MBA800X25 - LastName |_|_|_|_|_|_|_|_|_|_|_|_| FirstName

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Last Name | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | First Name | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | _ | MBA 800 Exam  II Summer 2008 Instructions: 1. Read each question carefully and answer fully.     Unless otherwise  noted, all firms use a calendar year.   All interest rates are annual  rates, compounded annually unless otherwise noted. 2. Budget your time carefully.  Students who continue to work on exams  after instructed to stop will receive a zero on this exam. 4. It is the student's responsibility to verify there are 50 multiple choice  questions attached.  The student must return this exam and the scan  sheet.  Unanswered questions receive zero points regardless of reason.  Only the multiple choice answers placed on the scan (bubble)   sheet will be counted. Problem Pages Approximate Points Approximate Time 50  Multiple  Choice  Questions 2 – 13 140 86 – 108 minutes Total 140 86 – 108 minutes
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Page 2 of 16 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. Kramer Company The Kramer Company has an opportunity to purchase an asset on 1 Jan 20x1 that will return cash on 31 Dec 20x1 and 31 Dec 20x2. The payment has an equal chance of $60,000 or $80,000 on 31 Dec 20x1. Regardless of the 20x1 return, the payment has an equal chance of $60,000 or $80,000 on 31 Dec 20x2. Kramer purchases the asset at its economic value, using an interest rate of 10%. 1. Refer to Kramer Company. If the asset pays $80,000, what is the economic return on this asset? a. 16.2% b. 12.6% c. 18.2% d. none of the others are correct e. 10.0% 2. Refer to Kramer Company. If the asset pays $60,000 on 31 Dec 20x1, what is the asset’s economic value after that payment is received? a. none of the others are correct b. $64,874 c. $63,636 d. $66,667 e. $70,000 3. Refer to Kramer Company. Assume that Kramer uses an accounting system that amortizes the cost of the asset evenly over its life. Assume further the asset paid $80,000 on 31 Dec 20x1, and that Kramer’s only assets on 31 Dec 20x1 are that amount of cash and the asset (there are no liabilities). Compute Kramer’s market-to-book ratio. a. none of the others are correct b. 1.10 c. 1.02 d. .97 e. 1.00 4. Refer to Kramer Company. How much will Kramer pay for this asset? a. $140,000 b. $116,786 c. $121,488 d. none of the others are correct e. $118,943
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Page 3 of 16 McBeal Company The inventory information pertains to McBeal Company. Number of units Cost per unit Total cost Inventory, January 1 10,000 $9.00 $ 90,000 First purchase Feb. 10 10,000 $16.00 $160,000 Second purchase July 15 10,000 $20.00 $200,000 Goods available for sale 30,000 $450,000 Units sold during the year 15,000 Inventory, December 31 15,000 5. Refer to McBeal Company. Determine the cost of the ending inventory assuming that average costing is used. a.
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MBA800X25 - LastName |_|_|_|_|_|_|_|_|_|_|_|_| FirstName

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