Chapter 003 Working with Financial Statements
107. What is the equity multiplier for 2007?
a. 1.67
b. 1.72
C. 1.91
d. 1.94
e. 2.03
Equity multiplier for 2007 = $18,904
($7,500 + $2,397) = 1.91
AACSB TOPIC: ANALYTIC
SECTION: 3.3
TOPIC: FINANCIAL LEVERAGE R
Chapter 005 Introduction to Valuation: The Time Value of Money
36. Your big brother deposited $10,000 today at 9 percent interest for 6 years. You would like
to have just as much money at the end of the next 6 years as your brother. However, you can
only
Chapter 005 Introduction to Valuation: The Time Value of Money
38. When you retire 36 years from now, you want to have $2 million. You think you can earn
an average of 11.5 percent on your investments. To meet your goal, you are trying to decide
whether t
Chapter 005 Introduction to Valuation: The Time Value of Money
40. Wexter and Daughter invested $165,000 to help fund a company expansion project
planned for 3 years from now. How much additional money will the firm have saved 3 years
from now if it can e
Chapter 005 Introduction to Valuation: The Time Value of Money
42. You will be receiving $2,500 from your family as a graduation present. You have decided
to save this money for your retirement. You plan to retire 40 years after graduation. How
much addit
Chapter 006 Discounted Cash Flow Valuation
24. Your parents are giving you $500 a month for five years while you attend college to earn
both a bachelor's and a master's degree. At a 7 percent discount rate, what are these payments
worth to you when you fi
Chapter 006 Discounted Cash Flow Valuation
32. You buy an annuity which will pay you $7,800 a year for 15 years. The payments are paid
on the first day of each year. What is the value of this annuity today if the discount rate is 12
percent?
a. $53,124.74
Chapter 006 Discounted Cash Flow Valuation
26. Angela is able to pay $230 a month for 6 years on a car loan. If the interest rate is 7.9 percent,
how much can she afford to borrow to buy a car?
A. $13,154.54
b. $13,408.17
c. $13,528.28
d. $13,666.67
e. $1
Chapter 006 Discounted Cash Flow Valuation
30. Swenson & Swenson just decided to save $2,200 a month for the next 6 years as a safety net
for recessionary periods. The money will be set aside in a separate savings account which pays
5.5 percent interest c
Chapter 006 Discounted Cash Flow Valuation
28. Your employer contributes $50 a week to your retirement plan. Assume that you work for
your employer for another 12 years and that the applicable discount rate is 8 percent. Given
these assumptions, what is t
Chapter 006 Discounted Cash Flow Valuation
34. You are comparing two annuities with equal present values. The applicable discount rate is
11.25 percent. One annuity pays $6,000 on the first day of each year for 25 years. How much
does the second annuity p
Chapter 006 Discounted Cash Flow Valuation
36. What is the future value of $3,400 a year for 6 years at a 9 percent rate of interest?
a. $22,051.60
b. $23,876.49
c. $24,011.77
D. $25,579.34
e. $27,881.48
AACSB TOPIC: ANALYTIC
SECTION: 6.2
TOPIC: ORDINARY
Chapter 006 Discounted Cash Flow Valuation
39. Christie adds $2,000 to her savings account on the first day of each year. Todd adds $2,000
to his savings account on the last day of each year. They both earn a 7 percent rate of return.
What is the differen
Chapter 006 Discounted Cash Flow Valuation
41. You borrow $187,500 to buy a house. The mortgage rate is 7.25 percent and the loan period
is 25 years. Payments are made monthly. If you pay for the house according to the loan
agreement, how much total inter
Chapter 005 Introduction to Valuation: The Time Value of Money
34. On your thirteenth birthday, you received $1,000 which you invested at 6.5 percent
interest, compounded annually. Your investment is now worth $5,476. How old are you
today?
a. age 29
b. a
Chapter 005 Introduction to Valuation: The Time Value of Money
23. You hope to buy your dream house 3 years from now. Today, your dream house costs
$247,900. You expect housing prices to rise by an average of 7.5 percent per year over the
next 3 years. Ho
Chapter 005 Introduction to Valuation: The Time Value of Money
27. One year ago, you invested $2,500. Today it is worth $2,789.50. What rate of interest did
you earn?
a. 8.67 percent
b. 9.89 percent
c. 10.67 percent
d. 11.42 percent
E. 11.58 percent
$2,78
Chapter 003 Working with Financial Statements
104. What is the net working capital to total assets ratio for 2007?
a. 24.18 percent
b. 26.23 percent
C. 26.38 percent
d. 37.43 percent
e. 40.17 percent
Net working capital to total assets for 2007 = ($7,594
Chapter 003 Working with Financial Statements
112. Lander & Sons have earnings per share of $1.32. The firm's earnings have been
increasing at an average rate of 2.3 percent annually and are expected to continue doing so.
The firm has 14,500 shares of sto
Chapter 004 Long-Term Financial Planning and Growth
46. Coffee Brewers expects sales of $1,500 next year. The profit margin is 5 percent and the
firm has a 70 percent dividend payout ratio. What is the projected increase in retained
earnings?
a. $15.00
B.
Chapter 004 Long-Term Financial Planning and Growth
54. A firm has a payout ratio of 40 percent and a sustainable growth rate of 8.5 percent. The
capital intensity ratio is 1.1 and the debt-equity ratio is .5. What is the profit margin?
a. 5.4 percent
b.
Chapter 004 Long-Term Financial Planning and Growth
60. Creative Analysis, Inc. does not want to incur any additional external financing. The
dividend payout ratio is constant. What is their maximum rate of growth?
A. 3.09 percent
b. 3.16 percent
c. 3.84
Chapter 004 Long-Term Financial Planning and Growth
58. Pizza Piatta has net income of $680 and total equity of $4,000. The debt-equity ratio is 1.0
and the payout ratio is 40 percent. What is the internal growth rate?
a. 3.52 percent
B. 5.37 percent
c. 7
Chapter 004 Long-Term Financial Planning and Growth
73. What is the pro forma retained earnings if Delalo, Inc. grows at a rate of 3.76 percent and
both the profit margin and the dividend payout ratio remain constant?
a. $2,946.90
b. $3,023.75
C. $3,309.4
Chapter 004 Long-Term Financial Planning and Growth
63. Creative Analysis, Inc. is currently operating at 70 percent of capacity. All costs and net
working capital vary directly with sales. The tax rate, the profit margin, and the dividend
payout ratio wi
Chapter 004 Long-Term Financial Planning and Growth
66. All costs and net working capital vary directly with sales. Sales are projected to decrease
by 3 percent. What is the projected decrease in accounts receivable?
A. $25.20
b. $39.90
c. $199.50
d. $252
Chapter 004 Long-Term Financial Planning and Growth
76. Consultants, Inc. is currently operating at 95 percent of capacity. What is the total asset
turnover ratio at full capacity?
A. .68
b. .86
c. .95
d. 1.16
e. 1.46
Full-capacity sales = $3,800 / .95 =
Chapter 005 Introduction to Valuation: The Time Value of Money
4. Interest earned on both the initial principal and the interest reinvested from prior periods is
called _ interest.
a. free
b. annual
c. simple
d. interest on
E. compound
SECTION: 5.1
TOPIC:
Chapter 004 Long-Term Financial Planning and Growth
85. If a firm has the option of growing at a six percent rate versus a four percent rate, should
the firm always opt for the higher rate of growth? Explain why or why not.
No. The best rate of growth for
Chapter 005 Introduction to Valuation: The Time Value of Money
19. Jeff invests $3,000 in an account that pays 7 percent simple interest. How much more
could he have earned over a 20-year period if the interest had compounded annually?
a. $2,840.00
b. $3,