ex1 - EXAM I PRACTICE 1 a b c d e The forecast of cash...

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EXAM I: PRACTICE 1. The forecast of cash receipts and disbursements for the next planning period is called a: a. Pro forma income statement. b. Statement of cash flows. c. Cash budget. d. Receivables analysis. e. Credit analysis. 2. Which of the following statements is false ? a. While marginal and average tax rates often differ, it is the average tax rate that is relevant for most financial decisions. b. The book value of an asset on the balance sheet can be very different from its market value. c. Net income as calculated from the income statement is not the net cash flow of the firm. d. Non-cash items are expenses charged against revenues that do not directly affect cash flow. e. The cash flow identity states that all net cash flows earned by the firm are distributed in whole to its creditors and shareholders. T a x a b l e i n c o m e T a x r a t e $ 0 – $ 5 0 , 0 0 0 1 5 % $ 5 0 , 0 0 1 – $ 7 5 , 0 0 0 2 5 % $ 7 5 , 0 0 1 – $ 1 0 0 , 0 0 0 3 4 % $ 1 0 0 , 0 0 1 – $ 3 3 5 , 0 0 0 3 9 % 3. If taxable income is $92,000, then the ______ . a. average tax rate is 21.1% b. average tax rate is 34.0% c. marginal tax rate is 15.0% d. marginal tax rate is 25.0% e. marginal tax rate is 39.0% L. Merville BA 3341
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4. An insurance company promises to pay Jane $1 million on her 65th birthday in return for a one-time payment of $125,000 today. (Jane just turned 30.) At what rate of interest would Jane be indifferent between accepting the company's offer and investing the premium on her own? a. 3.4% b. 4.5% c. 5.1% d. 6.1% e. 7.2% 5. The interest rate used to calculate the present value of future cash flows is called the ________ rate. a. free interest b. annual interest c. compound interest d. simple interest e. discount In a growing midwestern town, the number of eating establishments at the end of each of the last five years are as follows: Year 1 = 273; Year 2 = 279; Year 3 = 302; Year 4 = 320; Year 5 = 344 6. Between the end of year 2 and the end of year 3, the number of eating establishments grew at a rate of _______ compounded annually. a. 5.2% b. 6.7% c. 7.6% d. 8.2% e. 9.3%
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7. Which of the following statements is/are false , all else the same? I. Present values increase as the discount rate increases. II. Present values increase the further away in time the future value. III. Present values are always smaller than future values when both r and t are positive. a. I only
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ex1 - EXAM I PRACTICE 1 a b c d e The forecast of cash...

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