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Exam2 FIN470 Spring 2009 Key

# Exam2 FIN470 Spring 2009 Key - Exam2 FIN470 Spring 2009 Key...

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Exam2 FIN470 Spring 2009 Key 1. Glassparts, Inc. uses machines to manufacture windshields for automobiles. One machine costs \$142,000 and lasts about 5 years before it needs replaced. The operating cost per machine is \$7,000 a year. What is the equivalent annual cost of one machine if the required rate of return is 11 percent? (Round your answer to whole dollars) a. \$33,574 b. \$35,400 c. \$30,811 D. \$45,421 e. \$37,267 AACSB TOPIC: ANALYTIC Ross - Chapter 010 #79 SECTION: 10.6 TOPIC: EQUIVALENT ANNUAL COST TYPE: PROBLEMS 2. If a stock portfolio is well diversified, then the portfolio variance: Ross - Chapter 013 #20 SECTION: 13.2 TOPIC: PORTFOLIO VARIANCE TYPE: CONCEPTS

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3. A business entity which taxes it owners like partners while providing those owners with limited liability is called a: Ross - Chapter 001 #13 SECTION: 1.2 TOPIC: LIMITED LIABILITY COMPANY TYPE: DEFINITIONS 4. Tracie deposits \$5,000 into an account that pays 3 percent interest compounded annually. Chris deposits \$5,000 into an account that pays 3 percent simple interest. Both deposits were made this morning. Which of the following statements are true concerning these two accounts? I. At the end of one year, both Tracie and Chris will have the same amount in their accounts. II. At the end of five years, Tracie will have more money in her account than Chris has in his. III. Chris will never earn any interest on interest. IV. All else equal, Chris made the better investment. Ross - Chapter 005 #13 SECTION: 5.1 TOPIC: SIMPLE VERSUS COMPOUND INTEREST TYPE: CONCEPTS 5. A project has a contribution margin of \$6, projected fixed costs of \$14,000, projected variable cost per unit of \$14, and a projected financial break-even point of 6,000 units. What is the operating cash flow at this level of output? a. \$34,000 b. \$46,000 c. \$62,000 D. \$22,000 e. \$70,000 Operating cash flow at the financial break-even point = (6,000 \$6) \$14,000 = \$22,000 AACSB TOPIC: ANALYTIC Ross - Chapter 011 #81 SECTION: 11.4 TOPIC: FINANCIAL BREAK-EVEN TYPE: PROBLEMS

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Exam2 FIN470 Spring 2009 Key - Exam2 FIN470 Spring 2009 Key...

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