date Posted: 4/21/12 5:41 PM

1. In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT?

a. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market.

b. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 180-day forward market.

c. The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market.

d. The spot rate equals the 90-day forward rate.

e. The spot rate equals the 180-day forward rate.

2. If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.97 shekels per dollar, then the forward rate for the Israeli shekel is selling at a ________________ to the spot rate.

a. premium of 8%

b. premium of 18%

c. discount of 18%

d. discount of 8%

e. premium of 16%

3. Stover Corporation, a U.S. based importer, makes a purchase of crystal glassware from a firm in Switzerland for 39,960 Swiss francs, or $24,000, at the spot rate of 1.665 francs per dollar. The terms of the purchase are net 90 days, and the U.S. firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90-day forward rate of 1.682 francs. If the spot rate in 90 days is actually 1.638 francs, how much will the U.S. firm have saved or lost in U.S. dollars by hedging its exchange rate exposure?

a. -$396

b. -$243

c. $0

d. $243

e. $638

4. A product sells for $750 in the United States. The exchange rate is $1 to 1.65 Swiss francs. If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?

a. 123.75 Swiss francs

b. 454.55 Swiss francs

c. 750.00 Swiss francs

d. 1,237.50 Swiss francs

e. 1,650.00 Swiss francs

5. Chen Transport, a U.S. based company, is considering expanding its operations into a foreign country. The required investment at Time = 0 is $10 million. The firm forecasts total cash inflows of $4 million per year for 2 years, $6 million for the next 2 years, and then a possible terminal value of $8 million. In addition, due to political risk factors, Chen believes that there is a 50% chance that the gross terminal value will be only $2 million and a 50% chance that it will be $8 million. However, the government of the host country will block 20% of all cash flows. Thus, cash flows that can be repatriated are 80% of those projected. Chen's cost of capital is 15%, but it adds one percentage point to all foreign projects to account for exchange rate risk. Under these conditions, what is the project's NPV?

a. $1.01 million

b. $2.77 million

c. $3.09 million

d. $5.96 million

e. $7.39 million

MGT 350 Final Exam

Business / Economics

4/21/12

Price: $27.00
Posted by: argument
Date Posted: 4/21/12 6:51 PM

1) Bill Simmons is the manager of a small restaurant and must decide how much money he owes his suppliers. The best way for Bill to approach this as a critical thinker is to

A. collect and analyze the evidence

B. identify opportunities and obstacles

C. understand different perspectives on the issue

D. weigh the consequences of this decision

2) Critical thinking is very important in making decisions that impact an organization's growth and survival. Which of the following traits of a critical thinker is essential in this process?

A. Intellectual integrity

B. Intellectual empathy

C. Intellectual perseverance

D. Intellectual courage

3) When faced with a decision opportunity, a critical thinker must sort through a variety of readily apparent symptoms in order to focus on important considerations that may be hidden. Based on the decision steps model, when framing a problem a helpful step is to

A. Determine root causes

B. Measure the decision

C. Frame alternatives

D. Evaluate effects of the problem

4) In the stages of development of critical thinking, which of the following types of thinking entails exploring the foundation of our thinking and discover how we have come to think and believe we do?

A. Beginning thinker

B. Practical thinker

C. Advanced thinker

D. Master thinker

5) One way for a leader to develop alternative perspectives for decision making is to:

A. increase the use of the logical thinking style

B. increase the homogeneity of his or her team

C. assign the role of devil's advocate for meetings

D. apply past decision successes to current decision opportunities

6) The outcome of the process of framing the problem includes:

A. a list of potential alternative courses of action

B. a list of criteria, goals, and objectives for a decision

C. a timeline for decision implementation

D. an assessment of resources needed to execute a decision

7) A form of critical thinking is fair-minded, persuasive thinking. When engaging in problem formulation and identification with a group, the fair minded persuader would:

A. communicate only that information which supports the desired decision

B. avoid all affective appeals

C. emphasizes affective appeals over data and reason

D. acknowledges the difficulty that his or her position creates for the audience

8) Of the decision styles listed below, which one should be used for a non-urgent, yet critical and unusual problem affecting multiple stakeholders?

A. Autocratic

B. Participative

C. Democratic

D. Programmed decision making

9) Urgent crisis conditions might call for a decision making style that is

A. democratic

B. consensus

C. autocratic

D. collaborative

10) A manager may properly choose to ignore a problem

A. when the costs of doing nothing are less than the cost of addressing the problem

B. because of a bias against change

C. when the problem is surfaced through a positive trigger point

D. when a Pareto chart has properly clarified the causes of a problem

11) ____________ is based on the concept that 80% of a project's goal can be achieved by doing 20% of the work or that 80% of the problems are due to 20% of causes.

A. Plus/Minus Implications (PMI)

B. Force Field Analysis

C. Criteria Matrix

D. Pareto Analysis

12) For urgent decisions, which approach may be the most efficient and effective use of the manager's time when there are other critical competing priorities?

A. Satisficing

B. Optimizing

C. Experimenting

D. Brainstorming and multivoting with a team

13) Upon review of the customer comment cards dropped in the box in his convenience store, Bob sees that 61% of the customers filling out a card have expressed dissatisfaction with waiting times. Bob decides to add an additional cashier during the day. Bob is using the ______ thinking style in order to make this decision.

A. deductive logical

B. creative

C. metaphorical

D. inductive logical

14) In nearly all decision-making models, which of the following is an essential step in the decision-making process?

A. Identify alternatives

B. Analyzing negative feedback

C. Appraising the problem

D. Making trade-offs

15) You have been assigned to a project team to develop a marketing plan a new product being launched by your company. Which of the following should the project team do first?

A. Identify the obstacles presented by competitors.

B. Define the project team's goal.

C. Consult with the rest of the employees involved in the new product development.

D. Deliberate about the project team's commitment.

16) Jan has been selected to implement her company's decision to expand her company's manufacturing operation into a new location. Six months into this project, the building has been completed, and machinery installed. However, Jan has been unable to secure enough applicants with the technical skills needed to operate this computerized facility. Jan's implementation plan was most deficient in its consideration of

A. timeline

B. technological constraints

C. organizational mission

D. resource

17) In response to declining profits, a company decides that it needs to become world class, but is having difficulty developing an implementation plan around the goal of "becoming world class." Rather than implement this decision, the company would be well advised to return to the ______ step of decision making.

A. develop criteria, goals, and objectives

B. frame alternatives

C. determine measurements

D. evaluate the decision

18) Which factor would be most critical in decision implementation?

A. Contingency plan

B. Communication

C. Ethical considerations

D. Resources to implement decision

19) Freda is analyzing the prospects for a new gambling casino that her company is considering. In the course of her analysis, Freda has identified potential stakeholder resistance to this venture, in that she has discovered that the area is very densely populated with houses of worship. She has also discovered a potential source of support for this venture, in that the local government has established tax credits for new businesses in an effort to stimulate employment. Freda is, in all likelihood, developing a

A. resource allocation survey

B. Force Field Analysis

C. financial proforma income statement

D. ROI analysis

20) When implementing a decision, a company must ensure that its actions remain consistent with its

A. current resource allocations

B. organizational mission

C. past practices and procedures

D. employee's preferences

21) Which decision making tool would be used in identifying possible causes for a problem?

A. Brainstorming

B. Multivoting

C. Fishbone diagram

D. Ranking

22) Markus worked last summer as a receptionist in a lawyer's office. During a discussion with you, he commented that he was asked to tell callers that the lawyer was in court when in fact the lawyer was playing golf! He eventually quit the job because he believes that under no circumstance is it permissible to tell a lie. Markus appears to be following the ethical system referred to as a

A. rule or deontological ethics

B. Practical deliberation

C. Virtue ethics

D. utilitarianism

23) A company applying a ______ view of ethics would probably find fewer impediments to decisions involving cross cultural factors than one applying a ______ view.

A. universalist, relativist

B. relativist, universalist

C. deontological, rule based

D. virtue, utilitarian

24) In a global economy, which of the following must a manager consider in ensuring the ethicality of his or her decision?

A. Cross-cultural issues

B. Conflicting legal issues

C. Justification for outsourcing

D. Profitability

25) A tool that is helpful in monitoring, evaluating, and changing a decision as needed during implementation is the

A. stakeholder summary analysis

B. Plan, do, check, act (PDCA) cycle

C. contingency plan effectiveness audit

D. financial effectiveness audit

26) A measurement that identifies the degree to which goals and objectives are attained is a measure of:

A. organizational effectiveness

B. organizational precision

C. organizational efficiency

D. organizational stability

27) In order to apply continuous improvement in decision making, a company should take the time to record not only the results of its decisions, but also the

A. impact to external stakeholders

B. financial results

C. customer satisfaction data

D. process through which the decision was made

28) A company has decided to fund a summer basketball league for young people in the community. The decision will result in increased expenditures with no increase in revenues or profits. In evaluating this decision outcome, the officers of the company must weigh both its ______ responsibility and its ______ responsibility, two components of corporate social responsibility.

A. economic, legal

B. economic, philanthropic

C. economic, fiduciary

D. legal, ethical

29) As noted in our texts, a key measurement of our decisions is: "Are they ethical?" In order to achieve a superior level of ethical behavior in its decision making processes, leaders should instill a(n) ______ in those charged with making decisions.

A. compliance based approach to ethical considerations

B. integrity based approach to ethical considerations

C. legal approach to ethical considerations

D. utilitarian approach to ethical considerations

30) When evaluating the decision processes in an organization, leaders should consider doing which of the following?

A. Make a list of those affected by the decision, and determine if those interests are represented in the process under consideration.

B. Make sure to focus on results of the decision rather than the process.

C. Ensure that the process is consistent for all significant decisions.

D. Ensure that all of a company's stakeholders provide input all of a company's decisions.

LDR 531 Final Exam

Business / Economics

4/22/12

Price: $27.00
Posted by: argument
Date Posted: 4/22/12 8:29 AM

LDR 531 Final Exam

1) Which of the following is best defined as a consciously coordinated social unit, composed of two or more people, which functions on a relatively continuous basis to achieve a common goal or set of goals?

a. party

b. unit

c. team

d. community

e. organization

2) Over the past 2 decades, business schools have added required courses on organizational design to many of their curricula. Why have they done this?

a. Managers no longer need technical skills in subjects such as economics and accounting to succeed.

b. There is an increased emphasis in controlling employee behavior in the workplace.

c. Managers need to understand human behavior if they are to be effective.

d. These skills enable managers to effectively lead human resources departments.

e. A manager with good people skills can help create a pleasant workplace.

3) Robert Katz identified three essential skills that managers must have to reach their goals. What are these skills?

a. technical, decisional and interpersonal

b. technical, human, and conceptual

c. interpersonal, informational and decisional

d. conceptual, communication and networking

e. human, informational and communication

4) __________ is a field of study that investigates the effect that individuals, groups, and structures have on behavior within organizations for the purpose of applying such knowledge toward improving an organization's effectiveness.

Organizational developmentHuman Resources Managementc. Organizational behaviorPeople managementCorporate strategy

5) What do the fundamental consistencies underlying the behavior of all individuals enable researchers to do?

a. observe human behavior

b. systematize human behavior

c. research human behavior

d. predict human behavior

e. detect human behavior

6) Which of the following is a generic term that covers a broad range of feelings that people experience?

a. Affect emotionsmoodsemotional laborcognition

7) What term is used for intense feelings that are directed at someone or something?

affectcognitionmoodsthoughtse. emotions

8) If personality characteristics were completely dictated by __________, they would be fixed at

birth and no amount of experience could alter them.

job satisfactionb. heredityenvironmentsituationsreligion

9) Which of the following are classifications on the Myers-Briggs Type Indicator?

a. extroverted/introverted

b. sensing/intuitive

c. perceiving/judging

d. independent/dependent

e. thinking/feeling

10) Maria is dissatisfied with the way that her manager treats her. She has quit her job and found a new position with another firm. How has she expressed her dissatisfaction?

a. exit

b. voice

c. loyalty

d. neglect

e. social voice

11) You quietly continue to do your work when you know things will not improve. This is what type of response to dissatisfaction?

a. exit

b. voice

c. loyalty

d. neglect

e. social voice

12) A group

a. generates positive synergy through coordinated effort

b. generates greater outputs with no increase in inputs

c. is two or more individuals interacting and interdependent

d. engages in collective work that requires joint effort

13) __________ results in a level of performance that is greater than the sum of the individual input.

a. Synergy

b. Enthusiasm

c. Energy

d. Initiative

e. Inversion

14) What happens in the second stage of Tuckman's five stage model of group development?

a. Close relationships are developed.

b. The group demonstrates cohesiveness.

c. Intragroup conflict often occurs.

d. Groups disband.

15) Zach is devout and very active in his church. He is also a very dedicated employee. His manager offers him a promotion, but the new role will require him to work Sundays. Zach would like the promotion, but realizes that it would force him to miss some church activities. It is likely that Zach is experiencing which of the following:

a. role conflict

b. role expectation

c. role perception

d. psychological conflict

16) Which role focuses on bringing about order and consistency by drawing up formal plans?

leadershipb. managementtask structureinitiating structurenone of the above

17) Which statement regarding leadership is true?

All leaders are managers.Formal rights enable managers to lead effectively.All managers are leaders.All leaders are hierarchically superior to followers.e. Nonsanctioned leadership is as important as or more important than formal influence.

18) What are three situational criteria identified in the Fiedler model?

a. job requirements, position power, and leadership ability

b. charisma, influence, and leader-member relations

c. leader-member relations, task structure, and position power

d. task structure, leadership ability, and group conflict

e. emotional intelligence, group orientation, and employee status

19) The reconceptualization of the contingency model by Garcia and Fiedler is called _____ theory.

a. situational

b. cognitive resource

c. evaluative

d. leadership recognition

e. cognitive dissonance

20) Which path-goal leadership style leads to greater satisfaction when tasks are ambiguous or stressful?

a. directivesupportiveparticipativemixedreactive

21) According the Path-Goal Theory, what leader is friendly and shows concern for the needs of followers?

the achievement-oriented leaderthe directive leaderthe laissez-faire leaderthe participative leadere. the supportive leader

22) Phrases such as "more cultural diversity," "many new entrants with inadequate skills," and "increase in professionals" are all examples of what force for change?

a. technology

b. world politics

c. nature of the work force

d. social trends

23) What is a goal of planned change?

a. to change the forces of change

b. to alter the agents of change

c. to change employees' responsibilities

d. to improve the ability to adapt to the environment

e. to alter the employees' environment

24) Using covert influence to overcome resistance to change is called what?

a. negotiation

b. cooptation

c. education

d. coercion

e. manipulation

25) If individuals resisting change are included in making change decisions in an attempt to gain their support, what is this approach is called?

a. cooptation

b. exploitation

c. manipulation

d. coercion

e. education

26) Which of the following is a characteristic of organizational control?

a. Formality orientation

b. Decision orientation

c. Team orientation

d. Managerial orientation

27) What term describes the key characteristic of organizational control that addresses the degree to which employees are expected to exhibit precision?

a. accuracy orientation

b. accountability

c. attention to detail

d. stability

e. reactivity

28) Power is

a. a means for leaders to achieve goals

b. defined by leaders' hopes and aspirations

c. a goal in and of itself

d. not an influence on leaders' goals

29) Leaders achieve goals, and power is

a. defined by leaders' hopes and aspirations

b. usually used by poor leaders

c. a means of achieving goals

d. a goal in and of itself

e. a strong influence on leaders' goals

30) The most important aspect of power is probably that it _____.

a. is needed to get things done in an organization

b. is a function of dependency

c. tends to corrupt people

d. is counterproductive

e. involves control

LDR 531 Final Exam (2)

Business / Economics

4/22/12

Price: $30.00
Posted by: argument
Date Posted: 4/22/12 5:40 PM

LDR 531 Final Exam (2)

1. What are the three primary determinants of behavior on which organizational behavior focuses?

A. profit structure, organizational complexity, job satisfaction

B. individuals, profit structure, and job satisfaction

C. individuals, groups, and job satisfaction

D. groups, structure, and profit structure

E. individuals, groups, and structure

2. Which behavioral science discipline is most focused on understanding individual behavior?

A. sociology

B. social psychology

C. psychology

D. anthropology

E. organizational behavior

3. When the team he supports wins the World Cup, Detleb feels a surge of joy, which turns into a feeling of satisfaction that lasts for days. What is one of the reasons that the feeling of satisfaction might be categorized as a mood and not an emotion?

A. It has a lengthy duration

B. It is not the result of something that Detleb himself has done.

C. It is brought about by a specific event.

D. It is a positive feeling.

E. It is a very strong feeling.

4. Which of the following statements about personality is correct?

A. Personality is an aggregate whole.

B. Personality is the primary source of emotions in most people.

C. Personality is a part of a person.

D. Personality is for the most part comprised of traits that cannot be measured.

E. Personality is always stable

5. What does the Myers-Briggs Type Indicator classification of E or I stand for?

A. Extroverted or introverted

B. Sane or reflective

C. Emotional or introverted

D. Emotional or intuitive

E. Extroverted or intuitive

6. Which of the following is not generally true?

A. Satisfaction is the major determinant of a worker's OCB

B. Enterprises with a greater percentage of satisfied workers are more effective than those with a smaller percentage of satisfied workers.

C. Productive workers are satisfied workers.

D. Satisfaction comes down to fairness of outcomes, treatments, or procedures.

E. Satisfied workers are productive workers.

7. ________ results in a level of performance that is greater than the sum of the individual input.

A. Energy

B. Inversion

C. Enthusiasm

D. Initiative

E. Synergy

8. Which of the following helps explain the current popularity of teams?

A. Teams promote socialization.

B. Teams are easier to manage.

C. Teams are less expensive.

D. Teams are a way to better utilize employee talents.

E. Teams are very efficient.

9. What sort of group is defined by the organization's structure?

A. Interest

B. Informal

C. Friendship

D. Task

E. Formal

10. What will happen if group cohesiveness is high and performance norms are low?

A. Productivity will be low.

B. Internal conflict will be high.

C. Productivity will be high

D. Internal conflict will be low

E. It will have little effect on internal conflict or productivity.

11. Which of the following was the major finding of Zimbardo's simulated prison experiment?

A. An individual's emotions and the behavioral responses to those emotions are congruent.

B. Status differences between groups will always result in conflict between those groups.

C. Individuals can rapidly assimilate new roles very different from their inherent personalities.

D. Group cohesiveness is so important that individuals will restrain their natural impulses to remain part of the group.

E. When given the opportunity, people will tend to act in an oppressive manner to those around them.

12. Which theory differentiates leaders from nonleaders by focusing on personal qualities and characteristics?

A. Contingency theory

B. Fiedler's perspective

C. LPC

D. Characteristic theory

E. Trait theory

13. Which of the following statements regarding leadership is true?

A. All leaders are hierarchically superior to followers.

B. All leaders are managers.

C. All managers are leaders.

D. Formal rights enable managers to lead effectively.

E. Nonsanctioned leadership is as important as or more important than formal influence

14. Leadership is best defined as __________.

A. coordinating and staffing the organization and handling day-to-day problems

B. the ability to influence a group in goal achievement

C. implementing the vision and strategy provided by management

D. keeping order and consistency in the midst of change

E. not a relevant variable in modern organizations

15. Which model represents the theory that effective group performance depends on the proper match between a leader's style and the degree to which the situation gives control to the leader?

A. Leader-Member Exchange Model

B. Fiedler's Contingency Model

C. Hersey and Blanchard's Situational Leadership Model

D. Vroom and Yetton's Leader-Participation Model

E. None of the above

16. Three situational criteria identified in the Fiedler model are __________

A. task structure, leadership ability, and group conflict

B. job requirements, position power, and leadership ability

C. leader-member relations, task structure, and position power

D. charisma, influence, and leader-member relations

E. emotional intelligence, group orientation, and employee status

17. The leadership behaviors identified by the path-goal theory are __________.

A. directive, participative, supportive, and laissez-faire

B. supportive, employee-oriented, laissez-faire, and participative

C. participative, achievement-oriented, directive, and supportive

D. achievement-oriented, supportive, humanistic, and directive

E. affective, cognitive, and behavioral

18. According to Hersey and Blanchard, readiness encompasses the __________.

A. degree of confidence, trust, and respect members have in their leader

B. amount of influence a leader has over variables such as hiring, firing, and salaries

C. level of morale and satisfaction of the employees

D. ability and willingness of the followers to accomplish a task

E. all of the above

19. Which path-goal leadership style leads to greater satisfaction when tasks are ambiguous or stressful?

A. Mixed

B. Participative

C. Reactive

D. Supportive

E. Directive

20. Which of the following is not a primary force for change in organizations?

A. Social trends

B. Decreasing skill sets

C. The nature of the workforce

D. Economic shocks

E. Technology

21. An example of change in competition is __________.

A. increased interest in urban living

B. Iraq–U.S. war

C. a decrease in interest rates

D. collapse of Enron Corporation

E. growth of e-commerce

22. The application of direct threats or force on resisters is called __________.

A. coercion

B. manipulation

C. destruction

D. cooptation

E. exploitation

23. Which tactic to overcome resistance to change is a relatively easy way to gain the support of adversaries, but may backfire if the targets become aware of the tactic?

A. Coercion

B. Manipulation

C. Cooperation

D. Conciliation

E. Negotiation

24. Who developed a three-step model for change that included unfreezing, movement, and refreezing?

A. Lawrence Summers

B. Douglas Surber

C. Kurt Lewin

D. David McClelland

E. John Kotter

25. The basis by which jobs are grouped together is termed __________.

A. centralization

B. specialization

C. departmentalization

D. bureaucracy

E. social clustering

26. In the late 1940s, most manufacturing jobs in industrialized countries were being done with high _________.

A. structuralization

B. work specialization

C. generalized structure

D. decentralization

E. departmentalization

27. For much of the first half of the 20th century, managers viewed work specialization as __________.

A. difficult to implement without automation technology

B. an unending source of increased productivity

C. an effective solution to over-centralization

D. a frustrating cause of reduced product output

E. a means to encourage employee satisfaction

28. Which of the following is not a characteristic of organizational culture?

A. Team orientation

B. Formality orientation

C. Outcome orientation

D. Innovation

E. Attention to detail

29. __________ is a shared system of meaning held by the organization's members that distinguishes the organization from other organizations.

A. Formalization

B. Corporate image

C. Socialization

D. Institutionalization

E. Organizational culture

30. Leaders achieve goals, and power is __________.

A. a goal in and of itself

B. a strong influence on leaders' goals

C. a means of achieving goals

D. defined by leaders' hopes and aspirations

E. usually used by poor leaders

31. The most important aspect of power is probably that it __________.

A. is counterproductive

B. involves control

C. tends to corrupt people

D. is needed to get things done in an organization

E. is a function of dependency

MKT 571 Final Exam

Business / Economics

4/26/12

Price: $25.00
Posted by: argument
Date Posted: 4/26/12 1:57 AM

1) Which of the following is most closely associated with a proactive marketing orientation?

A. It involves delivering superior value.

B. It is about understanding and meeting customers' expressed needs.

C. It represents the "make and sell" philosophy.

D. The marketer focuses on the customers' latent or hidden needs.

2) Marketing __________ is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

A. internally

B. management

C. segmentation

D. integration

3) Business buyers ______________.

A. are geographically as diverse as consumers

B. tend to be geographically concentrated with over half of them in seven states

C. are largely concentrated in the southwestern United States

D. use geographical dispersion to keep shipping costs low

4) Toyota, the maker of the Scion brand, is using what kind of brand strategy with Scion products?

A. Separate family names

B. Blanket family names

C. Individual names

D. Corporate names

5) BMW, the maker of the Mini Cooper brand, is using what kind of brand strategy with its Mini products?

A. Individual names

B. Blanket family names

C. Separate family names

D. Corporate names

6) Brands can play a number of specific roles within a company's brand portfolio. For example, a __________ is positioned with respect to competitors' brands so that more important and profitable brands retain their desired positioning.

A. cash cow

B. low-end, entry level brand

C. high-end, prestige brand

D. flanker

7) When Apple introduced its popular iPod Nano model, it dropped its Mini iPod at the same time. The Mini was, at the time, the most popular MP3 player in the marketplace. This is an example of __________.

A. brand extension

B. preemptive cannibalization

C. a brand shake-out

D. product maturity

8) A ___________ is when a parent brand is used on a new product targeting a new market segment within a category currently served by the parent.

A. joint-venture co-brand

B. same company co-brand

C. category extension

D. line extension

9) ___________ are formal statements of expected product performance by the manufacturer.

A. Open pricing statements

B. Promotional statements

C. Warranties

D. General guarantees

10) Mazda's Miata convertible originally drew the most interest from women between the ages of 35 and 55. In order to interest more potential customers in the roadster, Mazda beefed up the model with heavier shocks and a faster engine, and then emphasized performance in its advertising. This is an example of creating a new product by ____________.

A. repositioning

B. the development of a new product line

C. market diversification strategy

D. product development strategy

11) When SAP software added a Windows-style "back" button to its industrial invoice management software, the new product ___________.

A. used a new product line

B. added to an existing product line

C. improved upon an existing product

D. used a marketing diversification strategy

12) In 2003, Toyota introduced its Scion brand with the aim of bringing younger buyers into the "family." This was a classic example of _________________.

A. line featuring

B. line cannibalization

C. line padding

D. line stretching

13) Painting and consulting are considered industrial goods because ______________.

A. they are specialty goods

B. they are considered "component materials"

C. most firms do not seek them directly

D. they facilitate developing and managing the finished product

14) Marketers plan their market offerings at five levels. What is the correct order of the levels, going from most fundamental to the level with the most benefits?

A. Basic-expected-augmented-core-potential

B. Expected-potential-basic-augmented-core

C. Core-basic-expected-augmented-potential

D. Potential-augmented-expected-core-basic

15) Characteristics a buyer can evaluate before purchase are called _______________.

A. search qualities

B. experience qualities

C. credence qualities

D. differentiation qualities

16) For $15 a day, Chlena will go to your home and feed, water, and play with your pet while you are on vacation. The service Chlena provides is an example of a _____________.

A. tangible good with accompanying service

B. hybrid

C. pure service

D. major service with accompanying minor goods and services

17) Mr. Tse and his family took a vacation to Washington, D.C. While there, they bought souvenirs; t-shirts and hats to take home to family and friends who didn't have the opportunity to go. The experience of the Tse family is an example of which offering?

A. A tangible good with accompanying services

B. A hybrid

C. A pure service

D. A major service with accompanying minor goods and services

18) Best Buy will often try to sell the buyer of a high-end television monitor an extended warranty. This is an example of _______________.

A. pure tangible good

B. tangible good with accompanying services

C. hybrid

D. pure service

19) The introduction of a new product to the market using market-penetration pricing is most likely to be successful when _____________.

A. the unit costs of producing a small volume of the product are high

B. there must be no existing demand for the product

C. the market is highly price sensitive

D. the high price communicates nothing to potential buyers

20) A __________ pricing objective is suitable for a company that has overcapacity, intense competition, and changing customer needs.

A. maximum current profit

B. survival

C. maximum current revenue

D. maximum sales growth

21) Scotty is in the process of opening Suburban Legends SK8S to sell boards, wheels, trucks, clothing, videos, and skateboarding related collectibles. The first thing Scotty should do when setting the store's prices is to ____________.

A. estimate costs

B. determine the target market

C. select a pricing method

D. select a pricing objective

22) A common mistake in pricing is ____________________.

A. revising prices too often

B. considering price and price competition as a key problem in marketing

C. ignoring costs when setting prices

D. setting prices independently of the rest of the market mix

23) When customers buy on the basis of a reference price or because the price conveys a particular quality image to them, they are being influenced by ____________.

A. value pricing

B. the psychology of pricing

C. the going rates of competitors

D. value augmented by perception

24) Which of the following areas will a marketing manager standardize or adapt when taking a new product global?

A. Marketing concept

B. Marketing mix

C. Product strategy

D. Promotion strategy

25) Which of the following best describes integrated marketing communication (IMC)?

A. Organizations present a consistent message.

B. Organizations present an effective communication plan.

C. Organizations present a plan that focuses on the customer.

D. Organizations present an effective advertising message.

26) Which of the following best describes the role of social responsibility in marketing?

A. Standards that guide marketing decisions and actions

B. Improving environment and products

C. Obligation to improve positive effects on society

D. Obligation to improve positive effects and reduce negative effects on society

27) Public policy makers have developed a substantial body of laws and regulations to govern advertising. For these reasons, an important step in developing an advertising campaign is _____________.

A. asking network censors what to cut out of the communication

B. the creative development of the message

C. the social responsibility review

D. preparing a copy strategy statement

28) Within the last couple years several cosmetics manufacturers have introduced non-clumping mascara. Revlon was one of these manufacturers. Revlon should use ________ advertising to increase selective demand for its non-clumping mascara.

A. descriptive

B. persuasive

C. reminder

D. informative

29) Hospitals are engaged in intense competition to fill maternity beds. What type of advertising would hospitals most likely use to advertise their new amenities like hot tubs in every room, filet mignon or lobster on the menu, and afternoon teas for the new mothers and their families?

A. descriptive

B. persuasive

C. reminder

D. informative

30) _____________ is the key ingredient in marketing campaigns and consists of a diverse collection of short-term incentive tools designed to influence trial, purchase, and interests of consumers and wholesalers.

A. Advertising

B. Public relations

C. Sales promotion

D. Personal selling

LDR 531 Final Exam

Business / Economics

4/26/12

Price: $25.00
Posted by: argument
Date Posted: 4/26/12 1:59 AM

1) Which of the following is best defined as a consciously coordinated social unit, composed of two or more people, which functions on a relatively continuous basis to achieve a common goal or set of goals?

a. party

b. unit

c. team

d. community

e. organization

2) Over the past 2 decades, business schools have added required courses on organizational design to many of their curricula. Why have they done this?

a. Managers no longer need technical skills in subjects such as economics and accounting to succeed.

b. There is an increased emphasis in controlling employee behavior in the workplace.

c. Managers need to understand human behavior if they are to be effective.

d. These skills enable managers to effectively lead human resources departments.

e. A manager with good people skills can help create a pleasant workplace.

3) Robert Katz identified three essential skills that managers must have to reach their goals. What are these skills?

a. technical, decisional and interpersonal

b. technical, human, and conceptual

c. interpersonal, informational and decisional

d. conceptual, communication and networking

e. human, informational and communication

4) __________ is a field of study that investigates the effect that individuals, groups, and structures have on behavior within organizations for the purpose of applying such knowledge toward improving an organization's effectiveness.

Organizational developmentHuman Resources Managementc. Organizational behaviorPeople managementCorporate strategy

5) What do the fundamental consistencies underlying the behavior of all individuals enable researchers to do?

a. observe human behavior

b. systematize human behavior

c. research human behavior

d. predict human behavior

e. detect human behavior

6) Which of the following is a generic term that covers a broad range of feelings that people experience?

a. Affect emotionsmoodsemotional laborcognition

7) What term is used for intense feelings that are directed at someone or something?

affectcognitionmoodsthoughtse. emotions

8) If personality characteristics were completely dictated by __________, they would be fixed at

birth and no amount of experience could alter them.

job satisfactionb. heredityenvironmentsituationsreligion

9) Which of the following are classifications on the Myers-Briggs Type Indicator?

a. extroverted/introverted

b. sensing/intuitive

c. perceiving/judging

d. independent/dependent

e. thinking/feeling

10) Maria is dissatisfied with the way that her manager treats her. She has quit her job and found a new position with another firm. How has she expressed her dissatisfaction?

a. exit

b. voice

c. loyalty

d. neglect

e. social voice

11) You quietly continue to do your work when you know things will not improve. This is what type of response to dissatisfaction?

a. exit

b. voice

c. loyalty

d. neglect

e. social voice

12) A group

a. generates positive synergy through coordinated effort

b. generates greater outputs with no increase in inputs

c. is two or more individuals interacting and interdependent

d. engages in collective work that requires joint effort

13) __________ results in a level of performance that is greater than the sum of the individual input.

a. Synergy

b. Enthusiasm

c. Energy

d. Initiative

e. Inversion

14) What happens in the second stage of Tuckman's five stage model of group development?

a. Close relationships are developed.

b. The group demonstrates cohesiveness.

c. Intragroup conflict often occurs.

d. Groups disband.

15) Zach is devout and very active in his church. He is also a very dedicated employee. His manager offers him a promotion, but the new role will require him to work Sundays. Zach would like the promotion, but realizes that it would force him to miss some church activities. It is likely that Zach is experiencing which of the following:

a. role conflict

b. role expectation

c. role perception

d. psychological conflict

16) Which role focuses on bringing about order and consistency by drawing up formal plans?

leadershipb. managementtask structureinitiating structurenone of the above

17) Which statement regarding leadership is true?

All leaders are managers.Formal rights enable managers to lead effectively.All managers are leaders.All leaders are hierarchically superior to followers.e. Nonsanctioned leadership is as important as or more important than formal influence.

18) What are three situational criteria identified in the Fiedler model?

a. job requirements, position power, and leadership ability

b. charisma, influence, and leader-member relations

c. leader-member relations, task structure, and position power

d. task structure, leadership ability, and group conflict

e. emotional intelligence, group orientation, and employee status

19) The reconceptualization of the contingency model by Garcia and Fiedler is called _____ theory.

a. situational

b. cognitive resource

c. evaluative

d. leadership recognition

e. cognitive dissonance

20) Which path-goal leadership style leads to greater satisfaction when tasks are ambiguous or stressful?

a. directivesupportiveparticipativemixedreactive

21) According the Path-Goal Theory, what leader is friendly and shows concern for the needs of followers?

the achievement-oriented leaderthe directive leaderthe laissez-faire leaderthe participative leadere. the supportive leader

22) Phrases such as "more cultural diversity," "many new entrants with inadequate skills," and "increase in professionals" are all examples of what force for change?

a. technology

b. world politics

c. nature of the work force

d. social trends

23) What is a goal of planned change?

a. to change the forces of change

b. to alter the agents of change

c. to change employees' responsibilities

d. to improve the ability to adapt to the environment

e. to alter the employees' environment

24) Using covert influence to overcome resistance to change is called what?

a. negotiation

b. cooptation

c. education

d. coercion

e. manipulation

25) If individuals resisting change are included in making change decisions in an attempt to gain their support, what is this approach is called?

a. cooptation

b. exploitation

c. manipulation

d. coercion

e. education

26) Which of the following is a characteristic of organizational control?

a. Formality orientation

b. Decision orientation

c. Team orientation

d. Managerial orientation

27) What term describes the key characteristic of organizational control that addresses the degree to which employees are expected to exhibit precision?

a. accuracy orientation

b. accountability

c. attention to detail

d. stability

e. reactivity

28) Power is

a. a means for leaders to achieve goals

b. defined by leaders' hopes and aspirations

c. a goal in and of itself

d. not an influence on leaders' goals

29) Leaders achieve goals, and power is

a. defined by leaders' hopes and aspirations

b. usually used by poor leaders

c. a means of achieving goals

d. a goal in and of itself

e. a strong influence on leaders' goals

30) The most important aspect of power is probably that it _____.

a. is needed to get things done in an organization

b. is a function of dependency

c. tends to corrupt people

d. is counterproductive

e. involves control

LDR 531 Final Exam (2)

Business / Economics

4/26/12

Price: $27.00
Posted by: argument
Date Posted: 4/26/12 2:00 AM

1. What are the three primary determinants of behavior on which organizational behavior focuses?

A. profit structure, organizational complexity, job satisfaction

B. individuals, profit structure, and job satisfaction

C. individuals, groups, and job satisfaction

D. groups, structure, and profit structure

E. individuals, groups, and structure

2. Which behavioral science discipline is most focused on understanding individual behavior?

A. sociology

B. social psychology

C. psychology

D. anthropology

E. organizational behavior

3. When the team he supports wins the World Cup, Detleb feels a surge of joy, which turns into a feeling of satisfaction that lasts for days. What is one of the reasons that the feeling of satisfaction might be categorized as a mood and not an emotion?

A. It has a lengthy duration

B. It is not the result of something that Detleb himself has done.

C. It is brought about by a specific event.

D. It is a positive feeling.

E. It is a very strong feeling.

4. Which of the following statements about personality is correct?

A. Personality is an aggregate whole.

B. Personality is the primary source of emotions in most people.

C. Personality is a part of a person.

D. Personality is for the most part comprised of traits that cannot be measured.

E. Personality is always stable

5. What does the Myers-Briggs Type Indicator classification of E or I stand for?

A. Extroverted or introverted

B. Sane or reflective

C. Emotional or introverted

D. Emotional or intuitive

E. Extroverted or intuitive

6. Which of the following is not generally true?

A. Satisfaction is the major determinant of a worker's OCB

B. Enterprises with a greater percentage of satisfied workers are more effective than those with a smaller percentage of satisfied workers.

C. Productive workers are satisfied workers.

D. Satisfaction comes down to fairness of outcomes, treatments, or procedures.

E. Satisfied workers are productive workers.

7. ________ results in a level of performance that is greater than the sum of the individual input.

A. Energy

B. Inversion

C. Enthusiasm

D. Initiative

E. Synergy

8. Which of the following helps explain the current popularity of teams?

A. Teams promote socialization.

B. Teams are easier to manage.

C. Teams are less expensive.

D. Teams are a way to better utilize employee talents.

E. Teams are very efficient.

9. What sort of group is defined by the organization's structure?

A. Interest

B. Informal

C. Friendship

D. Task

E. Formal

10. What will happen if group cohesiveness is high and performance norms are low?

A. Productivity will be low.

B. Internal conflict will be high.

C. Productivity will be high

D. Internal conflict will be low

E. It will have little effect on internal conflict or productivity.

11. Which of the following was the major finding of Zimbardo's simulated prison experiment?

A. An individual's emotions and the behavioral responses to those emotions are congruent.

B. Status differences between groups will always result in conflict between those groups.

C. Individuals can rapidly assimilate new roles very different from their inherent personalities.

D. Group cohesiveness is so important that individuals will restrain their natural impulses to remain part of the group.

E. When given the opportunity, people will tend to act in an oppressive manner to those around them.

12. Which theory differentiates leaders from nonleaders by focusing on personal qualities and characteristics?

A. Contingency theory

B. Fiedler's perspective

C. LPC

D. Characteristic theory

E. Trait theory

13. Which of the following statements regarding leadership is true?

A. All leaders are hierarchically superior to followers.

B. All leaders are managers.

C. All managers are leaders.

D. Formal rights enable managers to lead effectively.

E. Nonsanctioned leadership is as important as or more important than formal influence

14. Leadership is best defined as __________.

A. coordinating and staffing the organization and handling day-to-day problems

B. the ability to influence a group in goal achievement

C. implementing the vision and strategy provided by management

D. keeping order and consistency in the midst of change

E. not a relevant variable in modern organizations

15. Which model represents the theory that effective group performance depends on the proper match between a leader's style and the degree to which the situation gives control to the leader?

A. Leader-Member Exchange Model

B. Fiedler's Contingency Model

C. Hersey and Blanchard's Situational Leadership Model

D. Vroom and Yetton's Leader-Participation Model

E. None of the above

16. Three situational criteria identified in the Fiedler model are __________

A. task structure, leadership ability, and group conflict

B. job requirements, position power, and leadership ability

C. leader-member relations, task structure, and position power

D. charisma, influence, and leader-member relations

E. emotional intelligence, group orientation, and employee status

17. The leadership behaviors identified by the path-goal theory are __________.

A. directive, participative, supportive, and laissez-faire

B. supportive, employee-oriented, laissez-faire, and participative

C. participative, achievement-oriented, directive, and supportive

D. achievement-oriented, supportive, humanistic, and directive

E. affective, cognitive, and behavioral

18. According to Hersey and Blanchard, readiness encompasses the __________.

A. degree of confidence, trust, and respect members have in their leader

B. amount of influence a leader has over variables such as hiring, firing, and salaries

C. level of morale and satisfaction of the employees

D. ability and willingness of the followers to accomplish a task

E. all of the above

19. Which path-goal leadership style leads to greater satisfaction when tasks are ambiguous or stressful?

A. Mixed

B. Participative

C. Reactive

D. Supportive

E. Directive

20. Which of the following is not a primary force for change in organizations?

A. Social trends

B. Decreasing skill sets

C. The nature of the workforce

D. Economic shocks

E. Technology

21. An example of change in competition is __________.

A. increased interest in urban living

B. Iraq–U.S. war

C. a decrease in interest rates

D. collapse of Enron Corporation

E. growth of e-commerce

22. The application of direct threats or force on resisters is called __________.

A. coercion

B. manipulation

C. destruction

D. cooptation

E. exploitation

23. Which tactic to overcome resistance to change is a relatively easy way to gain the support of adversaries, but may backfire if the targets become aware of the tactic?

A. Coercion

B. Manipulation

C. Cooperation

D. Conciliation

E. Negotiation

24. Who developed a three-step model for change that included unfreezing, movement, and refreezing?

A. Lawrence Summers

B. Douglas Surber

C. Kurt Lewin

D. David McClelland

E. John Kotter

25. The basis by which jobs are grouped together is termed __________.

A. centralization

B. specialization

C. departmentalization

D. bureaucracy

E. social clustering

26. In the late 1940s, most manufacturing jobs in industrialized countries were being done with high _________.

A. structuralization

B. work specialization

C. generalized structure

D. decentralization

E. departmentalization

27. For much of the first half of the 20th century, managers viewed work specialization as __________.

A. difficult to implement without automation technology

B. an unending source of increased productivity

C. an effective solution to over-centralization

D. a frustrating cause of reduced product output

E. a means to encourage employee satisfaction

28. Which of the following is not a characteristic of organizational culture?

A. Team orientation

B. Formality orientation

C. Outcome orientation

D. Innovation

E. Attention to detail

29. __________ is a shared system of meaning held by the organization's members that distinguishes the organization from other organizations.

A. Formalization

B. Corporate image

C. Socialization

D. Institutionalization

E. Organizational culture

30. Leaders achieve goals, and power is __________.

A. a goal in and of itself

B. a strong influence on leaders' goals

C. a means of achieving goals

D. defined by leaders' hopes and aspirations

E. usually used by poor leaders

31. The most important aspect of power is probably that it __________.

A. is counterproductive

B. involves control

C. tends to corrupt people

D. is needed to get things done in an organization

E. is a function of dependency

FIN 370 Final Exam

Business / Economics

4/26/12

Price: $25.00
Posted by: argument
Date Posted: 4/26/12 5:21 PM

1) The goal of the firm should be

A. maximization of profits

B. maximization of shareholder wealth

C. maximization of consumer satisfaction

D. maximization of sales

2) An example of a primary market transaction is

A. a new issue of common stock by AT&T

B. a sale of some outstanding common stock of AT&T

C. AT&T repurchasing its own stock from a stockholder

D. one stockholder selling shares of common stock to another individual

3) According to the agency problem, _________ represent the principals of a corporation.

A. shareholders

B. managers

C. employees

D. suppliers

4) Which of the following is a principle of basic financial management?

A. Risk/return tradeoff

B. Derivatives

C. Stock warrants

D. Profit is king

5) Another name for the acid test ratio is the

A. current ratio

B. quick ratio

C. inventory turnover ratio

D. average collection period

6) The accounting rate of return on stockholders' investments is measured by

A. return on assets

B. return on equity

C. operating income return on investment

D. realized rate of inflation

7) If you are an investor, which of the following would you prefer?

A. Earnings on funds invested compound annually

B. Earnings on funds invested compound daily

C. Earnings on funds invested would compound monthly

D. Earnings on funds invested would compound quarterly

8) The primary purpose of a cash budget is to

A. determine the level of investment in current and fixed assets

B. determine accounts payable

C. provide a detailed plan of future cash flows

D. determine the estimated income tax for the year

9) Which of the following is a non-cash expense?

A. Depreciation expenses

B. Interest expense

C. Packaging costs

D. Administrative salaries

10) The break-even model enables the manager of a firm to

A. calculate the minimum price of common stock for certain situations

B. set appropriate equilibrium thresholds

C. determine the quantity of output that must be sold to cover all operating costs

D. determine the optimal amount of debt financing to use

11) A zero-coupon bond

A. pays no interest

B. pays interest at a rate less than the market rate

C. is a junk bond

D. is sold at a deep discount at less than the par value

12) If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of 5 years?

A. $3,525.62

B. $5,008.76

C. $3,408.88

D. $2,465.78

13) At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

A. 6%

B. 5%

C. 7%

D. 8%

14) The present value of a single future sum

A. increases as the number of discount periods increase

B. is generally larger than the future sum

C. depends upon the number of discount periods

D. increases as the discount rate increases

15) Which of the following is considered to be a spontaneous source of financing?

A. Operating leases

B. Accounts receivable

C. Inventory

D. Accounts payable

16) Compute the payback period for a project with the following cash flows, if the company's discount rate is 12%.

Initial outlay = $450

Cash flows:

Year 1 = $325

Year 2 = $65

Year 3 = $100

A. 3.43 years

B. 3.17 years

C. 2.88 years

D. 2.6 years

17) For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________.

A. less than zero, greater than the required return

B. greater than zero, greater than one

C. greater than one, greater than zero

D. greater than zero, less than one

18) Which of the following is considered to be a deficiency of the IRR?

A. It fails to properly rank capital projects.

B. It could produce more than one rate of return.

C. It fails to utilize the time value of money.

D. It is not useful in accounting for risk in capital budgeting.

19) The firm should accept independent projects if

A. the payback is less than the IRR

B. the profitability index is greater than 1.0

C. the IRR is positive

D. the NPV is greater than the discounted payback

20) The most expensive source of capital is

A. preferred stock

B. new common stock

C. debt

D. retained earnings

21) The cost associated with each additional dollar of financing for investment projects is

A. the incremental return

B. the marginal cost of capital

C. risk-free rate

D. beta

22) The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

A. 14.0%

B. 9.0%

C. 10.6%

D. 11.5%

23) Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt–10%; preferred stock–11%; and common stock–18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

A. 18.0%

B. 13.0%

C. 10.0%

D. 14.2%

24) Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brothers' present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

A. $1.75

B. $2.00

C. $3.25

D. $4.50

25) Zybeck Corp. projects operating income of $4 million next year. The firm's income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will be the projected EPS next year?

A. $4.94

B. $2.96

C. $5.33

D. $3.20

26) _________ risk is generally considered only a paper gain or loss.

A. Transaction

B. Translation

C. Economic

D. Financial

27) Capital markets in foreign countries

A. offer lower returns than those obtainable in the domestic capital markets

B. provide international diversification

C. in general are becoming less integrated due to the widespread availability of interest rate and currency swaps

D. have been getting smaller in the past decade

28) Buying and selling in more than one market to make a riskless profit is called

A. profit maximization

B. arbitrage

C. international trading

D. an efficient market

29) What keeps foreign exchange quotes in two different countries in line with each other?

A. Cross rates

B. Forward rates

C. Arbitrage

D. Spot rates

30) One reason for international investment is to reduce

A. portfolio risk

B. price-earnings (P/E) ratios

C. advantages in a foreign country

D. exchange rate risk

FIN 370 Final Exam

Business / Economics

4/26/12

Price: $27.00
Posted by: argument
Date Posted: 4/26/12 7:00 PM

1) The goal of the firm should be

A. maximization of profits

B. maximization of shareholder wealth

C. maximization of consumer satisfaction

D. maximization of sales

2) An example of a primary market transaction is

A. a new issue of common stock by AT&T

B. a sale of some outstanding common stock of AT&T

C. AT&T repurchasing its own stock from a stockholder

D. one stockholder selling shares of common stock to another individual

3) According to the agency problem, _________ represent the principals of a corporation.

A. shareholders

B. managers

C. employees

D. suppliers

4) Which of the following is a principle of basic financial management?

A. Risk/return tradeoff

B. Derivatives

C. Stock warrants

D. Profit is king

5) Another name for the acid test ratio is the

A. current ratio

B. quick ratio

C. inventory turnover ratio

D. average collection period

6) The accounting rate of return on stockholders' investments is measured by

A. return on assets

B. return on equity

C. operating income return on investment

D. realized rate of inflation

7) If you are an investor, which of the following would you prefer?

A. Earnings on funds invested compound annually

B. Earnings on funds invested compound daily

C. Earnings on funds invested would compound monthly

D. Earnings on funds invested would compound quarterly

8) The primary purpose of a cash budget is to

A. determine the level of investment in current and fixed assets

B. determine accounts payable

C. provide a detailed plan of future cash flows

D. determine the estimated income tax for the year

9) Which of the following is a non-cash expense?

A. Depreciation expenses

B. Interest expense

C. Packaging costs

D. Administrative salaries

10) The break-even model enables the manager of a firm to

A. calculate the minimum price of common stock for certain situations

B. set appropriate equilibrium thresholds

C. determine the quantity of output that must be sold to cover all operating costs

D. determine the optimal amount of debt financing to use

11) A zero-coupon bond

A. pays no interest

B. pays interest at a rate less than the market rate

C. is a junk bond

D. is sold at a deep discount at less than the par value

12) If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of 5 years?

A. $3,525.62

B. $5,008.76

C. $3,408.88

D. $2,465.78

13) At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

A. 6%

B. 5%

C. 7%

D. 8%

14) The present value of a single future sum

A. increases as the number of discount periods increase

B. is generally larger than the future sum

C. depends upon the number of discount periods

D. increases as the discount rate increases

15) Which of the following is considered to be a spontaneous source of financing?

A. Operating leases

B. Accounts receivable

C. Inventory

D. Accounts payable

16) Compute the payback period for a project with the following cash flows, if the company's discount rate is 12%.

Initial outlay = $450

Cash flows:

Year 1 = $325

Year 2 = $65

Year 3 = $100

A. 3.43 years

B. 3.17 years

C. 2.88 years

D. 2.6 years

17) For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________.

A. less than zero, greater than the required return

B. greater than zero, greater than one

C. greater than one, greater than zero

D. greater than zero, less than one

18) Which of the following is considered to be a deficiency of the IRR?

A. It fails to properly rank capital projects.

B. It could produce more than one rate of return.

C. It fails to utilize the time value of money.

D. It is not useful in accounting for risk in capital budgeting.

19) The firm should accept independent projects if

A. the payback is less than the IRR

B. the profitability index is greater than 1.0

C. the IRR is positive

D. the NPV is greater than the discounted payback

20) The most expensive source of capital is

A. preferred stock

B. new common stock

C. debt

D. retained earnings

21) The cost associated with each additional dollar of financing for investment projects is

A. the incremental return

B. the marginal cost of capital

C. risk-free rate

D. beta

22) The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

A. 14.0%

B. 9.0%

C. 10.6%

D. 11.5%

23) Shawhan Supply plans to maintain its optimal capital structure of 30% debt, 20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt–10%; preferred stock–11%; and common stock–18%. Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

A. 18.0%

B. 13.0%

C. 10.0%

D. 14.2%

24) Lever Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if its current capital structure is too conservative. Lever Brothers' present EBIT is $3 million, and profits available to common shareholders are $1,560,000, with 342,857 shares of common stock outstanding. If the firm were to instead have a debt ratio of 60%, additional interest expense would cause profits available to stockholders to decline to $1,440,000, but only 228,571 common shares would be outstanding. What is the difference in EPS at a debt ratio of 60% versus 40%?

A. $1.75

B. $2.00

C. $3.25

D. $4.50

25) Zybeck Corp. projects operating income of $4 million next year. The firm's income tax rate is 40%. Zybeck presently has 750,000 shares of common stock which have a market value of $10 per share, no preferred stock, and no debt. The firm is considering two alternatives to finance a new product: (a) the issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares of common stock. If Zybeck issues common stock this year, what will be the projected EPS next year?

A. $4.94

B. $2.96

C. $5.33

D. $3.20

26) _________ risk is generally considered only a paper gain or loss.

A. Transaction

B. Translation

C. Economic

D. Financial

27) Capital markets in foreign countries

A. offer lower returns than those obtainable in the domestic capital markets

B. provide international diversification

C. in general are becoming less integrated due to the widespread availability of interest rate and currency swaps

D. have been getting smaller in the past decade

28) Buying and selling in more than one market to make a riskless profit is called

A. profit maximization

B. arbitrage

C. international trading

D. an efficient market

29) What keeps foreign exchange quotes in two different countries in line with each other?

A. Cross rates

B. Forward rates

C. Arbitrage

D. Spot rates

30) One reason for international investment is to reduce

A. portfolio risk

B. price-earnings (P/E) ratios

C. advantages in a foreign country

D. exchange rate risk

RES 341 Final Exam

Business / Economics

4/28/12

Price: $25.00
Posted by: argument
Date Posted: 4/28/12 6:06 PM

1) Unstructured interviews are best used for

A. measuring worker productivity

B. solving manufacturing defect problems

C. assessing management effectiveness

D. asking individualized questions with no specific order

2) A recent study of breast cancer revealed that 13% of the women in the sample used antibiotics more than 500 days in their lifetime. Further, 79% of these "heavy antibiotics users" developed breast cancer. According to the American Cancer Society, one in twelve women will develop breast cancer at some time in her life. Of the numbers mentioned, which are parameters?

A. 13% and 79%

B. 13% and one in twelve

C. 79% and 500 days

D. 79% and one in twelve

3) Basic business research methods would be used to

A. identify factors that affect worker absenteeism

B. evaluate a retail store's inventory tracking system

C. assess consumer acceptance of a redesigned computer keyboard

D. determine the effect of a 10% price increase on the sale of school supplies

4) The collection and summarization of the socioeconomic and physical characteristics of the employees of a particular firm is an example of

A. inferential statistics

B. descriptive statistics

C. a parameter

D. an estimation

5) Which of the following is an example of statistical inference?

A. Counting the number of patients who file malpractice suits after being discharged from hospitals in New York

B. Calculating the mean number of fruit trees damaged by Mediterranean fruit flies in California last year

C. Calculating the mean age of patients discharged from hospitals in New York in 1997

D. Calculating the amount of fly spray needed for your orchard next season

6) A logically conjectured statement that describes the relationship between two or more variables and is formulated for empirical testing is a

A. hypothesis

B. theory

C. construct

D. thesis statement

7) The variable that causes a measurable effect or change on the dependent variable is

A independent

B. dependent

C. intervening

D. moderating

8) Survey questionnaires may be effectively used for research to determine

A. defect rates in automobile parts coming off a production line

B. the effect of price changes on sales volume

C. the attitudes of prospective voters

D. how temperature and humidity affect concrete cure time

9) A company is designing a survey to obtain information on the reliability of a product it sells. To obtain the most valid research information, who should the company send this type of survey to?

A. A random sample of its customers

B. Vendors

C. Customers who have bought the product

D. Employees

10) The following practice is considered ethical when conducting business research:

A. Disclosing some, but not all, financial interests that may affect research

B. Allowing participants to withdraw from a business research project whenever they ask to do so

C. Keeping minimal records of research activities and research design

D. Revealing only a small part of the purpose of the business research project

11) If a population distribution is skewed to the right, then given a random sample from that population, one would expect that the

A. median is greater than the mean

B. mode is equal to the mean

C. median is less than the mean

D. median is equal to the mean

12)

Textbook Price Number of Textbooks

$25 to $35 2

$35 to $45 16

$45 to $55 5

$55 to $65 7

$65 to $75 20

Estimate the standard deviation of the price of a textbook.

A. 14.03

B. 33.85

C. 196.78

D. 729.00

13)

Textbook Price Number of Textbooks

$25 to $34.99 2

$35 to $44.99 16

$45 to $54.99 5

$55 to $64.99 7

$65 to $74.99 20

Estimate the mean price of a textbook.

A. $554.00

B. $11.08

C. $60.00

D. $55.40

14) A supermarket has determined that daily demand for eggs has a bell-shaped distribution, with a mean of 55 cartons and a standard deviation of six cartons. If the supermarket begins each morning with a stock of 61 cartons of eggs, approximately what percentage of days will there be a surplus of eggs?

A. 16%

B. 18%

C. 68%

D. 84%

15) Which of these measurement scales has a rank order associated with its use?

A. Ratio

B. Ordinal

C. Nominal

D. Likert

16) Identify the scale that has no meaningful zero.

A. Nominal

B. Ordinal

C. Interval

D. Ratio

17) __________ is a measure of the chance that an uncertain event will occur.

A. Random experiment

B. Sample space

C. Probability

D. A complement

18) The Information Commons in the main library has 150 personal computers. The probability that any of them will require repair on a given day is 0.02. To find the probability that 25 of the computers will require repair, one would use what type of probability distribution?

A. Binomial

B. Poisson

C. Normal

D. Hypergeometric

19) A multiple-choice test has 20 questions. There are four choices for each question. A student comes to class with four different colored balls of identical shape and size in her pocket. She has decided to draw one ball from her pocket per question and allow the color of the ball to select the answer for each question. What type of probability distribution can be used to figure out her chance of getting 10 questions right?

A. Hypergeometric

B. Poisson

C. Normal

D. Binomial

20) Which of the following cannot generate a Poisson distribution?

A. The number of people at a movie theatre on Friday evening

B. The number of customers arriving at an automatic teller machine (ATM) in a minute

C. The number of defects in a new automobile

D. The number of goals in the World Cup soccer game

21) Which of the following is a characteristic of every binomial distribution?

A. Each outcome is dependent on the previous outcome.

B. The probability of success increases from trial to trial.

C. Each outcome is mutually exclusive.

D. The outcome of the trial depends on the number of trials.

22) The average qualifying speed for a championship NASCAR® race is 145.65 mph and the standard deviation is 9.45 mph. Only drivers who obtain z-scores greater than 1.2 will qualify for the race. If the speeds are normally distributed, what minimum speed must be clocked to compete for the trophy?

A. 146.9 mph

B. 155.2 mph

C. 157.0 mph

D. 174.8 mph

23) Trudy Jones recently completed her certification examination and learned that her z-score was -2.5. The examining board also informed her that a failure to pass would equal all scores that were one or more standard deviations below the mean and that those with scores higher than two standard deviations above the mean would receive a special commendation award. Trudy can conclude that she

A. failed the exam

B. needs more data to determine if she passed the exam

C. passed the exam and will receive a special commendation award

D. passed the exam, but no commendation award is forthcoming

24) The use of the student's distribution requires which of the following assumptions?

A. The sample size is greater than 30.

B. The population variance is known.

C. The population is normal.

D. The sample is drawn from a positively skewed distribution.

25) The standard error of the sample mean is equal to 5 when n=25. If the sample size increases by a factor of four, how will the standard error change?

A. It will be double.

B. It will be cut in half.

C. It will be cut to 1/4 of 5.

D. It will quadruple.

26) For a sample size of 1, the sampling distribution of the mean will be normally distributed

A. regardless of the shape of the population

B. only if the shape of the population is positively skewed

C. only if the population values are larger than 30

D. only if the population is normally distributed

27) A 95% confidence interval for the population mean indicates that

A. with an infinite number of samples, there's a 5% chance that the population mean will be outside the interval

B. more sampling is required to increase the confidence interval to 100%

C. the sampling process is biased

D. 95% of the observations from any sample will fall within the interval

28) A random sample of 16 ATM transactions at the First National Bank of Flintrock revealed a mean transaction time of 2.8 minutes with a standard deviation of 1.2 minutes. The width, in minutes, of the 95% confidence interval for the true mean transaction time is

A. ± 0.639

B. ± 0.588

C. ± 0.300

D. ± 2.131

29) All other things being equal, which is narrower, a 95% confidence interval with n=100 or a 99% confidence interval with n=30?

A. The 95% confidence interval

B. The 99% confidence interval

C. The same width

D. Need the margin of error to tell

30) When the only sources of variation in a production process are caused by chance, the process is said to be

A. out of balance but under control

B. out of control but in balance

C. under control

D. out of control

BUS 415 Final Exam

Business / Economics

5/2/12

Price: $27.00
Posted by: argument
Date Posted: 5/2/12 6:14 PM

1) The form of alternative dispute resolution wherein the parties hire someone to review the evidence and make a decision that is binding upon the parties is called

A. negotiation

B. settlement conference

C. conciliation

D. arbitration

2) The Federal Trade Commission is an example of

A. a federal agency created by the federal government

B. a corporation subsidized by the federal government

C. a branch of the U.S. Supreme Court

D. a temporary commission created by executive order that has become permanent

3) A corporation is considered a citizen of what state?

A. The state where the majority of the employees live

B. It is not a citizen because it is a business

C. The state where it filed its Articles of Incorporation

D. The state where the president of the corporation lives

4) The Federal False Claims Act is also known as

A. the Sarbanes-Oxley Act

B. the Whistleblower Statute

C. the Statute of Frauds

D. the Statute of Limitations

5) Utilitarianism is a moral theory, which states

A. ethics requires a decision-maker to take actions which result in the greatest good to society

B. ethics requires following the Golden Rule (do unto others as you would have them do unto you)

C. ethics requires actions which use the most efficient tools

D. ethics requires acting according to the Bible or some outside source

6) Which of the following statements is true?

A. If something is legal, it is always ethical

B. Practices that are legal in the United States are legal everywhere in the world

C. Practices that are ethical in the United States are considered ethical everywhere else in the world

D. A course of action can be legal but not ethical

7) If a defendant files a motion for summary judgment in a civil case, what is the defendant saying?

A. That the plaintiff's claims are false

B. That the court has no jurisdiction to decide the case

C. That the case is ready to go to the jury

D. That even if what the plaintiff says is true, there is no basis for judgment against the defendant

8) A defendant fails to answer a civil lawsuit, what is likely to happen?

A. A court will contact the defendant and ask him to answer the lawsuit

B. The court will grant a default judgment against the defendant

C. The case will be appealed before the court makes a ruling

D. The court will order that the defendant go to jail until he or she agrees to answer

9) The legal authority of a court to make orders that are binding upon the parties is called

A. in rem jurisdiction

B. personal jurisdiction

C. quasi in rem jurisdiction

D. enumerated jurisdiction

10) Harry Hoosier, an Indiana resident, drives his family to Florida for spring vacation. When he is at a red light, Freddie Floridian, a Florida resident, is unable to stop in time and his vehicle impacts Harry's car from the rear. No one is hurt and Harry's vehicle suffers approximately $10,000 in damages. Which is correct?

A. Harry can sue Freddie in federal court in Florida but not in Indiana

B. Harry can sue Freddie in state court in Florida or Indiana

C. Harry can sue Freddie in state court but not federal court in Florida but not in Indiana

D. Harry can sue Freddie in state court but not federal court in Florida or Indiana

11) Monica owed Bob $500 for a business investment, which was more than a year overdue. Bob got drunk at a party and told everyone that Monica had owed him $500 for over a year. Can Monica recover from Bob for defamation?

A. Yes, because Bob abused his conditional privilege.

B. No, because Bob was telling the truth.

C. Yes, because Bob communicated the statement to third persons.

D. No, because Bob had been drinking.

12) What is the definition of a tort?

A. Any violation of an ethical duty

B. Any crime or misdemeanor

C. Any action done in violation of a prior agreement, which allows the victim to recover damages

D. Any civil wrong that allows the injured person to recover damages

13) Pete and Vicky make the following agreement: Pete promises he will go into a store, buy something for $5, and pay for it with a $100 bill on which he has written "Happy Birthday Vicky!" Vicky promises that after Pete collects his change and leaves the store, she will go into the same store, buy something that costs $5, and pay with a $10 bill. When the clerk attempts to give her change for $10, Vicky will claim that the $100 bill that is in the cash register was money she just received for her birthday, and will demand change from a $100 bill. Then Pete and Vicky will split the extra money they think Vicky will receive in change. Is this a valid contract?

A. This is a valid contract. There was a promise in exchange for a promise, and both parties got what they wanted.

B. This is a void contract, because the parties agreed to commit fraud.

C. This is a voidable contract because Vicky can change her mind.

D. This is not an enforceable contract because the agreement is not in writing.

14) An easement can be defined as

A. a limited right to use another person's land for a specified purpose

B. a relaxation of the borderlines between two parcels of land

C. a life estate in the property of another

D. an option to purchase the land of another

15) Huey, Dewey, and Louie own a building as tenants in common. Huey lives in the building. Without consulting the other two owners, Dewey deeds his interest in the building to Joe. What will be the outcome of this situation?

A. Huey, Louie, and now Joe will own the property as tenants in common.

B. Huey and Louie will still own the property as tenants in common, but Joe will have a reversionary interest.

C. The transfer of the interest to Joe will be ineffective because the other two did not consent.

D. Joe will make Huey pay rent.

16) Which of the following best describes the benefits of a limited liability company (LLC)?

A. LLC managers are not personally liable for debts, obligations, and liabilities of the LLC.

B. LLCs have limited duration.

C. Documents do not have to be filed with the state to create an LLC.

D. LLCs are automatically taxed like corporations.

17) Which of the following is true when a general partnership is converted to an LLC?

A. The property must be sold to a third party who then immediately sells it to the LLC.

B. The conversion can be made retroactive for up to 2 years.

C. The profit and loss sharing terms must remain the same as they were in the partnership.

D. The general partners will retain unlimited personal liability for obligations incurred while the business was a partnership.

18) In the Northeast Ethanol, LLC case, the court pierced the defendant's corporate veil after determining that

A. the plaintiffs could not find financing to build the ethanol plant

B. the defendant's shareholder used the corporation to perpetrate fraud

C. the ethanol plant was an unwise investment, against the best interest of the parties

D. the plaintiff's corporate directors were engaging in ultra vires activities

19) Which comment best describes the alter-ego doctrine in corporate law?

A. A corporation automatically becomes the alter ego of its shareholders

B. The president is the sole decision maker of a corporation

C. The board of directors is the alter ego of a corporation

D. Protection from personal shareholder liability can be forfeited if corporate formalities are not observed

20) If a corporation is properly incorporated in one state and wants authority to do business in second state, the corporation typically must

A. re-incorporate in the second state

B. do nothing because being incorporated in one state automatically entitles the corporation to do business in all states

C. register with the Interstate Commerce Commission as an alien corporation

D. obtain a certificate of authority from the second state

21) The DEF Corporation is incorporated in Texas. It wishes to do business in Oklahoma. Before DEF can legally do businesses in Oklahoma, which of the following must it do?

A. Nothing; DEF automatically has constitutional rights to do business in Oklahoma.

B. DEF must incorporate in Oklahoma.

C. DEF must qualify (register) to do business in Oklahoma.

D. DEF must domicile itself in Oklahoma.

22) What types of business can be converted to an LLC?

A. General partnerships only

B. General partnerships and limited partnerships only

C. Corporations and limited partnerships only

D. Corporations, general partnerships, and limited partnerships

23) Which of the following best describes the status of the employment at-will doctrine in the United States today? bus 415 final exam

A. It applies in most states to most employment relationships, but there are many exceptions that limit its application.

B. It applies more today than in the last century, and the quantity of corporate layoffs is evidence of this.

C. It today applies only to the employer, although in the past it applied to both the employee and employer.

D. It still applies today, but only to employees who are expressly told that they are an at-will employee when they are hired.

24) Which of the following rejected applicants may have a valid claim for discriminatory hiring practices?

A. A public health service did not hire a registered nurse because his shaking hands prevented him from administering injections.

B. A Catholic school did not hire a teacher because he was not Catholic.

C. A trucking company did not hire a truck driver because she was pregnant.

D. A university did not hire a 22-year-old woman to be a director of faculty because she was too young.

25) Which of the following people is protected from employment discrimination on the basis of age?

A. A 90-year-old person who wants a job as an airline pilot

B. A 50-year-old person who wants a job as an accountant

C. A 30-year-old person who wants a job as a waitress

D. A 10-year-old person who wants a job as a bartender

26) Marie works as a receptionist for a plumbing company. She works from 9 a.m. to 6 p.m. Monday through Friday. BUS415 Final Exam She earns $12 per hour, and is told how to do her job and what she should be working on at any particular time. Her boss does not withhold any taxes from her paycheck. Which of the following is true?

A. Marie would be treated as an employee because she is paid for the work that she does.

B. Marie would be treated as an employee because of the control exercised by the plumbing company over her work.

C. Marie would be treated as an independent contractor because she is paid hourly.

D. Marie would be treated as an independent contractor because the employer doesn't take any taxes out of her check.

27) Company employee handbooks have been found in some cases to amount to a(n) ______________ exception to the employment at will doctrine.

A. apparent

B. tort

C. public policy

D. implied contract

28) Which of the following is a correct statement of the requirements for a Bona Fide Occupational Qualification (BFOQ)?

A. The occupational qualification is job-related and cost-effective.

B. The occupational qualification is job-related and nondiscriminatory.

C. The occupational qualification is job-related and is a business necessity.

D. The occupational qualification is rationally based and evenly applied.

29) What federal legal protection is there with respect to trade secrets?

A. Trade secrets are protected under the federal patent laws.

B. Trade secrets are protected under the federal copyright laws.

C. Trade secrets are protected under the Trade Secret Protection Act of 1952.

D. Trade secrets are protected under the Economic Espionage Act of 1996.

30) Which of the following is true about misappropriation of trade secrets?

A. Although it is not necessary that the trade secret be patented, the secret must be such that it could be patented.

B. Trade secrets are always protected regardless of the actions of the trade secret owner.

C. The plaintiff can recover damages from theft of a trade secret only if the defendant acquired the trade secret through unlawful means.

D. Injunctions are generally not available to protect trade secrets.

Definition Scavenger Hunt

Business / Economics

5/3/12

Price: $5.00
Posted by: rkrepp
Date Posted: 5/3/12 7:38 AM

CheckPoint: Definition Scavenger Hunt

 

Define each of the following basic accounting terms in your own words by finding sources on the Internet.

 

Provide the URL that supports the definition you have created for each item. 

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