1. Kuznet Rental Center requires $1,000,000 in financing over the next two year. Kuznet can borrow long-term at 9 percent interest per year for two year. Alternatively, Kuznet can borrow short term and pay 7 percent interest in the first year. The Kuznet project paying 10 percent interest in the second year. Assuming Kuznets pays off the accrued interest at the end of each year, Which of the following statement is true?
a. Kuznets will definitely end up paying more under the long-term financing plan.
b. Kuznets will definitely end up paying less under the long- term financing plan.
c. Kuznets will probably pay more under the short- term financing plan.
d. Kuznets will probably pay less under the short-term financing plan.
2. Hicks Health Cluds, Inc. has $10,000,000 in assets. If it goes with a low liquidity plan for the assets. It can earn a return of 15 percent, but with a high liquidity plan, the return will be 10 percent. If the firm the goes with the short-term financing plan, the financing cost on the $10,000,000 will be 8 percent, and with a long-term financing plan, financing cost on the $10,000,000 will be 9 percent. Compute the anticipated return after financing cost on the most conservative assets financing mix.
a. $50,000
b. $100,000
c. $200,000
d. $700,000
3. The strong from of the efficient market hypothesis states that.
a. past price data is positively correlated to future price.
b. prices reflect all public information.
c. all information both public and private is immediately reflect in stock price.
d. none of the above.
4. A firm’s long term assets =$75,000, total assets = $200,000, inventory =$25,000 and current liabilities =$50,000
a. Current ratio =0.5;quick ratio= 1.5
b. Current ratio=1.0; quick ratio= 2.0
c. Current ratio= 1.5;quick ratio= 2.0
d. Current ratio= 2.5; quick ratio= 2.0
1. If a firm has a price of $4.00, variable cost per unit of $2.50 and a breakeven point of 20,000 units, fixed cost are equal to:
a. $13,333
b. $10,000
c. $30,000
d. $50,000
2. A firm has profit of $10,000on units sales of 5,000 units. Fixed cost are $30,000. what is the firm’s break-even sales level?
a. less than 4000 units.
b. 4000 units.
c. more than 4000 units.
d. there is not enough information to determine the unit the break-even point.
3. Tinbergen cans expect sales next year to be $30,000,000, inventory and accounts receivable (Combined) will increase $4,000,0000 to accommodate this sales level. The company has a profit margin of 10percent and a 30 percent dividend payout. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
a. No external financing will be needed.
b. less than $1,000,00 of external financing is needed.
c. between $1,000,000 and $2,000,000 of external financing is needed.
d. more than $2,000,000 of external financing is needed.
4. Under normal condition (70% probability) financing plan A will product $24,000 higher return than plan B. under tight money condition (30% probability) Plan A will produce $40,000 less than Plan B. what is the expected value of return plan A over Plan B?
a. $28,800
b. $4,000
c. $48,00
d. $35,200
1. The efficient market hypothesis deals primary with.
a. random speculation in securities.
b. the degree to which prices adjust to new information.
c. degree to which price movement are the result past trends.
d. how can investor can significantly outperform the market in general.
2. XYZ Co. has forecasted June sales of 600 units and July sales of 1000 units. The company maintains ending inventory equals to 125% pf next month’s Sales . June beginning inventory reflect this policy. What is June required production?
a. 1100 units
b. -0- units
c. 500 units
d. 400 units
3. Wiggles Right forecast sales $4,000 in January $6,000 in February and $55,00 in march. All sales are on credit 40% in collected the month of sale and the reminder the following month. How much is collected from account in receivable in February?
a. $5400
b. $4,800
c. $6,000
d. $3,000
4. A firm has a debt to assets ratio of 75%, $240,000in debt, and net income of $48,000. calculate return on equity?
a. 60%
b. 20%
c. 26%
d. not enough information
1. A firm has forecasted sales $3,000, in April $4,500 in May and $6,500 in June. All sales are on credit 30% is collected the month of sale and the reminder the following month. What will be balance in account receivable at the beginning of the July?
a. $1,950
b. $6,500
c. $4,550
d. $5,100
2. Frisch Fish Corp. expected net income next year to be $600,000. inventory and accounts receivable will have to be increased by $300,000 to accommodate this sales level. Frisch will pay dividends of $400,000. how much external financing will Frisch Fish need assuming no organically generated increase liability?
a. no external financing is required.
b. $100,000
c. $200,000
d. $300,000
3. Samuelson will produce the 20,000 units using level production. If each bed cost$1,000 to manufacture, what is the dollar value of inventory at the end of winter quarter?
a. $0
b. $1,000,000
c. the inventory level will be more than 1,100,000
d. there will be shortage
4. Allen Lumber Company had earning after taxes of $580,000 in the year 2006 with 400,000 shares outstanding. On January 1, 2007 the firm issued $35,000 new shares. Because of the proceeds from these new shares and other operating improvement,2007 earning was 25 percent higher than in 2006. Earning per share for the year 2007 was.
a. $1.67
b. $1.45
c. approximately $1.81
d. none of the above
1. Consider the following information for Ball crop.
| Selling and administrative expense | $50,000 |
| Depreciation expense | 80,000 |
| Sales | 400,000 |
| Interest expense | 30,000 |
| Cost of goods sold | 150,000 |
| Taxes | 18,550 |
What is the operating profit for Ball Crop.?
a. $71,450
b. $90,000
c. $120,000
d. none of the above
2. Allen Lumber Company had earning after taxes of $580,000 in the year 2006 with 400,000 shares outstanding. On January 1, 2007 the firm issued $35,000 new shares. Because of the proceeds from these new shares and other operating improvement,2007 earning was 25 percent higher than in 2006. Earning per share for the year 2007 was.
a. $1.67
b. $1.45
c. approximately $1.81
d. none of the above
3. GS Cookie Co. forecast cash receipt or January and February of $9,000 and $10,000, respectively. Cash payment of $4,000 and $ 55,00 are expected in these two months. GS cookie’s Cash balance at the beginning of January was $5,000 a level that it attempts to maintain. At the beginning of the year. GS Cookie has a $13,000 balance Outstanding on its line of credit at the local bank. Based on its cash budget, how much of the line of credit can GS Cookie repay by the end of February ?
a. $10,000
b. $9,000
c. $4,000
d. None GS Cookie must increase borrowings.
4. A firm’s long term assets =$75,000, total assets = $200,000, inventory =$25,000 and current liabilities =$50,000
a. Current ratio =0.5;quick ratio= 1.5
b. Current ratio=1.0; quick ratio= 2.0
c. Current ratio= 1.5;quick ratio= 2.0
d. Current ratio= 2.5; quick ratio= 2.0
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