A+ ANSWERS OF THE FOLLOWING QUESTIONS

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1. Which of the following titles is made more effective by alliteration?

A. Now You See It; Now You Don’t

B. Ruby, the Rose of Roslyn

C. What’s in a Name?

D. Guns: Our Lethal Heritage

 

2. When you write, the tone, vocabulary, and type of information you choose should vary depending on your

A. values.

B. biases.

C. education.

D. audience

 

3. Your topic is courtesy, and you’re writing from the point of view of a caring mentor. Which of the following sentences is most persuasive for an audience of high school graduates from a working-class neighbor hood?

A. Courtesy yields profits to the impecunious as well as to the wealthy.

B. Courtesy to others shows self-respect as much as it does respect for others.

C. Remember that you can catch more flies with honey than with vinegar.

D. Courtesy is the oil that lubricates the machinery of discourse.

1. Fasco Industries just paid a dividend of D0 = $1.45. Analysts expect the company’s dividend to grow by 28% this year, by 11% in Year 2, and at a constant rate of 6% in Year 3 and thereafter. The required return on this low-risk stock is 11.00%. What is the best estimate of the stock’s current market value?

2. Why are cash flows that are connected to common stock difficult to estimate? How does this compare to those related to bonds.

Question:

Case Problem C1.Paychecks kept coming Ken, a salaried employee, was terminated form his company in April of this year. Business had been slow since the beginning of the year, and each of the operating plant had laid off workers. Kens dismissal was processed through the human Resources Department, but the information was not relayed to the Corporate Payroll office. As had been the policy, checks for workers at remote sites were mailed to the employees. The mailing of Kens Checks continued for the next four weekly Paydays. It wasnt until the monthly Payroll reports were sent to Kens supervisor that the error was detected. Ken refused to return the four extra checks. What actions should the company take?

1. Which of the following statements is most correct?
A. If a project with normal cash flows has an IRR that exceeds the cost of capital, then the project must have a positive NPV.
B. If the IRR of project A exceeds the IRR of project B, then project A must also have a higher NPV.
C. The modified internal rate of return (MIRR) can never exceed the IRR.
D. Answers A and C are correct.
E. None of the answers above are correct.

2. Company purchased land from its 80% owned subsidiary at a cost of $100,000 greater than it subsidiary’s book value. Two years later P sold the land to an outside entity for $50,000 more than it’s cost. In its current year consolidated income statement P and its subsidiary should

report a gain on the sale of land of:
A. $50,000.
B. $120,000.
C. $130,000.
D. $150,000.

3. Which of the following statements is true of education as a way of changing people’s behavior? (Points : 2)
A. The 1964 surgeon general’s report on smoking and health had no effect on people’s smoking behavior
B. The Food and Drug Administration’s practice of requiring labels stating the fat content of prepared foods has had no effect on the fat content of people’s diets
C. The Food and Drug Administration’s practice of requiring labels stating the fat content of prepared foods has not reduced the prevalence of obesity in the United States.
D. Sex education in schools is not effective in reducing rates of adolescent pregnancy

1. Corporation acquired an 80% interest in S Corporation two years ago at an implied value equal to the book value of S. On January 2, 2011, S sold equipment with a five-year remaining life to P for a gain of $120,000. S reports net income of $600,000 for 2011 and pays dividends of $200,000. P’s Equity from Subsidiary Income for 2011 is: (Points : 2)
$480,000.
$384,000.
$576,000
$403,200.

2. On January 1, 2010, P Corporation sold equipment with a 3-year remaining life and a book value of $40,000 to its 70% owned subsidiary for a price of $46,000. In the consolidated work papers for the year ended December 31, 2011, an elimination entry for this transaction will include a: (Points : 2)
debit to Equipment for $6,000.
debit to Gain on Sale of Equipment for $6,000.
credit to Depreciation Expense for $6,000.
debit to Accumulated Depreciation for $4,000.

3. Which of the following statements is most correct?
A. The MIRR method will always arrive at the same conclusion as the NPV method.

 

B. The MIRR method can overcome the multiple IRR problem and the NPV method cannot.
C. The MIRR method uses a more reasonable assumption about reinvestment rates than the IRR method.
D. Statements A and C are correct.
E. All of the above statements are correct.

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