公司理财精要版原书第12版课后习题答案FCF 12th edition Chapter 20

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公司理财精要版原书第12版习题库答案Ross12e_Chapter22_TB_AnswerKey

Fundamentals of Corporate Finance, 12e (Ross)Chapter 22 Behavioral Finance: Implications for Financial Management1) Nadine made a business decision that turned out badly. In reflecting upon her decision, she decided it was a reasoning error that led to the faulty decision. Which one of the following areas of study best applies to this situation?A) Corporate ethicsB) Financial statement analysisC) Managerial financeD) Debt managementE) Behavioral financeAnswer: EDifficulty: 1 EasyTopic: Behavioral financeLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation2) Peter has successfully managed the finances of A.D. Leadbetter in a manner that has yielded abnormally high returns. Due to this success, Peter has decided to publish a newsletter for financial executives so that he can share his superior financial wisdom with others. There is a very real probability that Peter has which one of the following characteristics?A) Gambler's fallacyB) Frame dependenceC) OverconfidenceD) Representativeness heuristicE) Sentiment-based risk attitudesAnswer: CDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation3) Jeremy believes he excels at picking stock winners and thus trades frequently. Which characteristic does he most likely represent?A) Confirmation biasB) Frame dependenceC) OverconfidenceD) Representativeness heuristicE) Break-even effectAnswer: CDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation4) Anytime Ted analyzes a proposed project, he always assigns a much higher probability of success to the project than is warranted by the information he has gathered. Ted suffers from which one of the following?A) Frame dependenceB) Mental accountingC) Endowment effectD) Confirmation biasE) OveroptimismAnswer: EDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation5) The tendency for a decision maker to search for reassurance that a recent decision he or she made was a good decision represents which one of the following characteristics?A) OverconfidenceB) OveroptimismC) Affect heuristicD) Confirmation biasE) Representativeness heuristicAnswer: DDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation6) Which one of the following best illustrates an error which you, as a project manager, might make due to confirmation bias?A) Overestimating the best outcome expected from a project while underestimating the possibility of a less favorable outcomeB) Assuming that a new project will be profitable since similar projects in the past were successfulC) Assuming that your expectations of the future outcome from a project are more accurate than the expectations of others within your organizationD) Listening to the advice of subordinates with whom you agree while ignoring the advice of subordinates with whom you tend to disagreeE) Downplaying the cost of future failure of an existing project since the project has already paid for itselfAnswer: DDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation7) Assume you are an overconfident manager. You are most apt to do which one of the following more so than you would if you were not overconfident?A) Research a project more thoroughly before committing funds to commence itB) Accept risky projects that turn out to be less profitable than you expectedC) Wait until new technology proves its worth before incorporating it into your firm's operationsD) Avoid mergers and acquisitionsE) Invest excess company cash more conservatively than your peers at other firmsAnswer: BDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation8) Marzella Corp. is analyzing a project that involves expanding the firm into a new product line. The project's financial projections will tend to have which one of the following characteristics if the person compiling those projections suffers from overoptimism?A) Overestimated construction costsB) Overestimated expensesC) Overestimated net present valuesD) Underestimated profitsE) Underestimated sales estimatesAnswer: CDifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation9) Alice believes she can accurately forecast the future and makes business decisions based on this belief. Which characteristics does this belief represent?A) OverconfidenceB) OveroptimismC) Affect heuristicD) Confirmation biasE) Representativeness heuristicAnswer: ADifficulty: 1 EasyTopic: BiasesLearning Objective: 22-01 Describe how behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation10) Kate tends to hold onto assets that have lost value in the hope that their values will increase in the future. Kate illustrates which one of the following?A) Frame dependenceB) Self-attribution biasC) Gambler's fallacyD) Break-even effectE) Regret aversionAnswer: DDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation11) Which one of the following refers to the fact that an individual may reply differently if a question is asked in an equivalent but different manner?A) Loss aversionB) Gambler's fallacyC) Frame dependenceD) OverconfidenceE) Format referenceAnswer: CDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation12) Aivree wants to accumulate great wealth but she invests all of her funds in U.S. Treasury bills because she wants to avoid the potential losses she knows can occur in the stock markets. Aivree best illustrates which one of these characteristics?A) Loss aversionB) Gambler's fallacyC) Disposition effectD) Law of small numbersE) Mental accountingAnswer: ADifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation13) Consumer Marketing just conducted a two-phase survey. In the first phase, the survey questions were worded such that the answers tended to sound positive. In the second phase, the survey questions were reworded so the answers tended to convey a negative feeling. Both sets of survey questions should have resulted in similar results as the information solicited was essentially identical. However, the survey results varied significantly. This survey best illustrates which one of the following?A) Mental accountingB) OverconfidenceC) Self-attribution biasD) Confirmation biasE) Frame dependenceAnswer: EDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation14) Recently, a neighbor you have known for years won a lottery and received a $250,000 prize. This neighbor decided to invest all of his winnings in a new business venture that he knew only had a 5 percent chance of success. Previous to this, the neighbor had always been ultra conservative with his money and had refused to invest in this business venture as recently as last week. Which one of the following behaviors most applies to your neighbor's decision to invest in this business venture now?A) Disposition effectB) Affect heuristicC) Gambler's fallacyD) House moneyE) Get-evenitisAnswer: DDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation15) The tendency to sell winners and hold losers is known as the:A) representativeness heuristic.B) disposition effect.C) house money effect.D) self-attribution bias.E) affect heuristic.Answer: BDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation16) Steve purchased a stock last year for $34 a share. The stock increased in value to $36 a share before declining to its current value of $30. Steve has decided to sell the stock, but only if he can receive $34 a share or better. Steve is primarily suffering from which one of the following behavioral conditions?A) Representativeness heuristicB) House moneyC) Loss aversionD) RandomnessE) Myopic loss aversionAnswer: CDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation17) Over the past six months, you have watched as your parent's retirement savings have declined in value by 25 percent due to a severe financial market downturn. As a result, you have decided that you will never invest in stocks for your own retirement but will instead keep all of your money in an insured bank account. Which behavioral characteristic have you acquired as a result of the market downturn?A) Myopic loss aversionB) Get-evenitisC) Self-attribution biasD) Mental accountingE) Regret aversionAnswer: ADifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation18) Ramon opened a combination laundry and dry cleaning establishment three years ago that is quite successful. He has considered expanding this business by opening another location but keeps putting off that decision for fear that the second location will not be a success. Ramon is currently displaying which one of the following behavioral characteristics?A) Self-attribution biasB) OverconfidenceC) Regret aversionD) House money effectE) Frame dependenceAnswer: CDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation19) Phyllis is planning for her retirement in 15 years. She currently lives comfortably on $38,000a year given that she is debt-free. Based on her family history she only expects to live ten years after she retires. Thus, she computes her retirement need as $38,000 a year for ten years. Which one of the following behaviors applies to Phyllis?A) Regret aversionB) Money illusionC) Self-attribution biasD) Endowment effectE) Myopic loss aversionAnswer: BDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation20) Kate is attempting to sell her house for $260,000. Fred lives across the street in an identical house. Fred recently stated to his wife that Kate's house is probably worth only $250,000 but that once she sells her house, he would like to put their house on the market at $285,000 and then move into a condominium. Which one of the following behaviors applies to Fred?A) Myopic loss aversionB) House money effectC) Money illusionD) Self-attribution biasE) Endowment effectAnswer: EDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation21) You have a tendency to take credit for the decisions you make that have good outcomes even when those outcomes are out of your control. On the other hand, you blame bad luck for your decisions that turn out badly. Which of these terms applies to you?A) Myopic loss aversionB) House money effectC) Money illusionD) Self-attribution biasE) Endowment effectAnswer: DDifficulty: 1 EasyTopic: Framing effectsLearning Objective: 22-02 Demonstrate how framing effects can result in inconsistent and/or incorrect decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation22) A tendency to be overly conservative when faced with new information is referred to as:A) anchoring and adjustment.B) heuristics.C) self-attribution.D) loss aversion.E) regret aversion.Answer: ADifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation23) Bill feels that he possesses a good dose of "street smarts." Thus, he makes his business decisions based on how a project feels to him rather than taking the time to financially analyze a project. This type of behavior is referred to as:A) overconfidence.B) endowment effect.C) money illusion.D) affect heuristic.E) sentiment-based risk.Answer: DDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation24) Which term refers to the tendency to shy away from the unknown?A) Aversion to ambiguityB) Clustering illusionC) Anchoring and adjustmentD) Recency biasE) Availability biasAnswer: ADifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation25) You recently overheard your boss telling someone that if he'd actually crunched some numbers and done some analysis instead of just going with his instincts, he never would have opened the new store in Centre City. Which one of the following caused your boss to make a bad decision?A) Regret aversionB) Endowment effectC) Money illusionD) Affect heuristicE) Representativeness heuristicAnswer: DDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation26) Roger's Meat Market is a chain of retail stores that limits its sales to fresh-cut meats. The stores have been very profitable in northern cities. However, when two stores were opened in the south, both lost money and had to be closed. Roger, the owner, has now concluded that no southern-based store should be opened as it would not be profitable. Which one of the following applies to Roger?A) Confirmation biasB) Endowment effectC) Money illusionD) Affect heuristicE) Representativeness heuristicAnswer: EDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation27) Up until three years ago, A.C. Dime opened an average of ten new retail stores a year. One of every ten new stores had to be closed within two years due to poor sales. This 90 percent success ratio was fairly steady for over 30 years. Starting three years ago, the firm has opened 40 new stores and every one had significant profits within six months. Management believes their recent success is not just a random event and that all future stores will be profitable. Thus, the managers have decided to open a minimum of 15 new stores each year. The managers are suffering from:A) arbitrage limitations.B) anchoring and adjustment.C) aversion to ambiguity.D) the clustering illusion.E) myopic aversion.Answer: DDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation28) You are employed as a commission-based sales clerk for a cosmetics retail store. You know that, on average, exactly 50 percent of the customers that enter your store will make at least one purchase. Thus far this morning, you have waited on eight customers without making a single sale. You are convinced that the next customer you wait on will buy something. This belief is known as:A) aversion to ambiguity.B) the law of small numbers.C) anchoring and adjusting.D) gambler's fallacy.E) false consensus.Answer: DDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation29) The last six times you purchased a stock you earned high returns within one year. Thus, you believe you will have the same result with your next stock purchase. This is an example of which one of the following?A) Recency biasB) Anchoring and adjustmentC) Frame dependenceD) Aversion to ambiguityE) Clustering illusionAnswer: ADifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation30) You started an online business two weeks ago. Thus far, you have averaged ten sales a day, which is one sale for every five hits. You are now considering giving up your day job and becoming a full-time online retailer. You have calculated the amount of income you can earn based on ten sales a day and know that level of income would support you in a comfortable fashion. The belief that you will have ten sales per day if this becomes your full-time occupation is based on which one of the following?A) Mental accountingB) Anchoring and adjustmentC) Law of small numbersD) Bubble and crash theoryE) Confirmation biasAnswer: CDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation31) You are a hard-charging manager who doesn't really like to sit at a desk for too long. You prefer to gather information quickly, make a decision, and move on to the next item on your agenda. Which one of the following applies to you?A) Availability biasB) Arbitrage limitsC) Law of small numbersD) Representativeness heuristicE) Regret aversionAnswer: ADifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation32) Your friends are all investing in a start-up company. You, on the other hand, refuse to invest in the company because you don't know the odds of it becoming successful. Which behavioral characteristic are you displaying?A) Aversion to ambiguityB) Recency biasC) Sentiment-based risk aversionD) Clustering illusionE) Money illusionAnswer: ADifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation33) You are the manager of a retail store. You believe the economy is in a recession and that sales for the month will be unusually slow. Since you have complete discretion over the pricing at your location, you decide to have a storewide sale and offer ten percent off all merchandise for a three-day period. You don't expect your superiors to criticize this decision as you believe they, along with the majority of the other store managers, feel the same way about the economy as you do. Which one of the following applies to you?A) Recency biasB) Law of small numbersC) Gambler's fallacyD) False consensusE) Money illusionAnswer: DDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation34) The last two promotions within a firm involved individuals who completed the same advanced managerial program. As a result, the company president has stipulated that all future management hires must be graduates of that program. This behavior is typical of someone who has which one of the following characteristics?A) Endowment effectB) Framing effectC) Representativeness heuristicD) Narrow framingE) Affect heuristicAnswer: CDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation35) Which term refers to the reliance on stereotypes or limited samples to form opinions about an entire class?A) Clustering illusionB) Law of small numbersC) Representativeness heuristicD) False consensusE) Recency biasAnswer: CDifficulty: 1 EasyTopic: HeuristicsLearning Objective: 22-03 Show how the use of heuristics can lead to suboptimal financial decisions.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation36) It is believed by some individuals that, in an efficient market, the actions of traders who constantly buy and sell on any perceived market mispricing will in effect cause market prices to correctly reflect asset values. A person who believes that the actions of these traders will not result in correctly valued prices are most apt to believe in which one of the following?A) Gambler's fallacyB) Limits to arbitrageC) Availability biasD) False consensusE) Clustering illusionAnswer: BDifficulty: 1 EasyTopic: Arbitrage and its limitsLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation37) Which one of the following is an investment risk that investors face in addition to firm-based risk and market-based risk?A) Management-related riskB) Inflation riskC) Supply chain riskD) Interest rate riskE) Sentiment-based riskAnswer: EDifficulty: 1 EasyTopic: Behavioral financeLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation38) Which word best describes the stock market during the month of October 1987?A) CrashB) CircleC) BubbleD) LimitE) FlatAnswer: ADifficulty: 1 EasyTopic: Historical performanceLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation39) All of the following create limits to arbitrage except:A) firm-specific risk.B) noise traders.C) thinly traded securities.D) rational traders.E) implementation costs.Answer: DDifficulty: 1 EasyTopic: Arbitrage and its limitsLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation40) AB Industries is an all-equity firm that has $10 per share in cash and a book value per share of $12. At which one of the following market prices would you know with absolute certainty that the stock was mispriced?A) $9B) $10C) $11D) $12E) $13Answer: ADifficulty: 1 EasyTopic: Market efficiencyLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: UnderstandAACSB: Reflective ThinkingAccessibility: Keyboard Navigation41) Approximately what percent of its total value did the stock market lose on "Black Monday"?A) 19B) 10C) 23D) 30E) 38Answer: CDifficulty: 1 EasyTopic: Historical performanceLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation42) Which one of the following statements related to market crashes is correct?A) Financial market crashes are unique to the United States.B) A market crash tends to occur within a week but have effects that last many years.C) Once the market finally crashed in 1929, stock prices began a long period of steady increases.D) The market crash of 1987 occurred on a day when trading volume was light indicating there were a limited number of irrational investors involved.E) Actions in Washington, D.C., may have helped contribute to the market crash in 1929 but not to the 1987 crash.Answer: BDifficulty: 1 EasyTopic: Historical performanceLearning Objective: 22-04 Define the shortcomings and limitations to market efficiency from the behavioral finance view.Bloom's: RememberAACSB: Reflective ThinkingAccessibility: Keyboard Navigation。

公司理财精要版原书第12版习题库答案Ross12e_Chapter15_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 15 Raising Capital1) Business Aid is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. What is this type of funding called?A) Green shoe fundingB) Tombstone underwritingC) Venture capitalD) Red herring fundingE) Life cycle capital2) It is common for venture capitalists to receive at least ________ percent of a start-up company's equity in exchange for the venture capital.A) 10B) 15C) 20D) 30E) 403) Equity financing of new, non-public companies is broadly referred to as:A) singular-risk financing.B) mezzanine-level stock.C) stylized financing.D) private equity.E) exit funding.4) Which one of the following statements concerning venture capital financing is correct?A) Venture capitalists desire shares of common stock but avoid preferred stock.B) Venture capital is relatively easy to obtain.C) Venture capitalists rarely assume active roles in the management of the financed firm.D) Venture capitalists should have key contacts and financial strength.E) Venture capital is relatively inexpensive in today's competitive markets.5) Which one of the following statements concerning venture capitalists is correct?A) Venture capitalists always assume management responsibility for the companies they finance.B) Exit strategy is a key consideration when selecting a venture capitalist.C) Venture capitalists limit their services to providing money to start-up firms.D) Most venture capitalists are long-term investors in the companies they finance.E) A venture capitalist normally invests in a new idea from conception through the IPO.6) When selecting a venture capitalist, which one of the following characteristics is probably the least important?A) Financial strengthB) Level of involvementC) ContactsD) Exit strategyE) Underwriting experience7) Trevor is the CEO of Harvest Foods, which is a privately held corporation. What is the first step he must take if he wishes to take Harvest Foods public?A) Select an underwriterB) Obtain SEC approvalC) Gain board approvalD) Prepare a registration statementE) Distribute a prospectus8) Which one of these describes an exception to the registration filing requirement of the SEC?A) Loans that mature in one year or lessB) Issues that have an approved prospectusC) Loans of $10 million or lessD) Issues of less than $5 millionE) Issues that have received an approved letter of comment9) The Securities and Exchange Commission:A) verifies the accuracy of the information contained in the prospectus.B) publishes red herrings on prospective new security offerings.C) examines the prospectus during the Green Shoe period.D) reviews registration statements to ensure they comply with current laws and regulations.E) determines the final offer price once they have approved the registration statement.10) What is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuer offers new securities to the general public?A) ProspectusB) Red herringC) IndentureD) Public disclosure statementE) Registration statement11) M&C Merchants is offering $2.5 million of new securities to the general public. Which SEC regulation governs this offering?A) Regulation AB) Regulation CC) Regulation GD) Regulation QE) Regulation R12) What is a prospectus?A) A letter issued by the SEC authorizing a new issue of securitiesB) A report stating that the SEC recommends a new security to investorsC) A letter issued by the SEC that outlines the changes required for a registration statement to be approvedD) A document that describes the details of a proposed security offering along with relevant information about the issuerE) An advertisement in a financial newspaper that describes a security offering13) Which one of the following is a preliminary prospectus?A) TombstoneB) Green shoeC) Registration statementD) Rights offerE) Red herring14) Advertisements in a financial newspaper announcing a public offering of securities, along with a list of the investment banks handling the offering, are called:A) red herrings.B) tombstones.C) Green Shoes.D) registration statements.E) cash offers.15) The raising of small amounts of capital from a large number of people is known as:A) a rights offering.B) over allocating.C) a diversified offer.D) crowdfunding.E) a standby offer.16) During a 12-month period, a company is permitted to issue new securities through crowdfunding up to a limit of:A) $200 thousand.B) $500 thousand.C) $1 million.D) $5 million.E) $50 million.17) What is an issue of securities that is offered for sale to the general public on a direct cash basis called?A) Best efforts underwritingB) Firm commitment underwritingC) General cash offerD) Rights offerE) Herring offer18) Alberto currently owns 2,500 shares of Southern Tools. He has just been notified that the company is issuing additional shares and he is being given a chance to purchase some of these shares prior to the shares being offered to the general public. What is this type of an offer called?A) Best efforts offerB) Firm commitment offerC) General cash offerD) Rights offerE) Priority offer19) JLK is a partnership that was formed two years ago and has been extremely successful thus far. The owners have decided to incorporate and offer shares of stock to the general public. What is this type of an equity offering called?A) Venture capital offeringB) Shelf offeringC) Private placementD) Seasoned equity offeringE) Initial public offering20) What is a seasoned equity offering?A) An offering of shares by shareholders for repurchase by the issuerB) Shares of stock that have been recommended for purchase by the SECC) Equity securities held by a company's founder that are being offered for sale to the general publicD) Sale of newly issued equity shares by a publicly owned companyE) Outstanding shares that are offered for sale by one of a company's original founders21) Executive Tours has decided to go public and has hired an investment firm to handle the offering. The investment firm is serving as a(n):A) aftermarket specialist.B) venture capitalist.C) underwriter.D) seasoned writer.E) primary investor.22) Underwriters generally:A) pay a spread to the issuing firm.B) provide only best efforts underwriting in the U.S.C) accept the risk of selling the new securities in exchange for the gross spread.D) market and distribute an entire issue of new securities within their own firm.E) pass the risk of unsold shares back to the issuing firm via a firm commitment agreement.23) A syndicate can best be defined as a:A) venture capitalist.B) group of attorneys providing services for an IPO.C) block of investors who control a firm.D) bank that loans funds to finance the start-up of a new company.E) group of underwriters sharing the risk of selling a new issue of securities.24) The difference between the underwriters' cost of buying shares in a firm commitment and the offering price of those securities to the public is called the:A) gross spread.B) under price amount.C) filing fee.D) new issue premium.E) offer price.25) Jones & Co. recently went public and received $23.07 a share on their entire offer of 30,000 shares. Keeser & Co. served as the underwriter and sold 28,500 shares to the public at an offer price of $26.50 a share. What type of underwriting was this?A) Best effortsB) ShelfC) OversubscribedD) Private placementE) Firm commitment26) Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the public. The underwriters charged a fee of 8.2 percent and paid Blue Stone Builders the uniform auction price for each of those shares. Which one of the following terms best describes this underwriting?A) Dutch auctionB) Best effortsC) Public rightsD) Private placementE) Market commitment27) The 40-day period following an IPO during which the SEC places restrictions on the public communications of the issuer is known as the ________ period.A) auctionB) quietC) lockupD) Green ShoeE) red28) Mobile Units recently offered 75,000 new shares of stock for sale. The underwriters sold a total of 78,500 shares to the public at a price of $16 a share. The additional 3,500 shares were purchased in accordance with which one of the following?A) Green Shoe provisionB) Red herring provisionC) Quiet provisionD) Lockup agreementE) Post-issue agreement29) With firm commitment underwriting, the issuing firm:A) is unsure of the total amount of funds it will receive until after the offering is completed.B) is unsure of the number of shares it will actually issue until after the offering is completed.C) knows exactly how many shares will be purchased by the general public during the offer period.D) retains the financial risk associated with unsold shares.E) knows upfront the amount of money it will receive from the stock offering.30) Which one of the following is a key goal of the aftermarket period?A) Collecting the largest number of Dutch auction bids as possibleB) Determining a fair offer priceC) Supporting the market price for a new securities issueD) Establishing a broad-based underwriting syndicateE) Distributing red herrings to as many potential investors as possible31) Which one of the following statements is correct?A) The quiet period commences when a registration statement is filed with the SEC and ends on the day the IPO shares commence trading.B) Lockup agreements outline how oversubscribed IPO shares will be allocated.C) Additional IPO shares can be issued in accordance with the lockup agreement.D) Quiet period restrictions only apply to the issuer of new securities.E) A public interview with an issuer's CFO could cause a forced delay in the issuer's IPO.32) With Dutch auction underwriting:A) each winning bidder pays the minimum price offered by any bidder.B) all successful bidders pay the same price per share.C) all bidders receive at least a portion of the quantity for which they bid.D) the selling firm receives the maximum possible price for each security sold.E) the bidder for the largest quantity receives the first allocation of securities.33) Individual investors might avoid requesting 100 shares in an upcoming IPO because they:A) do not want to be bothered with submitting their bid to the SEC for approval.B) do not want to abide by the quiet period requirement.C) are prevented from entering orders for less than 1,000 shares.D) are more apt to receive shares if the IPO is under allocated.E) would have to pay a premium based on their small order size.34) If a firm commitment IPO is overpriced then the:A) investors in the IPO may consider suing the underwriters.B) Green Shoe provision will probably be utilized.C) stock price will generally increase on the first day of trading.D) issuing firm is guaranteed to be successful in the long term.E) issuing firm receives less money than it probably should have.35) All of the following are supporting arguments in favor of IPO underpricing except which one?A) Helps prevent the "winner's curse"B) Rewards institutional investors who share their market value opinionsC) Reduces potential lawsuits against underwritersD) Diminishes underwriting riskE) Provides better returns to issuing firms36) When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:A) increase.B) decrease.C) remain constant.D) respond, but the direction of the response is not predictable as shown by past studies.E) decrease momentarily and then immediately increase substantially within an hour following the announcement.37) The total direct costs of underwriting an equity IPO:A) tend to increase on a percentage basis as the total proceeds of the IPO increase.B) are generally between 7 and 9 percent, regardless of the issue size.C) tend to be less than the direct costs of issuing bonds on a percentage of proceeds basis.D) exclude the gross spread.E) can be as low as 5.5 percent and as high as 25 percent of gross proceeds.38) Which one of the following statements is correct concerning the direct costs of issuing securities?A) Domestic bonds are generally more expensive to issue than equity IPOs.B) The gross spread as a percentage of proceeds is the same for similar-sized IPOs and SEOs.C) A seasoned offering is always more expensive on a percentage basis than an IPO.D) There tends to be substantial economies of scale when issuing any type of security.E) The costs of issuing convertible bonds tend to be less on a percentage basis than the costs of issuing straight debt.39) Shares of PLS United have been selling with rights attached. Tomorrow, the stock will sell independent of these rights. Which one of the following terms applies to tomorrow in relation to this stock?A) Pre-issue dateB) Aftermarket dateC) Declaration dateD) Holder-of-record dateE) Ex-rights date40) The date on which a shareholder is officially listed as the recipient of stock rights is called the:A) issue date.B) offer date.C) declaration date.D) holder-of-record date.E) ex-rights date.41) A rights offering in which an underwriting syndicate agrees to purchase the unsubscribed portion of an issue is called a(n) ________ underwriting.A) standbyB) best effortsC) firm commitmentD) direct feeE) oversubscription42) BK & Co. offered 15,000 shares in a rights offer. T.L. Moore & Co. was the underwriter that by prior agreement purchased the 639 unsold shares. For its participation in this rights offer, T.L. Moore & Co. is most likely entitled to:A) the gross margin.B) the optional spread.C) a standby fee.D) the subscription price.E) an oversubscription fee.43) Franklin Minerals recently had a rights offering of 12,000 shares at an offer price of $17 a share. Isabelle is a shareholder who exercised her rights option by buying all of the rights to which she was entitled based on the number of shares she owns. Currently, there are six shareholders who have opted not to participate in the rights offering. Isabelle would like to purchase these unsubscribed shares. Which one of the following will allow her to do so?A) Standby provisionB) Oversubscription privilegeC) Open offer privilegeD) New issues provisionE) Overallotment provision44) Existing shareholders:A) may or may not have a pre-emptive right to newly issued shares.B) must purchase new shares whenever rights are issued.C) are prohibited from selling their rights.D) are generally well advised to let the rights they receive expire.E) can maintain their proportional ownership positions without exercising their rights.45) To purchase a share in a rights offering, an existing shareholder generally just needs to:A) pay the subscription amount in cash.B) submit the required form along with the required number of rights.C) pay the difference between the market price of the stock and the subscription price.D) submit the required number of rights along with a payment for the underwriting fee.E) submit the required number of rights along with the subscription price.46) The value of a right depends upon the number of rights required for each new share as well as the:A) subscription price and book value per share.B) market and book values per share.C) market price, book value, and subscription price.D) market and subscription prices.E) difference between the market and book values per share.47) Before a seasoned stock offering, you owned 500 shares of a firm that had 20,000 shares outstanding. After the seasoned offering, you still owned 500 shares but the number of shares outstanding rose to 25,000. Which one of the following terms best describes this situation?A) OverallotmentB) Percentage ownership dilutionC) Green Shoe allocationD) Red herring allotmentE) Abnormal event48) Which one of the following statements concerning dilution is correct?A) Dilution of percentage ownership occurs whenever an investor fully participates in a rights offer.B) Market value dilution increases as the net present value of a project increases.C) Market value dilution occurs when the net present value of a project is negative.D) Neither book value dilution nor market value dilution has any direct bearing on individual shareholders.E) Book value dilution is the cause of market value dilution.49) Roy owns 200 shares of RTF Inc. He has opted not to participate in the current rights offering by this company. As a result, Roy will most likely be subject to:A) an oversubscription cost.B) underpricing.C) dilution.D) the Green Shoe provision.E) a locked-in period.50) Direct business loans typically ranging from one to five years are called:A) private placements.B) debt SEOs.C) notes payable.D) debt IPOs.E) term loans.51) The High-End mutual fund recently loaned $13.6 million to Henderson Hardware for 15 years at 6.8 percent interest. This loan is best described as a:A) private placement.B) debt SEO.C) note payable.D) debt IPO.E) term loan.52) Which one of the following statements is correct concerning the issuance of long-term debt?A) A direct private long-term loan has to be registered with the SEC.B) Direct placement debt tends to have more restrictive covenants than publicly issued debt.C) Distribution costs are lower for public debt than for private debt.D) It is easier to renegotiate public debt than private debt.E) Wealthy individuals tend to dominate the private debt market.53) Shelf registration allows a firm to register multiple issues at one time with the SEC and then sell those registered shares anytime during the subsequent:A) 3 months.B) 6 months.C) 180 days.D) 2 years.E) 5 years.54) Pearson Electric recently registered 180,000 shares of stock under SEC Rule 415. The company plans to sell 100,000 shares this year and the remaining 80,000 shares next year. What type of registration was this?A) Standby registrationB) Shelf registrationC) Regulation A registrationD) Regulation Q registrationE) Private placement registration55) The Boat Works decided to go public by offering a total of 135,000 shares of common stockto the public. The company hired an underwriter who arranged a firm commitment underwriting and an initial selling price of $24 a share with a spread of 8.3 percent. As it turned out, the underwriters only sold 122,400 shares to the public. What is the amount paid to the issuer?A) $2,227,280B) $3,074,420C) $2,971,080D) $2,692,820E) $2,477,38056) Nelson Paints recently went public by offering 50,000 shares of common stock to the public. The underwriters provided their services in a best efforts underwriting. The offering price was set at $17.50 a share and the gross spread was $2.30. After completing their sales efforts, the underwriters determined that they sold a total of 47,500 shares. How much cash did the company receive from its IPO?A) $722,000B) $717,000C) $735,000D) $705,000E) $748,00057) LC Delivery has decided to sell 1,800 shares of stock through a Dutch auction. The bids received are as follows: 600 shares at $37 a share, 800 shares at $36, 900 shares at $35, 200 shares at $34, and 100 shares at $32 a share. How much will the company receive in total from selling the 1,800 shares? Ignore all transaction and flotation costs.A) $63,100B) $52,500C) $63,000D) $58,800E) $52,10058) Bakers' Town Bread is selling 1,500 shares of stock through a Dutch auction. The bids received are as follows: 200 shares at $17 a share, 400 shares at $15, 700 shares at $14, 400 shares at $13, and 200 shares at $11 a share. How much cash will the company receive from selling these shares of stock? Ignore all transaction and flotation costs.A) $22,000B) $22,500C) $23,000D) $24,500E) $20,20059) Eastern Electric is offering 2,100 shares of stock in a Dutch auction. The bids include: 1,400 shares at $32 a share, 1,500 shares at $31, 1,400 shares at $30, and 900 shares at $29 a share. How much cash will Eastern Electric receive from selling these shares? Ignore all transaction and flotation costs.A) $62,100B) $64,200C) $60,000D) $63,000E) $63,30060) You have been instructed to place an order for a client to purchase 500 shares of every IPO that comes to market. The next two IPOs are each priced at $26 a share and will begin trading on the same day. The client is allocated 500 shares of IPO A and 240 shares of IPO B. At the end of the first day of trading, IPO A was selling for $23.90 a share and IPO B was selling for $29.40 a share. What is the client's total profit or loss on these two IPOs as of the end of the first day of trading?A) − $286B) − $234C) − $148D) $275E) $32961) Richard placed an order for 1,000 shares in each of three IPOs at $28 a share. He was allocated 1,000 shares of IPO A, 200 shares of IPO B, and 600 shares of IPO C. On the first day of trading, IPO A opened at $28 a share and ended the day at $24.25 a share. IPO B opened at $30 a share and finished the day at $37 a share. IPO C opened at $28 a share and ended the day at $27.65 a share. What is the total profit or loss on these three IPO purchases as of the end of the first day of trading?A) − $2,160B) − $1,850C) − $1,950D) $2,240E) $2,17562) Two IPOs will commence trading next week. Scott places an order to buy 600 shares of IPOA. Steve places an order to purchase 600 shares of IPO A and 600 shares of IPOB. Both IPOs are priced at $21 a share. Scott is allocated 300 shares of IPO A. Steve is allocated 300 shares of IPO A and 600 shares of IPO B. At the end of the first day of trading, IPO A is selling for $23.30 a share and IPO B is selling for $17.75 a share. How much additional profit did Steve have at the end of the first day of trading as compared to Scott?A) $1,950B) $1,260C) $1,870D) −$1,950E) −$1,26063) Davis Bros. and The Storage Shed have both announced IPOs at $32 per share. One of these is undervalued by $9, and the other is overvalued by $4, but you have no way of knowing whichis which. You plan on buying 1,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. What is the amount of the difference between your expected profit and the amount of profit you could earn if you could get 1,000 shares of both IPO offerings?A) $4,500B) $5,000C) $4,000D) $5,500E) $6,00064) Wear Ever is expanding and needs $6.8 million to help fund this growth. The company estimates it can sell new shares of stock for $43 a share. It also estimates it will cost an additional $352,000 for filing and legal fees related to the stock issue. The underwriters have agreed to a spread of 7.5 percent. How many shares of stock must be sold for the company to fund its expansion?A) 170,376B) 185,127C) 179,811D) 154,209E) 61,80665) Mountain Teas wants to raise $13.6 million to open a new production facility. The company estimates the issue costs for legal and accounting fees will be $386,000. The underwriters have set the stock price at $27.50 a share and the underwriting spread at 8.15 percent. How many shares of stock must be sold to meet this cash need?A) 528,414B) 553,709C) 569,315D) 492,144E) 501,90966) Outdoor Goods needs $3.8 million to modernize its production equipment. The underwriters set the stock price at $29.50 a share with an underwriting spread of 7.35 percent. This would be a firm commitment underwriting. The estimated issue costs are $272,000. How many shares of stock must be sold to finance this project?A) 148,984B) 188,917C) 152,311D) 186,299E) 162,40067) Flagler Inc. needs to raise $11.6 million, including all accounting and legal fees, to finance its expansion so has decided to sell new shares of equity via a general cash offering. The offer price is $22.50 per share and the underwriting spread is 7.85 percent. How many shares need to be sold?A) 559,474B) 604,011C) 566,667D) 571,008E) 538,40968) New Education needs to raise $8.79 million to finance its expansion and has decided to sell new shares of equity via a general cash offering. The offer price is $31.40 per share, the underwriting spread is 7.32 percent, and the associated administrative expenses and fees are $517,600. How many shares need to be sold?A) 348,907B) 361,222C) 311,111D) 329,937E) 319,83269) The Huff Co. has just gone public. Under a firm commitment agreement, the company received $17.64 for each of the 3.2 million shares sold. The initial offering price was $22.50 per share, and the stock rose to $24.15 per share in the first day of trading. The company paid $984,900 in direct legal and other costs and incurred $340,000 in indirect costs. What was the flotation cost as a percentage of the net amount raised?A) 38.56 percentB) 40.32 percentC) 41.68 percentD) 40.20 percentE) 39.09 percent70) Mountain Mining requires $3.3 million to expand its current operations and has decided to raise these funds through a rights offering at a subscription price of $18 a share. The current market price of the company's stock is $24.70 a share. How many shares of stock must be sold to fund the expansion plans?A) 140,015B) 133,603C) 148,909D) 183,333E) 195,60771) Northwest Rail wants to raise $27.8 million through a rights offering to upgrade its rail lines. How many shares of stock need to be sold if the current market price is $30.34 a share and the subscription price is $26.50 a share?A) 916,282B) 937,856C) 985,065D) 1,058,604E) 1,049,05772) S&S wants to raise $11.3 million through a rights offering with a subscription price of $15 a share. The company has 1.24 million shares outstanding and a market price of $17.50 a share. Each shareholder will receive one right for each share of stock owned. How many rights will be needed to purchase one new share of stock in this offering?A) 1.42B) 1.75C) 1.65D) 1.82E) 1.5573) P&T wants to raise $2.8 million through a rights offering with a subscription price of $20 a share. Currently, the company has 750,000 shares of stock outstanding at a market price of $24.50 a share. One right will be granted for each share of stock outstanding. How many rights are required to purchase one new share of stock in this offering?A) 5.36B) 6.02C) 5.55D) 6.56E) 6.6774) Miller Fruit wants to expand and needs $1.6 million to do so. Currently, the firm has 465,000 shares of stock outstanding at a market price per share of $32.50. The firm decided on a rights offering with one right granted for each share of outstanding stock. The subscription price is $28 a share. How many rights are needed to purchase one new share of stock in this offering?A) 8.14B) 7.17C) 8.22D) 8.63E) 9.45。

公司理财精要版原书第12版习题库答案Ross12e_Chapter01_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 1 Introduction to Corporate Finance1) Which one of the following functions should be the responsibility of the controller rather than the treasurer?A) Depositing cash receiptsB) Processing cost reportsC) Analyzing equipment purchasesD) Approving credit for a customerE) Paying a vendor2) The treasurer of a corporation generally reports directly to the:A) board of directors.B) chairman of the board.C) chief executive officer.D) president.E) vice president of finance.3) Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?A) The vice president of finance reports to the chairman of the board.B) The chief executive officer reports to the president.C) The controller reports to the chief financial officer.D) The treasurer reports to the president.E) The chief operations officer reports to the vice president of production.4) An example of a capital budgeting decision is deciding:A) how many shares of stock to issue.B) whether or not to purchase a new machine for the production line.C) how to refinance a debt issue that is maturing.D) how much inventory to keep on hand.E) how much money should be kept in the checking account.5) When evaluating the timing of a project's projected cash flows, a financial manager is analyzing:A) the amount of each expected cash flow.B) only the start-up costs that are expected to require cash resources.C) only the date of the final cash flow related to the project.D) the amount by which cash receipts are expected to exceed cash outflows.E) when each cash flow is expected to occur.6) Capital structure decisions include determining:A) which one of two projects to accept.B) how to allocate investment funds to multiple projects.C) the amount of funds needed to finance customer purchases of a new product.D) how much debt should be assumed to fund a project.E) how much inventory will be needed to support a project.7) The decision to issue additional shares of stock is an example of:A) working capital management.B) a net working capital decision.C) capital budgeting.D) a controller's duties.E) a capital structure decision.8) Which one of the following questions is a working capital management decision?A) Should the company issue new shares of stock or borrow money?B) Should the company update or replace its older equipment?C) How much inventory should be on hand for immediate sale?D) Should the company close one of its current stores?E) How much should the company borrow to buy a new building?9) Which one of the following is a working capital management decision?A) What type(s) of equipment is (are) needed to complete a current project?B) Should the firm pay cash for a purchase or use the credit offered by the supplier?C) What amount of long-term debt is required to complete a project?D) How many shares of stock should the firm issue to fund an acquisition?E) Should a project should be accepted?10) Working capital management decisions include determining:A) the minimum level of cash to be kept in a checking account.B) the best method of producing a product.C) the number of employees needed to work during a particular shift.D) when to replace obsolete equipment.E) if a competitor should be acquired.11) Which one of the following terms is defined as the management of a firm's long-term investments?A) Working capital managementB) Financial allocationC) Agency cost analysisD) Capital budgetingE) Capital structure12) Which one of the following terms is defined as the mixture of a firm's debt and equity financing?A) Working capital managementB) Cash managementC) Cost analysisD) Capital budgetingE) Capital structure13) A firm's short-term assets and its short-term liabilities are referred to as the firm's:A) working capital.B) debt.C) investment capital.D) net capital.E) capital structure.14) Which one of the following questions is least likely to be addressed by financial managers?A) How should a product be marketed?B) Should customers be given 30 or 45 days to pay for their credit purchases?C) Should the firm borrow more money?D) Should the firm acquire new equipment?E) How much cash should the firm keep on hand?15) A business owned by a solitary individual who has unlimited liability for the firm's debt is called a:A) corporation.B) sole proprietorship.C) general partnership.D) limited partnership.E) limited liability company.16) A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:A) corporation.B) sole proprietorship.C) general partnership.D) limited partnership.E) limited liability company.17) A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:A) general partner.B) sole proprietor.C) limited partner.D) corporate shareholder.E) zero partner.18) A business created as a distinct legal entity and treated as a legal "person" is called a(n):A) corporation.B) sole proprietorship.C) general partnership.D) limited partnership.E) unlimited liability company.19) Which one of the following statements concerning a sole proprietorship is correct?A) A sole proprietorship is designed to protect the personal assets of the owner.B) The profits of a sole proprietorship are subject to double taxation.C) The owner of a sole proprietorship is personally responsible for all of the company's debts.D) There are very few sole proprietorships remaining in the U.S. today.E) A sole proprietorship is structured the same as a limited liability company.20) Which one of the following statements concerning a sole proprietorship is correct?A) The life of a sole proprietorship is limited.B) A sole proprietor can generally raise large sums of capital quite easily.C) Transferring ownership of a sole proprietorship is easier than transferring ownership of a corporation.D) A sole proprietorship is taxed the same as a C corporation.E) A sole proprietorship is the most regulated form of organization.21) Which of the following individuals have unlimited liability for a firm's debts based on their ownership interest?A) Only general partnersB) Only sole proprietorsC) All stockholdersD) Both limited and general partnersE) Both general partners and sole proprietors22) The primary advantage of being a limited partner is:A) the receipt of tax-free income.B) the partner's active participation in the firm's activities.C) the lack of any potential financial loss.D) the daily control over the business affairs of the partnership.E) the partner's maximum loss is limited to their capital investment.23) A general partner:A) is personally responsible for all partnership debts.B) has no say over a firm's daily operations.C) faces double taxation whereas a limited partner does not.D) has a maximum loss equal to his or her equity investment.E) receives a salary in lieu of a portion of the profits.24) A limited partnership:A) has an unlimited life.B) can opt to be taxed as a corporation.C) terminates at the death of any one limited partner.D) has at least one partner who has unlimited liability for all of the partnership's debts.E) consists solely of limited partners.25) A partnership with four general partners:A) distributes profits based on percentage of ownership.B) has an unlimited partnership life.C) limits the active involvement in the firm to a single partner.D) limits each partner's personal liability to 25 percent of the partnership's total debt.E) must distribute 25 percent of the profits to each partner.26) One disadvantage of the corporate form of business ownership is the:A) limited liability of its shareholders for the firm's debts.B) double taxation of distributed profits.C) firm's greater ability to raise capital than other forms of ownership.D) firm's potential for an unlimited life.E) firm's ability to issue additional shares of stock.27) Which one of the following statements is correct?A) The majority of firms in the U.S. are structured as corporations.B) Corporate profits are taxable income to the shareholders when earned.C) Corporations can have an unlimited life.D) Shareholders are protected from all potential losses.E) Shareholders directly elect the corporate president.28) Which one of the following statements is correct?A) A general partnership is legally the same as a corporation.B) Income from both sole proprietorships and partnerships that is taxable is treated as individual income.C) Partnerships are the most complicated type of business to form.D) All business organizations have bylaws.E) Only firms organized as sole proprietorships have limited lives.29) The articles of incorporation:A) describe the purpose of the firm and set forth the number of shares of stock that can be issued.B) are amended periodically especially prior to corporate elections.C) explain how corporate directors are to be elected and the length of their terms.D) sets forth the procedures by which a firm regulates itself.E) include only the corporation's name and intended life.30) Corporate bylaws:A) must be amended should a firm decide to increase the number of shares authorized.B) cannot be amended once adopted.C) define the name by which the firm will operate.D) describe the intended life and purpose of the organization.E) determine how a corporation regulates itself.31) A limited liability company:A) can only have a single owner.B) is comprised of limited partners only.C) is taxed similar to a partnership.D) is taxed similar to a C corporation.E) generates totally tax-free income.32) Which business form is best suited to raising large amounts of capital?A) Sole proprietorshipB) Limited liability companyC) CorporationD) General partnershipE) Limited partnership33) A ________ has all the respective rights and privileges of a legal person.A) sole proprietorshipB) general partnershipC) limited partnershipD) corporationE) limited liability company34) Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?A) Sole proprietorshipB) Joint stock companyC) Limited partnershipD) General partnershipE) Corporation35) Sally and Alicia are equal general partners in a business. They are content with their current management and tax situation but are uncomfortable with their unlimited liability. Which form of business entity should they consider as a replacement to their current arrangement assuming they wish to remain the only two owners of the business?A) Sole proprietorshipB) Joint stock companyC) Limited partnershipD) Limited liability companyE) Corporation36) The growth of both sole proprietorships and partnerships is frequently limited by the firm's:A) double taxation.B) bylaws.C) inability to raise cash.D) limited liability.E) agency problems.37) Corporate dividends are:A) tax-free because the income is taxed at the personal level when earned by the firm.B) tax-free because they are distributions of aftertax income.C) tax-free since the corporation pays tax on that income when it is earned.D) taxed at both the corporate and the personal level when the dividends are paid to shareholders.E) taxable income of the recipient even though that income was previously taxed.38) Financial managers should primarily focus on the interests of:A) stakeholders.B) the vice president of finance.C) their immediate supervisor.D) shareholders.E) the board of directors.39) Which one of the following best states the primary goal of financial management?A) Maximize current dividends per shareB) Maximize the current value per shareC) Increase cash flow and avoid financial distressD) Minimize operational costs while maximizing firm efficiencyE) Maintain steady growth while increasing current profits40) Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?A) An increase in the amount of the quarterly dividendB) A decrease in the per unit production costsC) An increase in the number of shares outstandingD) A decrease in the net working capitalE) An increase in the market value per share41) Financial managers should strive to maximize the current value per share of the existingstock to:A) guarantee the company will grow in size at the maximum possible rate.B) increase employee salaries.C) best represent the interests of the current shareholders.D) increase the current dividends per share.E) provide managers with shares of stock as part of their compensation.42) Decisions made by financial managers should primarily focus on increasing the:A) size of the firm.B) growth rate of the firm.C) gross profit per unit produced.D) market value per share of outstanding stock.E) total sales.43) The Sarbanes-Oxley Act of 2002 is a governmental response to:A) decreasing corporate profits.B) the terrorist attacks on 9/11/2001.C) a weakening economy.D) deregulation of the stock exchanges.E) management greed and abuses.44) Which one of the following is an unintended result of the Sarbanes-Oxley Act?A) More detailed and accurate financial reportingB) Increased management awareness of internal controlsC) Corporations delisting from major exchangesD) Increased responsibility for corporate officersE) Identification of internal control weaknesses45) A firm which opts to "go dark" in response to the Sarbanes-Oxley Act:A) must continue to provide audited financial statements to the public.B) must continue to provide a detailed list of internal control deficiencies on an annual basis.C) can provide less information to its shareholders than it did prior to "going dark".D) can continue publicly trading its stock but only on the exchange on which it was previously listed.E) ceases to exist.46) The Sarbanes-Oxley Act of 2002 holds a public company's ________ responsible for the accuracy of the company's financial statements.A) managersB) internal auditorsC) external legal counselD) internal legal counselE) Securities and Exchange Commission agent47) Which one of the following actions by a financial manager is most apt to create an agency problem?A) Refusing to borrow money when doing so will create losses for the firmB) Refusing to lower selling prices if doing so will reduce the net profitsC) Refusing to expand the company if doing so will lower the value of the equityD) Agreeing to pay bonuses based on the market value of the company's stock rather than on its level of salesE) Increasing current profits when doing so lowers the value of the company's equity48) Which one of the following is least apt to help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes.A) Compensation based on the value of the stockB) Stock option plansC) Threat of a company takeoverD) Threat of a proxy fightE) Increasing managers' base salaries49) Agency problems are most associated with:A) sole proprietorships.B) general partnerships.C) limited partnerships.D) corporations.E) limited liability companies.50) Which one of the following is an agency cost?A) Accepting an investment opportunity that will add value to the firmB) Increasing the quarterly dividendC) Investing in a new project that creates firm valueD) Hiring outside accountants to audit the company's financial statementsE) Closing a division of the firm that is operating at a loss51) Which one of the following is a means by which shareholders can replace company management?A) Stock optionsB) PromotionC) Sarbanes-Oxley ActD) Agency playE) Proxy fight52) Which one of the following grants an individual the right to vote on behalf of a shareholder?A) ProxyB) By-lawsC) Indenture agreementD) Stock optionE) Stock audit53) Which one of the following parties has ultimate control of a corporation?A) Chairman of the boardB) Board of directorsC) Chief executive officerD) Chief operating officerE) Shareholders54) Which of the following parties are considered stakeholders of a firm?A) Employees and the governmentB) Long-term creditorsC) Government and common stockholdersD) Common stockholdersE) Long-term creditors and common stockholders55) Which one of the following represents a cash outflow from a corporation?A) Issuance of new securitiesB) Payment of dividendsC) New loan proceedsD) Receipt of tax refundE) Initial sale of common stock56) Which one of the following is a cash flow from a corporation into the financial markets?A) Borrowing of long-term debtB) Payment of government taxesC) Payment of loan interestD) Issuance of corporate debtE) Sale of common stock57) Which one of the following is a primary market transaction?A) Sale of currently outstanding stock by a dealer to an individual investorB) Sale of a new share of stock to an individual investorC) Stock ownership transfer from one shareholder to another shareholderD) Gift of stock from one shareholder to another shareholderE) Gift of stock by a shareholder to a family member58) Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:A) took place in the primary market.B) occurred in a dealer market.C) was facilitated in the secondary market.D) involved a proxy.E) was a private placement.59) Public offerings of debt and equity must be registered with the:A) New York Board of Governors.B) Federal Reserve.C) NYSE Registration Office.D) Securities and Exchange Commission.E) Market Dealers Exchange.60) Which one of the following statements is generally correct?A) Private placements must be registered with the SEC.B) All secondary markets are auction markets.C) Dealer markets have a physical trading floor.D) Auction markets match buy and sell orders.E) Dealers arrange trades but never own the securities traded.61) Which one of the following statements concerning stock exchanges is correct?A) NASDAQ is a broker market.B) The NYSE is a dealer market.C) The exchange with the strictest listing requirements is NASDAQ.D) Some large companies are listed on NASDAQ.E) Most debt securities are traded on the NYSE.62) Shareholder A sold shares of Maplewood Cabinets stock to Shareholder B. The stock is listed on the NYSE. This trade occurred in which one of the following?A) Primary, dealer marketB) Secondary, dealer marketC) Primary, auction marketD) Secondary, auction marketE) Secondary, OTC market63) Which one of the following statements is correct concerning the NYSE?A) The publicly traded shares of a NYSE-listed firm must be worth at least $250 million.B) The NYSE is the largest dealer market for listed securities in the United States.C) The listing requirements for the NYSE are more stringent than those of NASDAQ.D) Any corporation desiring to be listed on the NYSE can do so for a fee.E) The NYSE is an OTC market functioning as both a primary and a secondary market.11。

公司理财精要版原书第12版习题库答案Ross12e_Chapter20_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 20 Credit and Inventory Management1) Brown's Hardware offers a discount of two percent on their commercial accounts if payment is received within ten days. Otherwise, payment is due within 30 days. This credit offering is referred to as the:A) terms of sale.B) credit analysis.C) collection policy.D) payables policy.E) collection float.2) Jillian was recently hired to determine the probability that individual customers of a major retailer will fail to pay for their charge sales. Jillian's job best relates to which one of the following?A) Terms of saleB) Credit analysisC) Collection policyD) Payables policyE) Customer service3) Town Hardware sells goods on credit with payment due 30 days after purchase. If payment is not received by the 30th day, the store mails a friendly reminder to the customer. If payment is not received by the 45th day, the store calls the customer and requests payment and also stops offering credit to that customer. These procedures are referred to as the store's:A) customer service policy.B) credit policy.C) collection policy.D) payables policy.E) disbursements policy.4) The terms of sale generally include all of the following except the:A) credit period.B) cash discount.C) type of credit instrument.D) discount period.E) customer's credit capacity.5) The primary purpose of credit analysis is to:A) determine the optimal credit period.B) analyze the effects of granting a cash discount.C) determine the optimal discount period, if any.D) summarize the frequency and amount of sales by customer.E) evaluate whether or not a customer will pay.6) The period of time that extends from the day a credit sale is made until the day the bank credits the seller's account with the payment for that sale is known as the ________ period.A) floatB) cash collectionC) salesD) accounts receivableE) discount7) Which one of the following will increase a firm's investment in accounts receivables?A) An increase in the number of days for which credit is grantedB) A decrease in credit salesC) An increase in cash salesD) A decrease in the average collection periodE) A decrease in average daily credit sales8) A firm's total investment in accounts receivables depends primarily on the firm's:A) total sales and cash discount period.B) cash to credit sales ratio.C) bad debt ratio.D) average collection period and amount of credit sales.E) amount of credit sales and cash discount percentage.9) Which one of the following statements is correct if you purchase an item with credit termsof 3/15, net 45?A) If you pay within 3 days, you will receive a discount of 15 percent.B) If you pay within 15 days, you will receive a discount of 3 percent.C) If you do not pay within 15 days, you will be charged interest at a rate of 3 percent per month.D) If you pay 3 percent of your purchases within 15 days, you will have 45 days to pay for the remainder.E) One-third of your purchase is due in 15 days and the rest is due in 45 days.10) Assume you put your purchases on your credit card and then take advantage of any cash discounts offered. Which one of these credit terms do you prefer?A) 1/10, net 20B) 2/5, net 30C) 2/10, net 30D) 1/15, net 45E) 2/15, net 3011) You need to charge your purchases and know that you will not be able to pay within the discount period. Which one of these credit terms is best-suited to you?A) 1/5, net 15B) 2/5, net 30C) 2/5, net 20D) 1/10, net 45E) 2/10, net 3012) Which one of the following statements is correct?A) The credit period begins when the discount period ends.B) The discount period is the length of time granted to a customer to pay for a purchase.C) The credit period begins on the invoice date.D) With terms of 2/10, net 30, the net credit period is 20 days.E) With EOM dating, all sales are assumed to have occurred on the 15th of each month.13) Which one of these is frequently cited as an appropriate upper limit to the credit period offered by a seller?A) The buyer's inventory periodB) The seller's inventory periodC) The seller's operating cycleD) The buyer's operating cycleE) The buyer's receivables period14) Phil's Print Shop grants its customers the right to pay for their print jobs within 30 days of the ROG. Thus, the customers' credit period begins when they:A) review and approve the print order.B) renew their contract on a revolving print order.C) reorder a previously approved print job.D) receive their print jobs.E) request a new job be printed.15) Scott purchased a shovel, a rake, and a wheelbarrow from The Local Hardware Store yesterday. Today, the store issued a bill for these items and mailed it to Scott. What is the name given to this bill?A) Ledger statementB) WarrantyC) IndentureD) ReceiptE) Invoice16) Geoff Industries offers its credit customers a two percent discount if they pay within ten days. This discount is referred to as a ________ discount.A) cashB) purchaseC) collectionD) marketE) receivables17) Any written proof that a customer owes you money for goods or services provided is referred to as a(n):A) account document.B) sales draft.C) credit instrument.D) commercial paper.E) letter of debt.18) Which one of the following factors most supports a longer credit period being offered to customers?A) Higher consumer demandB) Lower priced merchandiseC) Increased credit riskD) More perishable merchandiseE) Increased competition19) Which one of the following statements related to credit periods is correct?A) Longer credit periods are granted for sales of perishable items.B) Inexpensive goods tend to have longer credit periods.C) Smaller accounts tend to have longer credit periods.D) Sellers may offer different credit periods to different customers.E) Newer products tend to have shorter credit periods.20) A trade discount of 2/5th, EOM terms:A) grants customers five days to pay after month end.B) offers no credit to customers.C) means the full amount is due by the 5th of the month following the month of sale.D) means the invoice is overdue only after month-end.E) means the full amount is due the last day of the month following the month of sale.21) Under credit terms of 1/5, net 15, customers should:A) Always pay on the 15th day.B) take the discount and pay immediately.C) take the discount and pay on the day following the day of sale.D) either take the discount or pay on the 15th day.E) both take the discount and pay on the 15th day.22) A 2/10, net 30 credit policy:A) is an expensive form of short-term credit if a buyer forgoes the discount.B) provides cheap financing to the buyer for 30 days.C) is an inexpensive means of reducing the seller's collection period if every customer takes the discount.D) tends to have little effect on the seller's collection period.E) tends to increase the seller's investment in receivables as compared to a straight net 30 policy.23) The Painted House offers credit terms of 2/10th, EOM. Assume you purchase an item on credit from this store on Monday, November 3. When is payment due for this purchase if you do not take the discount?A) November 3B) November 13C) November 30D) December 31E) December 1024) Which one of the following credit instruments is commonly used in international commerce?A) Open accountB) Sight draftC) Time draftD) Banker's acceptanceE) Promissory note25) A conditional sales contract:A) passes title to the goods sold to the buyer at the time the contract is signed.B) normally calls for one lump sum payment on the contract payment date.C) allows the seller to retain ownership of the goods sold until the customer has fully paid for the purchase.D) is payable immediately upon receipt.E) is a formal bid for a project.26) Which one of these statements is correct?A) A firm's cash cycle generally decreases when it switches from a cash to a credit policy, all else equal.B) Most customers will forgo the discount and pay at the end of the credit period.C) Total revenues generally decrease if both the quantity sold and the price per unit increase when credit is granted.D) Only the cost of default should be considered before granting credit.E) A firm may have to increase its long-term borrowing if it decides to grant credit to its customers.27) When considering a switch from an all-cash credit policy to a net 30 credit policy all of the following should be considered except the:A) revenue effects.B) effects on the variable costs.C) cost of the discount.D) probability of default.E) change in the fixed costs.28) The optimal amount of credit equates the incremental costs of carrying the increase in accounts receivable to the incremental:A) decrease in the cash cycle.B) benefit from decreasing the inventory level.C) cash flows from increased sales.D) increase in bad debts.E) gain in net profits.29) Assume you are viewing a graph that compares costs with the amount of credit extended. Both the carrying costs and the opportunity costs of credit are depicted. What is the function called that represents the summation of these carrying and opportunity costs?A) Opportunity cost curveB) Credit extension curveC) Credit cost curveD) Terms of sale graphE) Optimal sales graph30) Assume that RSF is a wholly owned subsidiary of the Rolled Steel Company. RSF provides credit financing solely for large ticket items purchased from the Rolled Steel Company. Which one of the following terms describes RSF?A) Credit departmentB) Parent companyC) Captive finance companyD) Credit unionE) Service unit31) When credit policy is at the optimal point, the:A) total costs of granting credit will be maximized.B) carrying costs of credit will be equal to zero.C) opportunity cost of credit will be equal to zero.D) carrying costs will equal the opportunity costs.E) total costs will equal the opportunity costs.32) Which of the following characteristics are most associated with a firm that adopts a liberal credit policy?A) Mostly one-time customers and excess capacityB) Low carrying costs and full productionC) Low carrying costs and high variable costsD) Low variable costs and predominately repeat customersE) Excess capacity and high variable costs33) If you extend credit for a one-time sale to a new customer, you risk an amount equal to the:A) sales price of the item sold.B) variable cost of the item sold.C) fixed cost of the item sold.D) profit margin on the item sold.E) fixed and variable costs of the item sold.34) Which one of the following statements is correct?A) If the majority of a firm's new customers become repeat customers, then there is a strong argument against extending credit even if the default rate is low.B) A customer's past payment history reveals little information in relation to his or her future tendency to pay.C) A suggested policy for offering credit to new customers is to limit the amount of their initial credit purchase.D) The risk of issuing credit is the same for a new customer as it is for an existing customer.E) The recommended policy for new customers is to extend an offer of a high credit limit as an enticement to get their business.35) When evaluating the creditworthiness of a customer, the term capital refers to the:A) type of goods the customer wishes to obtain.B) customer's financial reserves.C) types of assets the customer wants to pledge as collateral.D) customer's willingness to pay bills in a timely fashion.E) nature of the customer's line of work.36) Which one of the five Cs of credit refers to a customer's willingness to pay its bills?A) CharacterB) CapacityC) CollateralD) ConditionsE) Capital37) Which one of the five Cs of credit refers to the general economic situation in the customer's line of business?A) CapacityB) CharacterC) ConditionsD) CapitalE) Collateral38) The basic factors to be evaluated in the credit evaluation process, the five Cs of credit, are:A) conditions, control, cessation, capital, and capacity.B) conditions, character, capital, control, and capacity.C) capital, collateral, control, character, and capacity.D) character, capacity, control, cessation, and collateral.E) capacity, character, collateral, capital, and conditions.39) Roger's Home Appliances offers credit to customers it deems qualified based on a numerical value that estimates the probability that the customer will default if credit is granted to them. Theprocess of computing this numerical value is referred to as:A) credit scoring.B) Credit capacity.C) receipts assessment.D) conditions for credit.E) consumer analysis.40) You are an accounting intern and today you are compiling a spreadsheet with column headings of: Invoice number; Customer number; < 30 days; 31-60 days; 61-90 days; > 90 days. You will list every unpaid invoice with the amount owed entered into the appropriate column based on the number of days between the sale date and today. Once you have completed that, you will sort the report by customer number and total the amounts listed in each column. What is this report called?A) Credit reportB) Aging scheduleC) Risk assessment reportD) Turnover delineationE) Receivables consolidation report41) Which one of the following statements is correct?A) Firms may opt to refuse additional credit to a delinquent customer.B) Seasonal sales have little, if any, impact on aging schedule percentages.C) Normally, firms call their delinquent customers prior to sending them a past due letter.D) If a firm wishes to sell a delinquent receivable, it must do so prior to the customer filing for bankruptcy.E) Expected decreases in the average collection period are a cause of concern.42) Which one of the following inventory items is probably the least liquid?A) Plywood held in inventory by a home builderB) A wheel barrow held in inventory by a garden centerC) A partially assembled interior for a new vehicleD) A set of tires owned by an automobile manufacturerE) A toy owned by a retail toy store43) Which one of the following inventory items is probably the most liquid?A) A custom made set of kitchen cabinetsB) Metal cabinets for dishwashersC) Wheat stored in a grain siloD) A customized drill pressE) A partially built modular home44) Which one of the following inventory-related costs is considered a shortage cost?A) Storage costsB) Insurance costC) Loss of customer goodwillD) Theft costE) Opportunity cost of capital used for inventory purchases45) The ABC approach to inventory management is based on the concept that:A) inventory should arrive at the time it is needed in the manufacturing process.B) the inventory period should be constant for all inventory items.C) basic inventory items that are essential to production and also inexpensive should be ordered in small quantities only.D) a small percentage of inventory items represents a large percentage of inventory cost.E) one-third of a year's inventory needs should be on hand, another third should be on order, and the last third should be unordered.46) The EOQ model is designed to determine how much:A) total inventory a firm needs during any one year.B) total inventory costs will be for any one given year.C) inventory should be purchased at one time.D) inventory will be sold per day.E) a firm loses in sales per day when an inventory item is depleted.47) A particular inventory manager orders items only in quantities that minimize inventory costs. What is this restocking quantity called?A) Short order quantityB) Refill unit quantityC) Economic order quantityD) Minimum stock levelE) Re-order limit48) Allison has developed a set of procedures for determining the amount of each raw material she needs to have in inventory if she is to keep the assembly lines operating efficiently. These procedures are commonly referred to by which one of the following terms?A) First-in, first-out methodB) The Baumol modelC) Net working capital planningD) Economic order proceduresE) Materials requirements planning49) Which one of the following is a characteristic of a just-in-time inventory system?A) High level of dependence on supplier performanceB) Low inventory turnover ratesC) Long inventory periodsD) Unusually high inventory levelsE) Large, infrequent re-orders of raw materials50) At the optimal order quantity size, the:A) total cost of holding inventory is fully offset by the restocking costs.B) carrying costs are equal to zero.C) restocking costs are equal to zero.D) total costs equal the carrying costs.E) carrying costs equal the restocking costs.51) The EOQ model is designed to minimize:A) production costs.B) inventory obsolescence.C) the carrying costs of inventory.D) the costs of replenishing inventory.E) the total costs of holding inventory.52) Which one of the following items is most likely a derived-demand inventory item?A) Wrenches held in inventory by a hardware storeB) Tires held in inventory by a tractor manufacturerC) Shoes on display in a retail storeD) Toys just received by a toy storeE) Wheat harvested by a farmer53) Inventory needs under a derived-demand inventory system are:A) primarily dependent upon the competitive demands placed on a firm's suppliers.B) based on the anticipated demand for the finished product.C) based on minimizing the cost of restocking inventory.D) held constant over time.E) determined by a Kanban system.54) A just-in-time inventory system:A) eliminates all inventory costs.B) reduces the inventory turnover rate.C) averages long-term inventory needs.D) focuses on immediate production needs.E) maximizes inventory costs.55) The incremental investment in receivables under the accounts receivable approach is equal to:A) P −νQ'.B) PQ'.C) PQ + ν(Q'− Q).D) P(Q'− Q).E) PQ(Q'− Q).56) The accounts receivable approach to credit policy supports the theory that:A) a firm's risk of offering credit to a new customer is limited to the cost of the items sold.B) the best credit policy is an all-cash policy.C) the cost of offering credit to a new customer is the same as the cost of offering credit to an existing customer.D) increasing receivables guarantees increasing profits.E) the default risk of a credit policy is the same as the default risk under an all cash-policy if your customers remain the same.57) Which two of the following are the key elements in determining the break-even default rate on a credit policy?A) Credit price and cash price assuming a zero default rateB) Required rate of return and percentage discount for cash customersC) Variable cost per unit and required rate of returnD) Sales price and variable cost per unit for credit customersE) Credit price and discount rate for cash customers58) On average, CT Motors has daily credit sales of $42,390, an inventory period of 53 days, anda collection period of 26 days. What is the average accounts receivable balance?A) $757,900B) $968,810C) $1,102,140D) $1,015,500E) $896,30059) Music City has an average collection period of 34.6 days and an average daily investment in receivables of $71,407. What are the annual credit sales given a 365-day year?A) $668,407B) $577,109C) $753,282D) $625,893E) $767,12360) Turner's offers credit terms of net 30 with payments received an average of 2.8 days past their due date. Annual credit sales are $2.38 million. What is the average book value of accounts receivable? Assume a 365-day year.A) $213,874B) $223,333C) $211,667D) $215,407E) $223,59361) Winters' just purchased $42,911 of goods from its supplier with credit terms of 1/5, net 25. What is the discounted price?A) $40,765B) $41,209C) $42,482D) $42,911E) $43,30062) Today, October 12, Nadine's Fashions purchased merchandise from a supplier. The credit terms are 2/10, net 30. By what day does Nadine's have to make the payment to receive the discount? Assume a 30-day month.A) October 12B) October 14C) October 22D) October 27E) November 1263) The Green Hornet offers credit terms of 2/5, net 20. Based on experience, 93 percent of all customers will take the discount. The firm sells 487 units each month at a price of $649 each. What is the average book value of accounts receivable? Assume a 365-day year.A) $60,274B) $68,272C) $62,866D) $67,012E) $65,38764) A firm offers credit terms of 2/15, net 45. What effective annual interest rate does the firm earn when a customer forgoes the discount?A) 18.67 percentB) 20.45 percentC) 23.37 percentD) 25.34 percentE) 27.86 percent65) A supplier grants credit terms of 1/5, net 30. What is the effective annual rate of the discount on a purchase of $5,000?A) 17.24 percentB) 15.80 percentC) 18.80 percentD) 19.03 percentE) 12.27 percent66) Cape May Products currently sells 487 units a month at a price of $79 a unit. The firm believes it can increase its sales by an additional 42 units if it switches to a net 30 credit policy. The monthly interest rate is .25 percent and the variable cost per unit is $31.50. What is the incremental cash inflow from the proposed credit policy switch?A) $1,774B) $1,995C) $2,746D) $3,318E) $3,37567) Home Accents currently sells 219 units a month at a price of $46 a unit. If it switches to a net 30 credit policy, monthly sales are expected to increase by 28 units. The monthly interest rateis .57 percent and the variable cost per unit is $21. What is the net present value of the proposed credit policy switch?A) $112,145B) $108,895C) $106,507D) $586,799E) $621,13568) Currently, Glasgow Importers sells 855 units a month at a price of $39 a unit. By switching to a net 30 credit policy, sales should increase to 950 units while the price remains constant. The monthly interest rate is .61 percent and the variable cost per unit is $8. What is the net present value of the proposed credit policy switch?A) $513,360B) $516,892C) $490,200D) $537,520E) $448,68269) Currently, Tanner's sells 69 units a month at an average price of $499 a unit. The company thinks it can increase sales by an additional 32 units a month if it switches to a net 30 credit policy. The monthly interest rate is .48 percent and the variable cost per unit is $216. What is the incremental cash inflow of the proposed credit policy switch?A) $10,120B) $9,056C) $12,760D) $17,810E) $15,96870) New Products currently sells a product with a variable cost per unit of $23 and a unit selling price of $49. At the present time, the firm only sells on a cash basis with monthly sales of 733 units. The monthly interest rate is .48 percent. What is the value of Q' at the switch break-even point if the firm adopted a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant.A) 739.66 unitsB) 736.34 unitsC) 728.47 unitsD) 740.29 unitsE) 743.18 units71) Quest is considering a change in its cash-only sales policy. The new terms of sale would be net one month. The required return is .98 percent per month. Currently, the firm sells 420 units per month at $736 per unit. Under the new policy, the firm expects sales of 475 units also at $736 per unit. The variable cost per unit is $426. What is the NPV of switching?A) $1,228,750B) $1,407,246C) $1,335,021D) $1,238,250E) $1,056,78472) Saucier Co. currently sells 1,208 units a month for total monthly sales of $209,600. The firm is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $106 and the monthly interest rate is .71 percent. What is the new sales quantity at the switch break-even level of sales? Assume the selling price per unit and the variable costs per unit remain constant.A) 1,143 unitsB) 1,267 unitsC) 1,230 unitsD) 1,306 unitsE) 1,148 units73) The Cellar Door currently sells 1,849 units a month for total monthly sales of $627,800. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per unit is $214 and the monthly interest rate is .87 percent. What is the new sales quantity at the switch break-even level of sales?A) 1,711 unitsB) 1,779 unitsC) 1,814 unitsD) 1,957 unitsE) 1,893 units74) The Dilana Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 1.5 percent per period. The firm has current sales of 3,500 units per month at a price of $71 per unit. The new policy is expected to increase sales to 3,550 units at a price of $71 per unit. The cost per unit is constant at $38. What is the incremental cash inflow of the new policy?A) $1,880B) $1,420C) $1,500D) $1,995E) $1,65075) A new customer has placed an order for a turbine engine that has a variable cost of $1.12 million per unit and a credit sales price of $1.64 million. Credit is extended for one period. Based on historical experience, payment for about 1 out of every 178 such orders is never collected. The required return is 2.1 percent per period. What is the NPV per unit if this is a one-time order?A) $516,407B) $421,819C) $477,244D) $534,290E) $351,05676) You can make a one-time sale if you will grant a new customer 30 days to pay. This customer wants to purchase an item with a sales price of $499 and a variable cost of $287. You estimate the probability of default at 33 percent. The monthly interest rate is .98 percent. Should you grant credit to this customer? Why or why not?A) Yes; because the NPV of the potential sale is $33.05B) Yes; because the NPV of the potential sale is $44.09C) Yes; because the NPV of the potential sale is $13.02D) No; because the NPV of the potential sale is −$13.05E) No; because the NPV of the potential sale is −$2.6577) The Cycle Shoppe has decided to offer credit to its customers during the spring selling season. Sales are expected to be 64 bikes with an average cost of $329 each. Four percent of customers are expected to default. To help identify those individuals, the shop is considering subscribing to a credit agency. The initial charge for their services is $250 with an additional charge of $7.50 per individual report. What is the amount of the net savings from subscribing to the credit agency?A) $108B) $92C) $84D) $112E) $10378) Assume all sales are one-time credit sales with a probability of collection of 96 percent. The variable cost per unit is $1.67, the sales price per unit is $4.99, and the monthly interest rate is1.35 percent. What is the NPV of a credit sale of one item?A) $3.18B) $2.87C) $3.38D) $2.92E) $3.0679) Assume a sales price of $119 per unit, a $76 per unit variable cost, an average default rate of 3 percent, and a monthly interest rate of 1.25 percent. What is the net present value of a new repeat customer who never defaults on his or her payment?A) $5,733B) $3,364C) $2,617D) $8,817E) $9,52080) Assume an average selling price of $547 per unit, a variable cost per unit of $339, a monthly interest rate of 1.1 percent, and a default rate of 3.1 percent. What is the NPV of extending credit for 30 days to all who are expected to become repeat customers?A) $17,984B) $19,787C) $12,304D) $18,662E) $13,60981) Lakeside Market sells 848 units of an item priced at $49 each year. The carrying cost per unit is $2.26 and the fixed costs per order are $46. What is the economic order quantity?A) 192 unitsB) 221 unitsC) 197 unitsD) 186 unitsE) 163 units82) High Mountain consistently sells 2,400 pairs of $189 skates annually. The fixed order costs is $56 and the carrying costs are $3.85 a pair. What is the economic order quantity?A) 246 pairsB) 215 pairsC) 229 pairsD) 264 pairsE) 248 pairs。

公司理财精要版原书第12版习题库答案Ross12e_Chapter11_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 11 Project Analysis and Evaluation1) Forecasting risk is defined as the possibility that:A) some proposed projects will be rejected.B) some proposed projects will be temporarily delayed.C) incorrect decisions will be made due to erroneous cash flow projections.D) some projects will be mutually exclusive.E) tax rates could change over the life of a project.2) The key means of defending against forecasting risk is to:A) rely primarily on the net present value method of analysis.B) increase the discount rate assigned to a project.C) shorten the life of a project.D) identify sources of value within a project.E) ignore any potential salvage value that might be realized.3) Steve is fairly cautious when analyzing a new project and thus he projects the most optimistic, the most realistic, and the most pessimistic outcome that can reasonably be expected. Which type of analysis is he using?A) Simulation testingB) Sensitivity analysisC) Break-even analysisD) Rationing analysisE) Scenario analysis4) Scenario analysis is best suited to accomplishing which one of the following when analyzing a project?A) Determining how fixed costs affect NPVB) Estimating the residual value of fixed assetsC) Identifying the potential range of reasonable outcomesD) Determining the minimal level of sales required to break-even on an accounting basisE) Determining the minimal level of sales required to break-even on a financial basis5) Which one of the following will be used in the computation of the best-case analysis of a proposed project?A) Minimal number of units that are expected to be produced and soldB) The lowest expected salvage value that can be obtained for a project's fixed assetsC) The most anticipated sales price per unitD) The lowest variable cost per unit that can reasonably be expectedE) The highest level of fixed costs that is actually anticipated6) The base case values used in scenario analysis are the values considered to be the most:A) optimistic.B) desired by management.C) pessimistic.D) likely to create a positive net present value.E) likely to occur.7) Which of the following variables will be forecast at their highest expected level under a best-case scenario?A) Fixed costs and units valueB) Variable costs and sales priceC) Fixed costs and sales priceD) Salvage value and units soldE) Initial cost and variable costs8) When you assign the lowest anticipated sales price and the highest anticipated costs to a project, you are analyzing the project under the condition known as:A) best-case sensitivity analysis.B) worst-case sensitivity analysis.C) best-case scenario analysis.D) worst-case scenario analysis.E) base-case scenario analysis.9) Which one of the following statements concerning scenario analysis is correct?A) The pessimistic case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project.B) Scenario analysis defines the entire range of results that could be realized from a proposed investment project.C) Scenario analysis determines which variable has the greatest impact on a project's final outcome.D) Scenario analysis helps managers analyze various outcomes that are possible given reasonable ranges for each of the assumptions.E) Management is guaranteed a positive outcome for a project when the worst-case scenario produces a positive NPV.10) Sensitivity analysis determines the:A) range of possible outcomes given that most variables are reliable only within a stated range.B) degree to which the net present value reacts to changes in a single variable.C) net present value range that can be realized from a proposed project.D) degree to which a project relies on its initial costs.E) ideal ratio of variable costs to fixed costs for profit maximization.11) Assume you graph a project's net present value given various sales quantities. Which one of the following is correct regarding the resulting function?A) The steepness of the function relates to the project's degree of operating leverage.B) The steeper the function, the less sensitive the project is to changes in the sales quantity.C) The resulting function will be a hyperbole.D) The resulting function will include only positive values.E) The slope of the function measures the sensitivity of the net present value to a change in sales quantity.12) As the degree of sensitivity of a project to a single variable rises, the:A) less important the variable is to the final outcome of the project.B) less volatile the project's net present value is to that variable.C) greater is the importance of accurately predicting the value of that variable.D) greater is the sensitivity of the project to the other variable inputs.E) less volatile is the project's outcome.13) A firm's managers realize they cannot monitor all aspects of their projects but do want to maintain a constant focus on the key aspect of each project in an attempt to maximize their firm's value. Given this specific desire, which type of analysis should they require for each project and why?A) Sensitivity analysis; to identify the key variable that affects a project's profitabilityB) Scenario analysis; to guarantee each project will be profitableC) Cash breakeven; to ensure the firm recoups its initial investmentD) Accounting breakeven; to ensure each project earns its required rate of returnE) Financial breakeven; to ensure each project has a positive NPV14) Which type of analysis identifies the variable, or variables, that are most critical to the success of a particular project?A) ScenarioB) SimulationC) Break-evenD) SensitivityE) Cash flow15) Simulation analysis is based on assigning a ________ and analyzing the results.A) narrow range of values to a single variableB) narrow range of values to multiple variables simultaneouslyC) wide range of values to a single variableD) wide range of values to multiple variables simultaneouslyE) single value to each of the variables16) Which one of the following types of analysis is the most complex to conduct?A) ScenarioB) Break-evenC) SensitivityD) Degree of operating leverageE) Simulation17) Scenario analysis is defined as the:A) determination of the initial cash outlay required to implement a project.B) determination of changes in NPV estimates when what-if questions are posed.C) isolation of the effect that a single variable has on the NPV of a project.D) separation of a project's sunk costs from its opportunity costs.E) analysis of the effects that a project's terminal cash flows has on the project's NPV.18) An analysis of the change in a project's NPV when a single variable is changed is called ________ analysis.A) forecastingB) scenarioC) sensitivityD) simulationE) break-even19) Combining scenario analysis with sensitivity analysis can yield a crude form of ________ analysis.A) forecastingB) combinedC) complexD) simulationE) break-even20) Variable costs can be defined as the costs that:A) remain constant for all time periods.B) remain constant over the short run.C) vary directly with sales.D) are classified as noncash expenses.E) are inversely related to the number of units sold.21) Fixed costs:A) change as a small quantity of output produced changes.B) are constant over the short-run regardless of the quantity of output produced.C) are defined as the change in total costs when one more unit of output is produced.D) are subtracted from sales to compute the contribution margin.E) can be ignored in scenario analysis since they are constant over the life of a project.22) The change in revenue that occurs when one more unit of output is sold is referred to as:A) marginal revenue.B) average revenue.C) total revenue.D) erosion.E) scenario revenue.23) The change in variable costs that occurs when production is increased by one unit is referred to as the:A) marginal cost.B) average cost.C) total cost.D) scenario cost.E) net cost.24) By definition, which one of the following must equal zero at the accounting break-even point?A) Net present valueB) DepreciationC) Contribution marginD) Net incomeE) Operating cash flow25) Which one of these combinations must increase the contribution margin?A) Increasing both the sales price and the variable cost per unitB) Increasing the sales quantity and increasing the variable cost per unitC) Decreasing the sales price and increasing the sales quantityD) Decreasing both fixed costs and depreciation expenseE) Increasing the sales price and decreasing the variable cost per unit26) Which of the following are inversely related to variable costs per unit?A) Sales quantity and sales priceB) Net profit per unit and sales quantityC) Operating cash flow and sales quantityD) Operating cash flow per unit and contribution margin per unitE) Contribution margin per unit and marginal costs27) Steve, the sales manager for TL Products, wants to sponsor a one-week "Customer Appreciation Sale" where the firm offers to sell additional units of a product at the lowest price possible without negatively affecting the firm's profits. Which one of the following represents the price that should be charged for the additional units during this sale?A) Average variable costB) Average total costC) Average total revenueD) Marginal revenueE) Marginal cost28) The president of Global Wholesalers would like to offer special sale prices to the firm's best customers under the following terms:1. The prices will apply only to units purchased in excess of the quantity normally purchased bya customer.2. The units purchased must be paid for in cash at the time of sale.3. The total quantity sold under these terms cannot exceed the excess capacity of the firm.4. The net profit of the firm should not be affected.5. The prices will be in effect for one week only.Given these conditions, the special sale price should be set equal to the:A) average variable cost of materials only.B) average cost of all variable inputs.C) sensitivity value of the variable costs.D) marginal cost of materials only.E) marginal cost of all variable inputs.29) The contribution margin per unit is equal to the:A) sales price per unit minus the total costs per unit.B) variable cost per unit minus the fixed cost per unit.C) sales price per unit minus the variable cost per unit.D) pretax profit per unit.E) aftertax profit per unit.30) Which of the following values will be equal to zero when a firm is operating at the accounting break-even level of output?A) IRR and OCFB) Net income and contribution marginC) IRR and net incomeD) OCF and NPVE) Net income and NPV31) A decrease in which one of the following will increase the accounting break-even quantity? Assume straight-line depreciation is used and ignore taxes.A) Sales price per unitB) Management salariesC) Variable labor costs per unitD) Initial fixed asset purchasesE) Fixed costs32) Webster Iron Works started a new project last year. As it turns out, the project has been operating at its accounting break-even level of output and is now expected to continue at that level over its lifetime. Given this, you know that the project:A) will never pay back.B) has a zero net present value.C) is operating at a higher level than if it were operating at its cash break-even level.D) is operating at a higher level than if it were operating at its financial break-even level.E) is lowering the total net income of the firm.33) A project that has a payback period exactly equal to the project's life is operating at:A) its maximum capacity.B) the financial break-even point.C) the cash break-even point.D) the accounting break-even point.E) a zero level of output.34) Valerie just completed analyzing a project. Her analysis indicates that the project will have a six-year life and require an initial cash outlay of $120,000. Annual sales are estimated at $189,000 and the tax rate is 21 percent. The net present value is negative $120,000. Based on this analysis, the project is expected to operate at the:A) maximum possible level of production.B) minimum possible level of production.C) financial break-even point.D) accounting break-even point.E) cash break-even point.35) A project that has a projected IRR of negative 100 percent will also have a(n):A) discounted payback period equal to the life of the project.B) operating cash flow that is positive and equal to the depreciation.C) net present value that is negative and equal to the initial investment.D) payback period that is exactly equal to the life of the project.E) net present value that is equal to zero.36) Which one of the following characteristics relates to the cash break-even point for a given project?A) The project never pays back.B) The discounted payback period equals the project's life.C) The NPV is equal to zero.D) The IRR equals the required rate of return.E) The OCF is equal to the depreciation expense.37) When the operating cash flow of a project is equal to zero, the project is operating at the:A) maximum possible level of production.B) minimum possible level of production.C) financial break-even point.D) accounting break-even point.E) cash break-even point.38) Which one of the following represents the level of output where a project produces a rate of return just equal to its requirement?A) Capital break-evenB) Cash break-evenC) Accounting break-evenD) Financial break-evenE) Internal break-even39) Which one of these is most associated with an IRR of negative 100 percent?A) Degree of operating leverageB) Accounting break-even pointC) Contribution marginD) Simulation analysisE) Cash break-even point40) You would like to know the minimum level of sales that is needed for a project to be accepted based on its net present value. To determine that sales level you should compute the:A) contribution margin per unit and set that margin equal to the fixed costs per unit.B) degree of operating leverage at the current sales level.C) accounting break-even point.D) cash break-even point.E) financial break-even point.41) Theresa is analyzing a project that currently has a projected NPV of zero. Which one of the following changes that she is considering is most apt to cause that project to produce a positive NPV instead? Consider each change independently.A) Decrease the sales priceB) Increase the materials cost per unitC) Decrease the labor hours per unit producedD) Decrease the sales quantityE) Increase the amount of the initial investment in net working capital42) Given the following, which feature identifies the most desirable level of output for a project?A) Operating cash flow equal to the depreciation expenseB) Payback period equal to the project's lifeC) Discounted payback period equal to the project's lifeD) Zero IRRE) Zero operating cash flow43) Assume both the discount and tax rates are positive values. At the financial break-even point, the:A) payback period equals the project's life.B) NPV is negative.C) OCF is zero.D) contribution margin per unit equals the fixed costs per unit.E) IRR equals the required return.44) By definition, which one of the following must equal zero at the cash break-even point?A) Net present valueB) Internal rate of returnC) Contribution marginD) Net incomeE) Operating cash flow45) Assume a project has a discounted payback that equals the project's life. The project's sales quantity must be at which one of these break-even points?A) AccountingB) LeveragedC) MarginalD) CashE) Financial46) Operating leverage is the degree of dependence a firm places on its:A) variable costs.B) fixed costs.C) sales.D) operating cash flows.E) depreciation tax shield.47) Which one of the following is the relationship between the percentage change in operating cash flow and the percentage change in quantity sold?A) Degree of sensitivityB) Degree of operating leverageC) Accounting break-evenD) Cash break-evenE) Contribution margin48) You are considering a project and are concerned about the reliability of the cash flow forecasts. To reduce any potentially harmful results from accepting this project, you should consider:A) lowering the degree of operating leverage.B) lowering the contribution margin per unit.C) increasing the initial cash outlay.D) increasing the fixed costs per unit.E) lowering the operating cash flow.49) Which one of the following characteristics best describes a project that has a low degree of operating leverage?A) High variable costs relative to the fixed costsB) Relatively high initial cash outlayC) OCF that is highly sensitive to the sales quantityD) High level of forecasting riskE) High depreciation expense50) Which one of the following will best reduce the risk of a project by lowering the degree of operating leverage?A) Hiring additional employees rather than using temporary outside contractorsB) Subcontracting portions of the project rather than purchasing new equipment to do all the work in-houseC) Buying equipment rather than leasing it short-termD) Lowering the projected selling price per unitE) Changing the proposed labor-intensive production method to a more capital intensive method51) The degree of operating leverage is equal to:A) 1 + OCF/(FC + VC).B) 1 + OCF/FC.C) 1 + FC/OCF.D) 1 + VC/OCF.E) 1 − (FC + VC)/OCF.52) Uptown Promotions has three divisions. As part of the planning process, the CFO requested that each division submit its capital budgeting proposals for next year. These proposals represent positive net present value projects that fall within the long-range plans of the firm. The requests from the divisions are $4.2 million, $3.1 million, and $6.8 million. For the firm as a whole, management has limited spending to $10 million for new projects next year even though the firm could afford additional investments. This is an example of:A) scenario analysis.B) sensitivity analysis.C) an operating leverage application.D) soft rationing.E) hard rationing.53) Bell Weather Goods has several proposed independent projects that have positive NPVs. However, the firm cannot initiate any of the projects due to a lack of financing. This situation is referred to as:A) financial rejection.B) project rejection.C) soft rationing.D) marginal rationing.E) capital rationing.54) The procedure of allocating a fixed amount of funds for capital spending to each business unit is called:A) marginal spending.B) capital preservation.C) soft rationing.D) hard rationing.E) marginal rationing.55) PC Enterprises wants to commence a new project but is unable to obtain the financing under any circumstances. This firm is facing:A) financial deferral.B) financial allocation.C) capital allocation.D) marginal rationing.E) hard rationing.56) Brubaker & Goss has received requests for capital investment funds for next year from each of its five divisions. All requests represent positive net present value projects. All projects are independent. Senior management has decided to allocate the available funds based on the profitability index of each project since the company has insufficient funds to fulfill all of the requests. Management is following a practice known as:A) scenario analysis.B) sensitivity analysis.C) leveraging.D) hard rationing.E) soft rationing.57) The CFO of Edward's Food Distributors is continually receiving capital funding requests from its division managers. These requests are seeking funding for positive net present value projects. The CFO continues to deny all funding requests due to the financial situation of the company. Apparently, the company is:A) operating at the accounting break-even point.B) operating at the financial break-even point.C) facing hard rationing.D) operating with zero leverage.E) operating at maximum capacity.58) New Town Instruments is analyzing a proposed project. The company expects to sell 1,600 units, ±3 percent. The expected variable cost per unit is $220 and the expected fixed costs are $438,000. Cost estimates are considered accurate within a ±2 percent range. The depreciation expense is $64,000. The sales price is estimated at $647 per unit, ±2 percent. What is the sales revenue under the worst-case scenario?A) $1,086,825B) $896,201C) $984,061D) $1,014,496E) $932,01759) Precise Machinery is analyzing a proposed project that is expected to have sales of 2,450 units, ±8 percent. The expected variable cost per unit is $246 and the expected fixed costs are $309,000. Cost estimates are considered accurate within a ±3 percent range. The depreciation expense is $106,000. The sales price is estimated at $599 per unit, ±2 percent. What is the amount of the total costs per unit under the worst-case scenario?A) $448.58B) $404.16C) $366.67D) $338.23E) $394.5860) Precise Machinery is analyzing a proposed project. The company expects to sell 7,500 units, ±10 percent. The expected variable cost per unit is $314 and the expected fixed costs are $647,000. Cost estimates are considered accurate within a ±4 percent range. The depreciation expense is $187,000. The sales price is estimated at $849 per unit, give or take 2 percent. The tax rate is 21 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $850. What is the operating cash flow based on this analysis?A) $2,703,940B) $2,293,089C) $1,986,675D) $2,354,874E) $2,284,83761) The Creamery is analyzing a project with expected sales of 5,700 units, ±5 percent. The expected variable cost per unit is $168 and the expected fixed costs are $424,000. Cost estimates are considered accurate within a ±3 percent range. The depreciation expense is $156,000. The sales price is estimated at $339 per unit, ±5 percent. The tax rate is 21 percent. The company is conducting a sensitivity analysis with fixed costs of $425,000. What is the OCF given this analysis?A) $416,511B) $385,350C) $467,023D) $394,874E) $421,30062) HiLo Mfg. is analyzing a project with anticipated sales of 12,500 units, ±2 percent. The variable cost per unit is $13, ± 2 percent, and the expected fixed costs are $237,000, ±1 percent.The sales price is estimated at $69 a unit, ±3 percent. The depreciation expense is $68,000 and the tax rate is 22 percent. What is the earnings before interest and taxes under the base-case scenario?A) $368,500B) $421,000C) $395,000D) $414,900E) $427,50063) Assume a project has a sales quantity of 7,400 units, ±6 percent and a sales price of $59 a unit, ±1 percent. The expected variable cost per unit is $13, ±3 percent, and the expected fixed costs are $214,000, ±2 percent. The depreciation expense is $63,000 and the tax rate is 23 percent. What is the operating cash flow under the best-case scenario?A) $136,759B) $118,470C) $145,705D) $134,208E) $124,22064) Windows and More is reviewing a project with sales of 6,200 units, ±2 percent, at a sales price of $29, ±1 percent, per unit. The expected variable cost per unit is $11, ±3 percent, and the expected fixed costs are $87,000, ±1 percent. The depreciation expense is $68,000 and the tax rate is 21 percent. What is the net income under the worst-case scenario?A) −$38,578B) −$39,713C) $15,846D) –$28,704E) $4,69665) Stellar Plastics is analyzing a proposed project with annual depreciation of $28,750 and a tax rate of 23 percent. The company expects to sell 16,500 units, ±3 percent. The expected variable cost per unit is $1.87, ±1 percent, and the expected fixed costs are $24,900, ±1 percent. The sales price is estimated at $7.99 a unit, ±2 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $26,000?A) $54,208B) $64,347C) $63,591D) $62,408E) $60,54066) Your company is reviewing a project with estimated labor costs of $14.68 per unit, estimated raw material costs of $43.18 a unit, and estimated fixed costs of $18,000 a month. Sales are projected at 15,500 units, ±5 percent, over the one-year life of the project. Cost estimates are accurate within a range of ±3 percent. What are the total variable costs for the best-case scenario?A) $869,925B) $861,560C) $913,421D) $951,960E) $891,96067) A project has base-case earnings before interest and taxes of $36,408, fixed costs of $42,700,a selling price of $24 a unit, and a sales quantity of 22,000 units. All estimates are accurate within ±2 percent. Depreciation is $16,700. What is the base-case variable cost per unit?A) $22.16B) $23.84C) $19.65D) $22.23E) $17.1868) Consider a 5-year project with an initial fixed asset investment of $324,000, straight-line depreciation to zero over the project's life, a zero salvage value, a selling price of $34, variable costs of $17, fixed costs of $189,700, a sales quantity of 94,000 units, and a tax rate of 21 percent. What is the sensitivity of OCF to changes in the sales price?A) $74,260 per $1 of salesB) $61,600 per $1 of salesC) $78,700 per $1 of salesD) $59,470 per $1 of salesE) $68,850 per $1 of sales69) You are considering a new product launch. The project will have an initial cost for fixed assets of $1,150,000, a three-year life, and no salvage value; depreciation is straight-line to zero. Sales are projected at 230 units per year, price per unit will be $7,500, variable cost per unit will be $3,900, and fixed costs will be $122,000 per year. The required return is 14.5 percent and the relevant tax rate is 24 percent. Based on your experience, you think the unit sales and price are accurate within a ±2 percent range while costs may vary by ±3 percent. What is the worst-case NPV?A) −$117,907B) $156,446C) −$78,517D) $162,134E) −$118,02070) Shoe Supply has decided to produce a new line of shoes that will have a selling price of $68 and a variable cost of $27 per pair. The company spent $187,000 for a marketing study that determined the company should sell 85,000 pairs of the new shoes each year for three years. The marketing study also determined that the company will lose sales of 24,000 pairs of its high-priced shoes that sell for $129 and have variable costs of $63 a pair. The company will also increase sales of its inexpensive shoes by 19,000 pairs. The inexpensive shoes sell for $39 and have variable costs of $15 per pair. The fixed costs each year will be $1.42 million. The company has also spent $1.29 million on research and development for the new shoes. The initial fixed asset requirement is $4.2 million and will be depreciated on a straight-line basis over the life of the project. The new shoes will also require an increase in net working capital of $447,000 that will be returned at the end of the project. Sales and cost projections have a ±2 percent range. The tax rate is 21 percent, and the cost of capital is 12 percent. What is the NPV for the new line of shoes assuming the base-case scenario?A) −$1,844,788B) −$806,318C) $102,311D) $687,415E) $520,90971) A suggested project requires initial fixed assets of $227,000, has a life of 4 years, and has no salvage value. Assume depreciation is straight-line to zero over the life of the project. Sales are projected at 31,000 units per year, the price per unit is $47, variable cost per unit is $23, and fixed costs are $842,900 per year. The tax rate is 23 percent and the required return is 11.5 percent. Suppose the projections given for price and quantity can vary by ±4 percent while variable and fixed cost estimates are accurate to within ±2 percent. What is the best-case NPV?A) $4,613B) −$67,008C) $127,511D) $82,409E) −$132,19472) A project has expected sales of 54,000 units, ±5 percent, variable cost per unit of $87, ±2 percent, fixed costs of $287,000, ±1 percent, and a sales price per unit of $219, ±2 percent. The depreciation expense is $47,000 and the tax rate is 23 percent. What is the contribution margin per unit for a sensitivity analysis using a variable cost per unit of $85?A) $132B) $134C) $135D) $136E) $133。

公司理财精要版原书第12版习题库答案Ross12e_Chapter16_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 16 Financial Leverage and Capital Structure Policy1) Which one of these statements is correct?A) Capital structure has no effect on shareholder value.B) The optimal capital structure occurs when the cost of equity is minimized.C) The optimal capital structure maximizes shareholder value.D) Shareholder value is maximized when WACC is also maximized.E) Unlevered firms have more value than levered firms when firms are profitable.2) A firm should select the capital structure that:A) produces the highest cost of capital.B) maximizes the value of the firm.C) minimizes taxes.D) is fully unlevered.E) equates the value of debt with the value of equity.3) The value of a firm is maximized when the:A) cost of equity is maximized.B) tax rate equals the cost of capital.C) levered cost of capital is maximized.D) weighted average cost of capital is minimized.E) debt-equity ratio is minimized.4) The optimal capital structure has been achieved when the:A) debt-equity ratio is equal to 1.B) weight of equity is equal to the weight of debt.C) cost of equity is maximized given a pretax cost of debt.D) debt-equity ratio is such that the cost of debt exceeds the cost of equity.E) debt-equity ratio results in the lowest possible weighted average cost of capital.5) Assume you are reviewing a graph that plots earnings per share (EPS) against earnings before interest and taxes (EBIT). The steeper the slope of the plotted line the:A) lower the impact of financial leverage.B) lower the debt-equity ratio.C) higher the tax rate.D) greater the sensitivity of EPS to changes in EBIT.E) lower the probability of a negative EPS.6) You have computed the break-even point between a levered and an unlevered capital structure. Ignore taxes. At the break-even level, the:A) company is earning just enough to pay for the cost of the debt.B) company's earnings before interest and taxes are equal to zero.C) earnings per share for the levered option are exactly double those of the unlevered option.D) advantages of leverage exceed the disadvantages of leverage.E) company has a debt-equity ratio of .50.7) Which one of the following statements is correct concerning the relationship between a levered and an unlevered capital structure? Ignore taxes.A) At the break-even point, there is no advantage to debt.B) The earnings per share will equal zero when EBIT is zero for a levered firm.C) The advantages of leverage are inversely related to the level of EBIT.D) The use of leverage at any level of EBIT increases the EPS.E) EPS are more sensitive to changes in EBIT when a firm is unlevered.8) Jessica invested in QRT stock when the company was unlevered. Since then, QRT has changed its capital structure and now has a debt-equity ratio of .36. To unlever her position, Jessica needs to:A) borrow some money and purchase additional shares of QRT stock.B) maintain her current equity position as the debt of the firm does not affect her personally.C) sell 36 percent of her shares of QRT stock and hold the proceeds in cash.D) sell 36 percent of her shares of QRT stock and loan out the sale proceeds.E) create a personal debt-equity ratio of .36.9) Which one of the following makes the capital structure of a company irrelevant?A) TaxesB) Interest tax shieldC) 100 percent dividend payout ratioD) Debt-equity ratio that is greater than 0 but less than 1E) Homemade leverage10) Homemade leverage is:A) the incurrence of debt by a corporation in order to pay dividends to shareholders.B) the exclusive use of debt to fund a corporate expansion project.C) the use of personal borrowing to alter an individual's exposure to financial leverage.D) best defined as an increase in a company's debt level.E) the term used to describe the capital structure of a levered firm.11) The concept of homemade leverage is most associated with:A) M&M Proposition I with no tax.B) M&M Proposition II with no tax.C) M&M Proposition I with tax.D) M&M Proposition II with tax.E) the static theory proposition.12) Which one of the following statements is correct in relation to M&M Proposition II, without taxes?A) The cost of equity remains constant as the debt-equity ratio increases.B) The cost of equity is inversely related to the debt-equity ratio.C) The required return on assets is equal to the weighted average cost of capital.D) Financial risk determines the return on assets.E) Financial risk is unaffected by the debt-equity ratio.13) M&M Proposition II, without taxes, is the proposition that:A) the capital structure of a company has no effect on that company's value.B) the cost of equity depends on the return on debt, the debt-equity ratio, and the tax rate.C) a company's cost of equity is a linear function with a slope equal to (R A− R D).D) the cost of equity is equivalent to the required rate of return on assets.E) the size of the pie does not depend on how the pie is sliced.14) The business risk of a company:A) depends on the company's level of unsystematic risk.B) is inversely related to the required return on the company's assets.C) is dependent upon the relative weights of the debt and equity used to finance the company.D) has a positive relationship with the company's cost of equity.E) has no relationship with the required return on a company's assets according to M&M theory.15) Financial risk is:A) the risk inherent in a company's operations.B) a type of unsystematic risk.C) inversely related to the cost of equity.D) dependent upon a company's capital structure.E) irrelevant to the value of a company.16) Which one of the following states that the value of a company is unrelated to the company's capital structure?A) Homemade leverageB) M&M Proposition I, no taxC) M&M Proposition II, no taxD) Pecking-order theoryE) Static theory of capital structure17) Which one of the following states that the cost of equity capital is directly and proportionally related to capital structure?A) Static theory of capital structureB) M&M Proposition IC) M&M Proposition IID) Homemade leverageE) Pecking-order theory18) Which one of the following is the equity risk that is most related to the daily operations of a firm?A) Market riskB) Systematic riskC) Extrinsic riskD) Business riskE) Financial risk19) Which one of the following is the equity risk related to capital structure policy?A) Market riskB) Systematic riskC) Static riskD) Business riskE) Financial risk20) M&M Proposition I with no tax supports the argument that:A) business risk has no effect on the return on assets.B) the cost of equity rises as leverage rises.C) a company's debt-equity ratio is completely irrelevant.D) business risk is irrelevant.E) homemade leverage is irrelevant.21) Westover Mills reduced its taxes last year by $210 by increasing its interest expense by $1,000. Which one of the following terms is used to describe this tax savings?A) Interest tax shieldB) Interest creditC) Homemade leverage shieldD) Current tax yieldE) Tax-loss interest22) M&M Proposition I with tax implies that the:A) weighted average cost of capital decreases as the debt-equity ratio increases.B) value of a company is inversely related to the amount of leverage used by that company.C) value of an unlevered company equals the value of a levered company plus the value of the interest tax shield.D) cost of capital is the same regardless of the mix of debt and equity used.E) cost of equity increases as the debt-equity ratio decreases.23) M&M Proposition I with taxes is based on the concept that:A) the optimal capital structure is the one that is totally financed with equity.B) capital structure is irrelevant because investors and companies have differing tax rates.C) WACC is unaffected by a change in the company's capital structure.D) the value of a taxable company increases as the level of debt increases.E) the cost of equity increases as the debt-equity ratio increases.24) M&M Proposition II with taxes:A) has the same general implications as M&M Proposition II without taxes.B) states that capital structure is irrelevant to shareholders.C) supports the argument that business risk is determined by the capital structure decision.D) supports the argument that the cost of equity decreases as the debt-equity ratio increases.E) concludes that the capital structure decision is irrelevant to the value of a firm.25) The present value of the interest tax shield is expressed as:A) T C D/R A.B) V U + T C D.C) T C DR A.D) [EBIT(T C D)]/R A.E) T C D.26) The interest tax shield is a key reason why:A) the required rate of return on assets rises when debt is added to the capital structure.B) the value of an unlevered company is equal to the value of a levered company.C) the net cost of debt is generally less than the cost of equity.D) the cost of debt is equal to the cost of equity for a levered company.E) companies prefer equity financing over debt financing.27) Based on M&M Proposition I with taxes, the weighted average cost of capital:A) is equal to the aftertax cost of debt.B) has a linear relationship with the cost of equity capital.C) is unaffected by the tax rate.D) decreases as the debt-equity ratio increases.E) is equal to R U(1 − T C).28) The symbol "R U" refers to the cost of capital for a(n) ________ while "R A" represents the:A) privately owned entity; unlevered cost of capital.B) all-equity company; weighted average cost of capital.C) levered company; cost of capital for an all-equity company.D) levered company; weighted average cost of capital.E) unlevered company; average cost of equity.29) The explicit costs, such as legal and administrative expenses, associated with corporate default are classified as ________ costs.A) flotationB) issueC) direct bankruptcyD) indirect bankruptcyE) unlevered30) Which one of the following is a direct cost of bankruptcy?A) Bypassing a positive NPV project to avoid additional debtB) Investing in cash reservesC) Maintaining a debt-equity ratio that is lower than the optimal ratioD) Losing a key company employeeE) Paying an outside accountant to prepare bankruptcy reports31) The costs incurred by a business in an effort to avoid bankruptcy are classified as ________ costs.A) flotationB) direct bankruptcyC) indirect bankruptcyD) financial solvencyE) capital structure32) The proposition that a company borrows up to the point where the marginal benefit of the interest tax shield derived from increased debt is just equal to the marginal expense of the resulting increase in financial distress costs is called:A) the static theory of capital structure.B) M&M Proposition I, with taxes.C) M&M Proposition II, with taxes.D) the pecking-order theory.E) the open markets theorem.33) If a company has the optimal amount of debt, then the:A) direct financial distress costs must equal the present value of the interest tax shield.B) value of the levered company will exceed the value of the unlevered company.C) company has no financial distress costs.D) Value of the firm is equal to V L + T C D.E) debt-equity ratio is equal to 1.34) Which one of the following provides the greatest tendency to increase the percentage of debt included in a company's optimal capital structure?A) Exceptionally high depreciation expensesB) Very low marginal tax rateC) Substantial tax shields from other sourcesD) Low probability of financial distressE) Minimal taxable income35) The capital structure that maximizes the value of a company also:A) minimizes financial distress costs.B) minimizes the cost of capital.C) maximizes the present value of the tax shield on debt.D) maximizes the value of the debt.E) maximizes the present value of the bankruptcy costs.36) The optimal capital structure:A) will be the same for all companies within the same industry.B) will remain constant over time unless the company changes its primary operations.C) will vary over time as taxes and market conditions change.D) places more emphasis on operations than on financing.E) is unaffected by changes in the financial markets.37) The static theory of capital structure advocates that the optimal capital structure for a company:A) is highly dependent upon a constant debt-equity ratio over time.B) remains fixed over time.C) is independent of the company's tax rate.D) is independent of the company's debt-equity ratio.E) equates marginal tax savings from additional debt to the marginal increased bankruptcy costs of that debt.38) The basic lesson of M&M theory is that the value of a company is dependent upon:A) the company's capital structure.B) the total cash flows of that company.C) minimizing the marketed claims.D) the amount of the company's marketed claims.E) size of the stockholders' claims.39) Which one of the following is a marketed claim against the cash flows of a company?A) Tax payment to the IRSB) Dividend payment to shareholdersC) Payment of employees' wagesD) Payment for warranty work on a product produced by the companyE) Payment of legal claim against the company40) The optimal capital structure of a company:A) minimizes the company's tax payments.B) maximizes the value of that company's marketed claims.C) minimizes both the marketed and nonmarketed claims against that company.D) eliminates all nonmarketed claims against that company.E) equates the company's marketed and nonmarketed claims.41) Which form of financing do companies prefer to use first according to the pecking-order theory?A) Regular debtB) Convertible debtC) Common stockD) Preferred stockE) Internal funds42) Which one of the following is correct according to pecking-order theory?A) There is a direct relationship between a company's profits and its debt levels.B) Companies avoid external debt except as a last resort.C) A company's capital structure is independent of its need for external funding.D) Companies stockpile internally generated cash.E) Every company has an optimal capital structure.43) With the exception of a few industries, most corporations in the U.S. tend to:A) minimize taxes.B) underutilize debt.C) rely equally on debt and equity.D) have relatively similar debt-equity ratios across industry lines.E) rely more heavily on debt than on equity.44) In general, the capital structures of U.S. firms:A) tend to overweigh debt in relation to equity.B) generally result in debt-equity ratios between .45 and .55.C) are fairly standard for all SIC codes.D) tend to exceed a debt-equity ratio of .45.E) vary significantly across industries.45) Edwards Farm Products was unable to meet its financial obligations and was forced into using legal proceedings to restructure itself so that it could continue as a viable business. The process this company underwent is known as a:A) merger.B) repurchase program.C) liquidation.D) reorganization.E) divestiture.46) Which one of these actions generally occurs first in a bankruptcy reorganization?A) Filing proofs of claimB) Dividing creditors into classesC) Confirming the reorganization planD) Distributing cash, property, and securities to creditorsE) Submitting a reorganization plan47) Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, how long after a company firm files for bankruptcy protection do creditors have to wait before submitting their own reorganization plan to the court?A) 60 daysB) 45 daysC) 180 daysD) 12 monthsE) 18 months48) The absolute priority rule determines:A) when a firm must be declared officially bankrupt.B) how a distressed firm is reorganized.C) which judge is assigned to a particular bankruptcy case.D) how long a reorganized firm is allowed to remain under bankruptcy protection.E) which parties receive payment first in a bankruptcy proceeding.49) Bankruptcy:A) occurs when total equity is negative.B) is a legal proceeding.C) occurs when a company cannot meet its financial obligations.D) refers to a loss of value for debt holders.E) is an inexpensive means of reorganizing a company.50) A company is technically insolvent when:A) it has a negative book value.B) its total debt exceeds its total equity.C) it is unable to meet its financial obligations.D) it files for bankruptcy protection.E) the market value of its stock is less than its book value.51) Which one of the following statements related to Chapter 7 bankruptcy is correct?A) A company in Chapter 7 bankruptcy is reorganizing its operations such that it can return to being a viable concern.B) Under a Chapter 7 bankruptcy, a trustee will assume control of the company's assets until those assets can be liquidated.C) Chapter 7 bankruptcies are always involuntary on the part of the firm.D) Under a Chapter 7 bankruptcy, the claims of creditors are paid prior to the administrative costs of the bankruptcy.E) Chapter 7 bankruptcy allows a firm to restructure its equity such that new shares of stock can be issued.52) Which one of the following will generally have the highest priority when assets are distributed in a bankruptcy proceeding?A) Consumer claimsB) Dividend payment to preferred shareholdersC) Company contribution to the employees' retirement accountD) Payment to an unsecured creditorE) Payment of employees' wages53) Which one of these statements related to Chapter 11 bankruptcy is correct?A) Prepacks apply only to Chapter 7, not Chapter 11, bankruptcies.B) Senior management must be replaced prior to exiting a Chapter 11 bankruptcy.C) A company can only file for Chapter 11 after it becomes totally insolvent.D) Companies sometimes file for Chapter 11 in an attempt to gain a competitive advantage.E) Chapter 11 involves the total liquidation of the bankrupt firm.54) The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:A) permits creditors to file a prepack immediately after a firm files for bankruptcy protection.B) prevents creditors from submitting any reorganization plans.C) prevents companies from filing for bankruptcy protection more than once.D) permits key employee retention plans only if the affected employee(s) has another job offer.E) allows the payment of bonuses to all key employees to entice those employees to remain in the company's employ.55) Katlin Markets is debating between a levered and an unlevered capital structure. The all-equity capital structure would consist of 60,000 shares of stock. The debt and equity option would consist of 45,000 shares of stock plus $250,000 of debt with an interest rate of 7.25 percent. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.A) $50,500B) $68,200C) $81,400D) $66,667E) $72,50056) Holly's is currently an all-equity firm that has 7,200 shares of stock outstanding at a market price of $41 a share. The firm has decided to leverage its operations by issuing $60,000 of debt at an interest rate of 7.6 percent. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. What is the minimum level of earnings before interest and taxes that the firm is expecting? Ignore taxes.A) $22,435B) $19,516C) $26,400D) $17,141E) $25,02057) Paradise Travels is an all-equity firm that has 9,000 shares of stock outstanding at a market price of $27 a share. Management has decided to issue $25,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 7.3 percent. What are the earnings per share at the break-even level of earnings before interest and taxes? Ignore taxes.A) $2.28B) $1.97C) $1.67D) $2.12E) $1.9258) Miller's Dry Goods is an all-equity firm with 40,000 shares of stock outstanding at a market price of $50 a share. The company's earnings before interest and taxes are $160,000. Miller's has decided to add leverage to its financial operations by issuing $200,000 of debt at 7 percent interest and using the proceeds to repurchase shares of stock. Jen owns 500 shares of Miller's stock and can loan out funds at 7 percent interest. How many shares of Miller's stock must Jen sell to offset the leverage that Miller's is assuming? (Assume Jen loans out all of the funds she receives from the sale of stock. Ignore taxes.)A) 125 sharesB) 100 sharesC) 50 sharesD) 25 sharesE) 75 shares59) Theo currently owns 700 shares of JKL, which is an all-equity firm with 320,000 shares of stock outstanding at a market price of $25 a share. The company's earnings before interest and taxes are $160,000. JKL has decided to issue $500,000 of debt at 7.5 percent interest and use the proceeds to repurchase shares of stock. How many shares of JKL stock must Theo sell to unlever his position if he can loan out funds at 7.5 percent interest? (Assume partial shares can be sold.)A) 38.50B) 42.50C) 50.00D) 43.75E) 46.6760) Naylor's is an all-equity firm with 48,000 shares of stock outstanding at a market price of $25 a share. The company has earnings before interest and taxes of $87,000. Naylor's has decided to issue $400,000 of debt at 7.3 percent and use the proceeds to repurchase shares. Currently, Angela owns 600 shares of Naylor's stock. How many shares of this stock will she continue to own if she unlevers this position? Assume she can loan out funds at 7.3 percent interest. Ignore taxes.A) 200B) 333C) 400D) 425E) 26761) Eastern Markets has no debt outstanding and a total market value of $346,500. Earnings before interest and taxes, EBIT, are projected to be $14,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 13 percent higher. If there is a recession, then EBIT will be 32 percent lower. The firm is considering a debt issue of $16,000 with an interest rate of 6.8 percent. The proceeds will be used to repurchase shares of stock. There are currently 4,500 shares outstanding. Ignore taxes. What will be the percentage change in EPS if the economy enters a recessionary period?A) −35 percentB) −41 percentC) −32 percentD) −28 percentE) −30 percent62) North Side Inc. has no debt outstanding and a total market value of $168,000. Earnings before interest and taxes, EBIT, are projected to be $18,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 22 percent higher. If there is a recession, then EBIT will be 35 percent lower. The company is considering a $50,000 debt issue with an interest rate of 7.4 percent. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding and the tax rate is 21 percent. What will be the percentage change in EPS if the economy has a strong expansion?A) 28.80 percentB) 31.26 percentC) 27.69 percentD) 25.45 percentE) 22.00 percent63) Galaxy Products is comparing two different capital structures, an all-equity plan (Plan I) anda levered plan (Plan II). Under Plan I, the company would have 112,000 shares of stock outstanding. Under Plan II, there would be 75,000 shares of stock outstanding and $600,000 in debt. The interest rate on the debt is 6.7 percent and there are no taxes. What is the break-even EBIT?A) $87,879B) $121,686C) $101,111D) $133,333E) $91,41464) ABC and XYZ are identical firms in all respects except for their capital structures. ABC is all-equity financed with $530,000 in stock. XYZ has the same total value but uses both stock and perpetual debt; its stock is worth $310,000 and the interest rate on its debt is 7.9 percent. Both firms expect EBIT to be $62,222. Ignore taxes. The cost of equity for ABC is ________ percent and for XYZ it is ________ percent.A) 11.74; 9.82B) 11.74; 12.48C) 11.74; 14.47D) 12.09; 9.82E) 12.09; 12.4865) Lamont Corp. is debt-free and has a weighted average cost of capital of 12.7 percent. The current market value of the equity is $2.3 million and there are no taxes. According to M&M Proposition I, what will be the value of the company if it changes to a debt-equity ratio of .85?A) $18,110,236B) $1,955,000C) $15,393,701D) $2,705,882E) $2,300,00066) Ignoring taxes, Pewter & Glass has a weighted average cost of capital of 10.82 percent. The company can borrow at 7.4 percent. What is the cost of equity if the debt-equity ratio is .68?A) 12.87%B) 13.15%C) 11.09%D) 15.85%E) 12.49%67) The Jean Outlet is an all-equity firm that has 64,000 shares of stock outstanding. The company has decided to borrow $120,000 to repurchase 1,500 shares of its stock from the estate of a deceased shareholder. What is the total value of the firm if you ignore taxes?A) $5,340,000B) $4,638,000C) $5,068,700D) $4,950,000E) $5,120,00068) Noelle owns 12 percent of The Toy Factory. She has decided to retire and wants to sell all of her shares in this closely held, all-equity firm. The other shareholders have agreed to have the company borrow the $248,000 needed to repurchase her shares of stock. What is the total market value of the company? Ignore taxes.A) $2,066,667B) $2,489,111C) $2,608,515D) $2,414,141E) $2,333,33369) Winter's Toyland has a debt-equity ratio of .57. The pretax cost of debt is 8.2 percent and the required return on assets is 14.7 percent. What is the company's cost of equity if you ignoretaxes?A) 14.70 percentB) 19.74 percentC) 15.29 percentD) 17.46 percentE) 18.41 percent70) Roy's Welding has a cost of equity of 14.1 percent and a pretax cost of debt of 7.7 percent. The required return on the assets is 13.2 percent. What is the debt-equity ratio based on M&M II with no taxes?A) .164B) .217C) .408D) .108E) .58371) The Corner Bakery has a debt-equity ratio of .53. The required return on assets is 13.5 percent and its cost of equity is 15.8 percent. What is the pretax cost of debt based on M&M Proposition II with no taxes?A) 8.78 percentB) 10.68 percentC) 9.16 percentD) 7.56 percentE) 8.40 percent72) L.A. Clothing has expected earnings before interest and taxes of $63,300, an unlevered cost of capital of 14.7 percent, and a combined tax rate of 23 percent. The company also has $11,000 of debt that carries a coupon rate of 7 percent. The debt is selling at par value. What is the value of this company?A) $342,579B) $273,333C) $284,108D) $334,101E) $305,476。

公司理财精要版原书第12版习题库答案Ross12e_Chapter06_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 6 Discounted Cash Flow Valuation1) Which one of the following statements correctly defines a time value of money relationship?A) Time and future values are inversely related, all else held constant.B) Interest rates and time are positively related, all else held constant.C) An increase in a positive discount rate increases the present value.D) An increase in time increases the future value given a zero rate of interest.E) Time and present value are inversely related, all else held constant.2) Project X has cash flows of $8,500, $8,000, $7,500, and $7,000 for Years 1 to 4, respectively. Project Y has cash flows of $7,000, $7,500, $8,000, and $8,500 for Years 1 to 4, respectively. Which one of the following statements is true concerning these two projects given a positive discount rate? (No calculations needed)A) Both projects have the same future value at the end of Year 4.B) Both projects have the same value at Time 0.C) Both projects are ordinary annuities.D) Project Y has a higher present value than Project X.E) Project X has both a higher present and a higher future value than Project Y.3) Project A has cash flows of $4,000, $3,000, $0, and $3,000 for Years 1 to 4, respectively. Project B has cash flows of $2,000, $3,000, $2,000, and $3,000 for Years 1 to 4, respectively. Which one of the following statements is correct assuming the discount rate is positive? (No calculations needed)A) The cash flows for Project B are an annuity, but those of Project A are not.B) Both sets of cash flows have equal present values as of Time 0.C) The present value at Time 0 of the final cash flow for Project A will be discounted using an exponent of three.D) Both projects have equal values at any point in time since they both pay the same total amount.E) Project B is worth less today than Project A.4) You are comparing two investment options that each pay 6 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate. (No calculations needed.)A) Both options are of equal value since they both provide $12,000 of income.B) Option A has the higher future value at the end of Year 3.C) Option B has a higher present value at Time 0.D) Option B is a perpetuity.E) Option A is an annuity.5) Which one of the following statements related to annuities and perpetuities is correct?A) An ordinary annuity is worth more than an annuity due given equal annual cash flows for 10 years at 7 percent interest, compounded annually.B) A perpetuity comprised of $100 monthly payments is worth more than an annuity of $100 monthly payments provided the discount rates are equal.C) Most loans are a form of a perpetuity.D) The present value of a perpetuity cannot be computed but the future value can.E) Perpetuities are finite but annuities are not.6) Which one of these statements related to growing annuities and perpetuities is correct?A) You can compute the present value of a growing annuity but not a growing perpetuity.B) In computing the present value of a growing annuity, you discount the cash flows using the growth rate as the discount rate.C) The future value of an annuity will decrease if the growth rate is increased.D) An increase in the rate of growth will decrease the present value of an annuity.E) The present value of a growing perpetuity will decrease if the discount rate is increased.7) You are comparing two annuities that offer regular payments of $2,500 for five years and pay .75 percent interest per month. You will purchase one of these today with a single lump sum payment. Annuity A will pay you monthly, starting today, while annuity B will pay monthly, starting one month from today. Which one of the following statements is correct concerning these two annuities?A) These annuities have equal present values but unequal future values.B) These two annuities have both equal present and equal future values.C) Annuity B is an annuity due.D) Annuity A has a smaller future value than annuity B.E) Annuity B has a smaller present value than annuity A.8) An ordinary annuity is best defined as:A) increasing payments paid for a definitive period of time.B) increasing payments paid forever.C) equal payments paid at the end of regular intervals over a stated time period.D) equal payments paid at the beginning of regular intervals for a limited time period.E) equal payments that occur at set intervals for an unlimited period of time.9) A perpetuity is defined as:A) a limited number of equal payments paid in even time increments.B) payments of equal amounts that are paid irregularly but indefinitely.C) varying amounts that are paid at even intervals forever.D) unending equal payments paid at equal time intervals.E) unending equal payments paid at either equal or unequal time intervals.10) A Canadian consol is best categorized as a(n):A) ordinary annuity.B) amortized cash flow.C) annuity due.D) discounted loan.E) perpetuity.11) The interest rate that is most commonly quoted by a lender is referred to as the:A) annual percentage rate.B) compound rate.C) effective annual rate.D) simple rate.E) common rate.12) The actual interest rate on a loan that is compounded monthly but expressed as an annual rate is referred to as the ________ rate.A) statedB) discounted annualC) effective annualD) periodic monthlyE) consolidated monthly13) Your credit card charges you .85 percent interest per month. This rate when multiplied by12 is called the ________ rate.A) effective annualB) annual percentageC) periodic interestD) compound interestE) episodic interest14) Which one of the following statements related to loan interest rates is correct?A) The annual percentage rate considers the compounding of interest.B) When comparing loans you should compare the effective annual rates.C) Lenders are most apt to quote the effective annual rate.D) Regardless of the compounding period, the effective annual rate will always be higher than the annual percentage rate.E) The more frequent the compounding period, the lower the effective annual rate given a fixed annual percentage rate.15) Which one of the following statements concerning interest rates is correct?A) Savers would prefer annual compounding over monthly compounding given the same annual percentage rate.B) The effective annual rate decreases as the number of compounding periods per year increases.C) The effective annual rate equals the annual percentage rate when interest is compounded annually.D) Borrowers would prefer monthly compounding over annual compounding given the same annual percentage rate.E) For any positive rate of interest, the annual percentage rate will always exceed the effective annual rate.16) Which one of the following compounding periods will yield the lowest effective annual rate given a stated future value at Year 5 and an annual percentage rate of 10 percent?A) AnnualB) Semi-annualC) MonthlyD) DailyE) Continuous17) A loan where the borrower receives money today and repays a single lump sum on a future date is called a(n) ________ loan.A) amortizedB) continuousC) balloonD) pure discountE) interest-only18) A loan that calls for periodic interest payments and a lump sum principal payment is referred to as a(n) ________ loan.A) amortizedB) modifiedC) balloonD) pure discountE) interest-only19) Amortized loans must have which one of these characteristics over its life?A) Either equal or unequal principal paymentsB) One lump-sum principal paymentC) Increasing paymentsD) Equal interest paymentsE) Declining periodic payments20) A(n) ________ loan has regular payments that include both principal and interest but these payments are insufficient to pay off the loan.A) perpetualB) continuingC) balloonD) pure discountE) interest-only21) The entire repayment of a(n) ________ loan is computed simply by computing one single future value.A) interest-onlyB) balloonC) amortizedD) pure discountE) bullet22) With an interest-only loan the principal is:A) forgiven over the loan period; thus it does not have to be repaid.B) repaid in decreasing increments and included in each loan payment.C) repaid in one lump sum at the end of the loan period.D) repaid in equal annual payments.E) repaid in increasing increments through regular monthly payments.23) An amortized loan:A) requires the principal amount to be repaid in even increments over the life of the loan.B) may have equal or increasing amounts applied to the principal from each loan payment.C) requires that all interest be repaid on a monthly basis while the principal is repaid at the end of the loan term.D) requires that all payments be equal in amount and include both principal and interest.E) repays both the principal and the interest in one lump sum at the end of the loan term.24) You need $25,000 today and have decided to take out a loan at 7 percent interest for five years. Which one of the following loans would be the least expensive for you? Assume all loans require monthly payments and that interest is compounded on a monthly basis.A) Interest-only loanB) Amortized loan with equal principal paymentsC) Amortized loan with equal loan paymentsD) Discount loanE) Balloon loan where 50 percent of the principal is repaid as a balloon payment25) Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218,000, $224,000, and $238,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 14.5 percent, what is the maximum Southern Tours should pay today to acquire Holiday Vacations?A) $519,799.59B) $538,615.08C) $545,920.61D) $595,170.53E) $538,407.7126) You are considering two savings options. Both options offer a rate of return of 7.6 percent. The first option is to save $2,500, $2,500, and $3,000 at the end of each year for the next three years, respectively. The other option is to save one lump sum amount today. You want to have the same balance in your savings account at the end of the three years, regardless of the savings method you select. If you select the lump sum method, how much do you need to save today?A) $7,414.59B) $6,289.74C) $6,660.00D) $6,890.89E) $6,784.2027) Your parents have made you two offers. The first offer includes annual gifts of $5,000, $6,000, and $8,000 at the end of each of the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 6.2 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer?A) $16,707.06B) $16,407.78C) $16,360.42D) $17,709.48E) $17,856.4228) You want to start a business that you believe can produce cash flows of $5,600, $48,200, and $125,000 at the end of each of the next three years, respectively. At the end of three years you think you can sell the business for $250,000. At a discount rate of 16 percent, what is this business worth today?A) $258,803.02B) $314,011.33C) $280,894.67D) $325,837.81E) $297,077.1729) You are considering a project with cash flows of $16,500, $25,700, and $18,000 at the end of each year for the next three years, respectively. What is the present value of these cash flows, given a discount rate of 7.9 percent?A) $54,877.02B) $51,695.15C) $55,429.08D) $46,388.78E) $53,566.6730) You just signed a consulting contract that will pay you $38,000, $42,000, and $45,000 annually at the end of the next three years, respectively. What is the present value of this contract given a discount rate of 10.5?A) $102,138.76B) $108,307.67C) $112,860.33D) $92,433.27E) $96,422.1531) You have some property for sale and have received two offers. The first offer is for $89,500 today in cash. The second offer is the payment of $35,000 today and an additional guaranteed $70,000 two years from today. If the applicable discount rate is 11.5 percent, which offer should you accept and why?A) You should accept the $89,500 today because it has the higher net present value.B) You should accept the $89,500 today because it has the lower future value.C) You should accept the first offer as it is a lump sum payment.D) You should accept the second offer because it has the larger net present value.E) It does not matter which offer you accept as they are equally valuable.32) Your anticipated wedding is three years from today. You don't know who your spouse will be but you do know that you are saving $10,000 today and $17,000 one year from today for this purpose. You also plan to pay the final $12,000 of anticipated costs on your wedding day. At a discount rate of 5.5 percent, what is the current cost of your upcoming wedding?A) $36,333.11B) $41,065.25C) $36,895.17D) $38,411.08E) $35,248.1633) One year ago, JK Mfg. deposited $12,000 in an investment account for the purpose of buying new equipment four years from today. Today, it is adding another $15,000 to this account. The company plans on making a final deposit of $10,000 to the account one year from today. How much cash will be available when the company is ready to buy the equipment assuming an interest rate of 5.5 percent?A) $43,609.77B) $45,208.61C) $44,007.50D) $46,008.30E) $47,138.0934) Troy will receive $7,500 at the end of Year 2. At the end of the following two years, he will receive $9,000 and $12,500, respectively. What is the future value of these cash flows at the end of Year 6 if the interest rate is 8 percent?A) $38,418.80B) $32,907.67C) $36,121.08D) $39,010.77E) $33,445.4435) Sue plans to save $4,500, $0, and $5,500 at the end of Years 1 to 3, respectively. What will her investment account be worth at the end of the Year 3 if she earns an annual rate of 4.15 percent?A) $10,583.82B) $10,381.25C) $10,609.50D) $11,526.50E) $10,812.0736) A proposed project has cash flows of $2,000, $?, $1,750, and $1,250 at the end of Years 1 to 4. The discount rate is 7.2 percent and the present value of the four cash flows is $6,669.25. What is the value of the Year 2 cash flow?A) $2,450B) $2,750C) $2,500D) $2,250E) $2,80037) Waldo expects to save the following amounts: Year 1 = $50,000; Year 2 = $28,000; Year 3 = $12,000. If he can earn an average annual return of 10.5 percent, how much will he have saved in this account exactly 25 years from the time of the first deposit?A) $1,172,373B) $935,334C) $806,311D) $947,509E) $1,033,54538) A charity plans to invest annual payments of $60,000, $70,000, $75,000, and $50,000, respectively, over the next four years. The first payment will be invested one year fromtoday. Assuming the investment earns 5.5 percent annually, how much will the charity have available four years from now?A) $263,025B) $236,875C) $277,491D) $328,572E) $285,73739) Your broker is offering 1.2 percent compounded daily on its money market account. If you deposit $7,500 today, how much will you have in your account 15 years from now?A) $8,979.10B) $9,714.06C) $8,204.50D) $9,336.81E) $9,414.1440) Your grandmother will be gifting you $150 at the end of each month for four years while you attend college. At a discount rate of 3.7 percent, what are these payments worth to you on the day you enter college?A) $6,201.16B) $6,682.99C) $6,539.14D) $6,608.87E) $6,870.2341) You just won the grand prize in a national writing contest! As your prize, you will receive $500 a month for 50 months. If you can earn 7 percent on your money, what is this prize worth to you today?A) $21,629.93B) $18,411.06C) $21,338.40D) $20,333.33E) $19,450.2542) Phil can afford $240 a month for five years for a car loan. If the interest rate is 8.5 percent, how much can he afford to borrow to purchase a car?A) $11,750.00B) $12,348.03C) $11,697.88D) $10,266.67E) $10,400.0043) As the beneficiary of a life insurance policy, you have two options for receiving the insurance proceeds. You can receive a lump sum of $200,000 today or receive payments of $1,400 a month for 20 years. If you can earn 6 percent on your money, which option should you take and why?A) You should accept the payments because they are worth $202,414 to you today.B) You should accept the payments because they are worth $201,846 to you today.C) You should accept the payments because they are worth $201,210 to you today.D) You should accept the $200,000 because the payments are only worth $189,311 to you today.E) You should accept the $200,000 because the payments are only worth $195,413 to you today.44) Assume you work for an employer who will contribute $60 a week for the next 20 years intoa retirement plan for your benefit. At a discount rate of 9 percent, what is this employee benefit worth to you today?A) $28,927.38B) $27,618.46C) $29,211.11D) $25,306.16E) $25,987.7445) The Distribution Point plans to save $2,000 a month for the next 3 years for future emergencies. The interest rate is 4.5 percent compounded monthly. The first monthly deposit will be made today. What would today's deposit amount have to be if the firm opted for one lump sum deposit that would yield the same amount of savings as the monthly deposits after 3 years?A) $70,459.07B) $67,485.97C) $69,068.18D) $69,333.33E) $67,233.8446) You need some money today and the only friend you have that has any is a miser. He agrees to loan you the money you need, if you make payments of $30 a month for the next six months. In keeping with his reputation, he requires that the first payment be paid today. He also charges you 2 percent interest per month. How much total interest is he charging?A) $4.50B) $3.60C) $9.50D) $4.68E) $8.6047) Sue just purchased an annuity that will pay $24,000 a year for 25 years, starting today. What was the purchase price if the discount rate is 8.5 percent?A) $241,309B) $245,621C) $251,409D) $258,319E) $266,49848) Marcus is scheduled to receive annual payments of $3,600 for each of the next 12 years. The discount rate is 8 percent. What is the difference in the present value if these payments are paid at the beginning of each year rather than at the end of each year?A) $2,170.39B) $2,511.07C) $2,021.18D) $2,027.94E) $2,304.9649) Two annuities have equal present values and an applicable discount rate of 7.25 percent. One annuity pays $2,500 on the first day of each year for 15 years. How much does the second annuity pay each year for 15 years if it pays at the end of each year?A) $2,331.00B) $2,266.67C) $2,500.00D) $2,390.50E) $2,681.2550) Trish receives $450 on the first of each month. Josh receives $450 on the last day of each month. Both Trish and Josh will receive payments for next four years. At a discount rate of 9.5 percent, what is the difference in the present value of these two sets of payments?A) $141.80B) $151.06C) $154.30D) $159.08E) $162.5051) What is the future value of $1,575 a year for 25 years at 6.3 percent interest, compounded annually?A) $76,919.04B) $72,545.78C) $90,152.04D) $92,006.08E) $91,315.0952) What is the future value of $8,500 a year for 40 years at 10.8 percent interest, compounded annually?A) $3,278,406.16B) $4,681,062.12C) $2,711,414.14D) $3,989,476.67E) $4,021,223.3353) Rosina plans on saving $2,000 a year and expects to earn an annual rate of 6.9 percent. How much will she have in her account at the end of 37 years?A) $406,429.10B) $338,369.09C) $297,407.17D) $313,274.38E) $308,316.6754) Theresa adds $1,500 to her savings account on the first day of each year. Marcus adds $1,500 to his savings account on the last day of each year. They both earn 6.5 percent annual interest. What is the difference in their savings account balances at the end of 35 years?A) $12,093.38B) $12,113.33C) $12,127.04D) $12,211.12E) $12,219.4655) You just obtained a loan of $16,700 with monthly payments for four years at 6.35 percent interest, compounded monthly. What is the amount of each payment?A) $387.71B) $391.40C) $401.12D) $419.76E) $394.8956) You borrowed $185,000 for 30 years to buy a house. The interest rate is 4.35 percent, compounded monthly. If you pay all of your monthly payments as agreed, how much total interest will you pay on this mortgage? (Round the monthly payment to the nearest whole cent.)A) $150,408B) $147,027C) $146,542D) $154,319E) $141,40657) Travis International has a one-time expense of $1.13 million that must be paid two years from today. The firm can earn 4.3 percent, compounded monthly, on its savings. How much must the firm save each month to fund this expense if the firm starts investing equal amounts each month starting at the end of this month?A) $38,416.20B) $45,172.02C) $51,300.05D) $47,411.08E) $53,901.1558) Nadine is retiring today and has $96,000 in her retirement savings. She expects to earn 5.5 percent, compounded monthly. How much can she withdraw from her retirement savings each month if she plans to spend her last penny 18 years from now?A) $809.92B) $847.78C) $919.46D) $616.08E) $701.1059) Island News purchased a piece of property for $1.79 million. The firm paid a down payment of 20 percent in cash and financed the balance. The loan terms require monthly payments for 20 years at an APR of 4.75 percent, compounded monthly. What is the amount of each mortgage payment?A) $9,253.92B) $10,419.97C) $8,607.11D) $11,567.40E) $12,301.1660) You estimate that you will owe $40,200 in student loans by the time you graduate. If you want to have this debt paid in full within 10 years, how much must you pay each month if the interest rate is 4.35 percent, compounded monthly?A) $411.09B) $413.73C) $414.28D) $436.05E) $442.5061) Phil purchased a car today at a price of $8,500. He paid $300 down in cash and financed the balance for 36 months at 5.75 percent, compounded monthly. What is the amount of each monthly loan payment?A) $248.53B) $270.23C) $318.47D) $305.37E) $257.6262) An insurance annuity offers to pay you $1,000 per quarter for 20 years. If you want to earn arate of return of 6.5 percent, compounded quarterly, what is the most you are willing to pay as a lump sum today to obtain this annuity?A) $32,008.24B) $34,208.16C) $44,591.11D) $43,008.80E) $38,927.5963) Your car dealer is willing to lease you a new car for $190 a month for 36 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 6.5 percent, what is the current value of the lease?A) $10,331.03B) $6,232.80C) $9,197.74D) $7,203.14E) $11,008.3164) Your great aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive $2,500 on the first day of each year, starting immediately and continuing for 20 years. What is the value of this inheritance today if the applicable discount rate is 4.75 percent?A) $24,890.88B) $31,311.16C) $33,338.44D) $28,909.29E) $29,333.3365) Chris has three options for settling an insurance claim. Option A will provide $1,500 a month for 6 years. Option B will pay $1,025 a month for 10 years. Option C offers $85,000 as a lump sum payment today. The applicable discount rate is 6.8 percent, compounded monthly. Which option should Chris select, and why, if he is only concerned with the financial aspects of the offers?A) Option A: It provides the largest monthly payment.B) Option B: It pays the largest total amount.C) Option C: It is all paid today.D) Option B: It pays the greatest number of payments.E) Option B: It has the largest value today.66) Racing Motors wants to save $825,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each quarter starting today. How much does the company need to save each quarter to achieve its goal if it can earn 4.45 percent on its savings?A) $63,932.91B) $62,969.70C) $63,192.05D) $62,925.00E) $64,644.1767) Stephanie is going to contribute $160 on the first of each month, starting today, to her retirement account. Her employer will provide a match of 50 percent. In other words, her employer will add $80 to the amount Stephanie saves. If both Stephanie and her employer continue to do this and she can earn a monthly interest rate of .45 percent, how much will she have in her retirement account 35 years from now?A) $336,264.14B) $204,286.67C) $199,312.04D) $268,418.78E) $299,547.9768) An annuity that pays $12,500 a year at an annual interest rate of 5.45 percent costs $150,000 today. What is the length of the annuity time period?A) 25 yearsB) 18 yearsC) 15 yearsD) 20 yearsE) 22 years69) You want to be a millionaire when you retire in 30 years and expect to earn 8.5 percent, compounded monthly. How much more will you have to save each month if you wait 10 years to start saving versus if you start saving at the end of this month?A) $947.22B) $1,046.80C) $808.47D) $841.15E) $989.1070) You are the recipient of a gift that will pay you $25,000 one year from now and every year thereafter for the following 24 years. The payments will increase in value by 2.5 percent each year. If the appropriate discount rate is 8.5 percent, what is the present value of this gift?A) $416,667B) $316,172C) $409,613D) $311,406E) $386,10171) You are preparing to make monthly payments of $100, beginning at the end of this month, into an account that pays 5 percent interest, compounded monthly. How many payments will youhave made when your account balance reaches $10,000?A) 97.30B) 83.77C) 89.46D) 100.00E) 91.1272) You want to borrow $27,500 and can afford monthly payments of $650 for 48 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford?A) 6.33 percentB) 6.67 percentC) 5.82 percentD) 7.01 percentE) 7.18 percent73) Today, you borrowed $3,200 on a credit card that charges an interest rate of 12.9 percent, compounded monthly. How long will it take you to pay off this debt assuming that you do not charge anything else and make regular monthly payments of $60?A) 6.87 yearsB) 6.28 yearsC) 6.64 yearsD) 7.23 yearsE) 7.31 years74) The Rodriquez family is determined to purchase a $250,000 home without incurring any debt. The family plans to save $2,500 a quarter for this purpose and expects to earn 6.65 percent, compounded quarterly. How long will it be until the family can purchase a home?A) 23.09 yearsB) 14.85 yearsC) 35.46 yearsD) 48.82 yearsE) 59.39 years75) Today, you are retiring. You have a total of $289,416 in your retirement savings. You want to withdraw $2,500 at the beginning of every month, starting today and expect to earn 4.6 percent, compounded monthly. How long will it be until you run out of money?A) 29.97 yearsB) 8.56 yearsC) 22.03 yearsD) 12.71 yearsE) 18.99 years。

公司理财精要版原书第12版习题库答案Ross12e_Chapter18_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 18 Short-Term Finance and Planning1) Which one of the following actions represents a source of cash?A) Granting credit to a customerB) Purchasing new machineryC) Making a payment on a bank loanD) Purchasing inventoryE) Accepting credit from a supplier2) Which one of these actions represents a use of cash?A) Collecting a receivableB) Paying employee wagesC) Selling inventory for cashD) Obtaining a bank loanE) Purchasing inventory on credit3) Which one of these activities represents a source of cash?A) Increasing accounts receivableB) Decreasing inventoryC) Increasing fixed assetsD) Decreasing accounts payableE) Decreasing common stock4) Which one of the following actions will increase net working capital? Assume the current ratio is greater than 1.0.A) Paying a supplier for a previous purchaseB) Paying off a long-term debtC) Selling inventory at cost for cashD) Purchasing inventory on creditE) Selling inventory at a profit on credit5) Which one of the following will decrease net working capital? Assume the current ratio is greater than 1.0.A) Selling inventory at costB) Collecting payment from a customerC) Paying a dividend to shareholdersD) Selling a fixed asset for less than book valueE) Paying a supplier for prior purchases6) Which one of these actions will increase the operating cycle? Assume all else held constant.A) Decreasing the payables periodB) Decreasing the receivables turnover rateC) Increasing the payables periodD) Decreasing the average inventory levelE) Increasing the inventory turnover rate7) The operating cycle is equal to the:A) cash cycle plus the accounts receivable period.B) inventory period plus the accounts receivable period.C) inventory period plus the accounts payable period.D) accounts payable period minus the cash cycle.E) accounts payable period plus the accounts receivable period.8) Which one of the following will decrease the operating cycle?A) Decreasing the inventory turnover rateB) Decreasing the accounts payable periodC) Increasing the accounts receivable turnover rateD) Increasing the accounts payable periodE) Increasing the accounts receivable period9) The operating cycle describes how a product:A) is priced.B) is sold.C) moves through the current asset accounts.D) moves through the production process.E) generates a profit.10) Which one of these affects the length of the cash cycle but not the operating cycle?A) Inventory periodB) Accounts payable periodC) Both the accounts receivable and inventory periodsD) Accounts receivable periodE) Both the accounts receivable and the accounts payable periods11) Which one of these will decrease the cash cycle, all else held constant?A) Increasing the accounts receivable turnover rateB) Decreasing the accounts payable periodC) Increasing the inventory periodD) Decreasing the inventory turnover rateE) Increasing the accounts receivable period12) A decrease in which one of the following will increase the cash cycle, all else held constant?A) Payables turnoverB) Days sales in inventoryC) Operating cycleD) Inventory turnover rateE) Accounts receivable period13) Metal Designs historically produced products for inventory. Now, they only produce a product when an actual order is received from a customer. All else equal, this change will:A) increase the operating cycle.B) lengthen the accounts receivable period.C) shorten the accounts payable period.D) decrease the cash cycle.E) decrease the inventory turnover rate.14) Which one of these statements is correct? Assume all else held constant.A) A decrease in the accounts receivable turnover rate decreases the cash cycle.B) The cash cycle is equal to the operating cycle minus the inventory period.C) A negative cash cycle is preferable to a positive cash cycle.D) A decrease in the accounts payable period shortens the cash cycle.E) The cash cycle plus the accounts receivable period is equal to the operating cycle.15) Which one of the following statements is correct concerning the cash cycle?A) The longer the cash cycle, the more likely a company will need external financing.B) Increasing the accounts payable period increases the cash cycle.C) Accepting a supplier's discount for early payment decreases the cash cycle.D) The cash cycle can exceed the operating cycle if the payables period is equal to zero.E) Offering early payment discounts to customers will tend to increase the cash cycle.16) Which one of the following actions will tend to increase the inventory period?A) Discontinuing all slow-selling merchandiseB) Selling obsolete inventory below cost just to get rid of itC) Buying raw materials only as needed for the manufacturing processD) Producing goods on demand versus for inventoryE) Increasing inventory selection to attract more customers17) Which one of the following actions will tend to increase the accounts receivable period from its current 14 days?A) Tightening the standards for granting credit to customersB) Refusing to grant additional credit to any customer who pays lateC) Increasing the finance charges applied to all customer balances outstanding over 30 daysD) Granting discounts for cash salesE) Eliminating the discount for early payment by credit customers18) An increase in which one of the following is an indicator that an accounts receivable policy is becoming more restrictive?A) Bad debtsB) Accounts receivable turnover rateC) Accounts receivable periodD) Credit salesE) Operating cycle19) Assume all else held constant. If you pay your suppliers three days sooner, then:A) your payables turnover rate will decrease.B) you may require additional funds from other sources to fund the cash cycle.C) the cash cycle will decrease.D) your operating cycle will decrease.E) the accounts receivable period will decrease.20) Which one of the following will increase the accounts payable period, all else held constant?A) A decrease in the inventory periodB) An increase in the ending accounts payable balanceC) An increase in the cash cycleD) A decrease in the operating cycleE) An increase in the accounts payable turnover rate21) Which one of the following managers determines which customers must pay cash and which can charge their purchases?A) Purchasing managerB) Credit managerC) ControllerD) Production managerE) Payables manager22) Which one of the following managers determines when a supplier will be paid?A) ControllerB) Payables managerC) Credit managerD) Purchasing managerE) Production manager23) The length of time between the purchase of inventory and the receipt of cash from the sale of that inventory is called the:A) operating cycle.B) inventory period.C) accounts receivable period.D) accounts payable period.E) cash cycle.24) The length of time that elapses between the day at item of inventory is purchased and the day that item sells is called the:A) operating cycle.B) inventory period.C) accounts receivable period.D) accounts payable period.E) cash cycle.25) The length of time between the sale of inventory and the collection of the payment for that sale is called the:A) operating cycle.B) inventory period.C) accounts receivable period.D) accounts payable period.E) cash cycle.26) The length of time between the day an item is purchased from a supplier until the day that supplier is paid for that purchase is called the:A) operating cycle.B) inventory period.C) accounts receivable period.D) accounts payable period.E) cash cycle.27) Central Supply paid off an accounts payable for a toboggan it had purchased on credit three weeks ago. The time period between today and the day Central Supply will receive cash from the sale of this toboggan is called the:A) operating cycle.B) inventory period.C) accounts receivable period.D) accounts payable period.E) cash cycle.28) Costs that increase as a firm acquires additional current assets are called ________ costs.A) carryingB) shortageC) orderD) safetyE) trading29) Costs that decrease as a company acquires additional current assets are called ________ costs.A) carryingB) shortageC) debtD) equityE) payables30) A firm with a flexible short-term financial policy will:A) maintain a low balance in accounts receivables.B) only have minimal amounts, if any, invested in marketable securities.C) invest heavily in inventory.D) have low cash balances.E) have tight restrictions on granting credit to customers.31) Which one of these is indicative of a short-term restrictive financial policy?A) Purchasing inventory on an as-needed basisB) Granting credit to all customersC) Investing heavily in marketable securitiesD) Maintaining a large accounts receivable balanceE) Keeping inventory levels high32) If a company adheres to a restrictive short-term financial policy, then they will generally have:A) little, if any, investment in marketable securities.B) low inventory turnover rates.C) liberal credit terms for customers.D) few, if any, stockouts.E) high cash balances.33) The Lumber Mart recently replaced its management team. As a result, they are implementinga restrictive short-term financial policy in place of the flexible policy under which they had been operating. Which one of the following should the employees expect as a result of this policy change?A) Increasing monthly sales as compared to the prior yearB) Greater inventory selectionC) Fewer out-of-stock occurrencesD) Loss of credit customersE) More liberal credit terms34) A flexible short-term financial policy:A) increases the need for long-term financing.B) minimizes net working capital.C) avoids bad debts by only selling items for cash.D) maximizes fixed assets and minimizes current assets.E) is most appropriate when carrying costs are high and shortage costs are low.35) A flexible short-term financial policy:A) maximizes cashouts.B) increases shortage costs due to frequent cash-outs.C) tends to decrease sales as compared to a restrictive policy.D) incurs more carrying costs than a restrictive policy.E) requires only a minimum investment in current assets.36) Shortage costs are least associated with:A) stockouts and cashouts.B) lost customer goodwill.C) disruptions of production schedules.D) inventory ordering costs.E) opportunity costs incurred by high levels of working capital.37) The optimal investment in current assets for an active company occurs at the point where:A) both shortage costs and carrying costs equal zero.B) shortage costs are equal to zero.C) carrying costs are equal to zero.D) carrying costs exceed shortage costs.E) shortage costs and carrying costs are equal.38) A company:A) with a restrictive financing policy secures sufficient long-term financing to fund all its assets.B) with a flexible financing policy frequently invests in marketable securities.C) with a flexible financing policy tends to use short-term financing on an ongoing basis.D) will tend to avoid short-term financing under both restrictive and flexible financing policies.E) with seasonal sales must select flexible financing policies.39) Which one of the following statements is correct?A) Seasonal needs are financed with short-term loans when companies adhere to a flexible financing policy.B) A flexible financing policy tends to increase the risk of encountering financial distress.C) Long-term interest rates tend to be less volatile than short-term rates.D) Most companies tend to finance inventory with long-term debt.E) Short-term interest rates are generally higher than long-term rates.40) Which one of these best describes a characteristic of a flexible financing policy?A) All of a company's assets are financed with long-term debt.B) Only long-term assets are financed with long-term debt.C) Short-term financing will be used to finance seasonal peaks.D) Inventory is purchased with cash.E) Low levels of inventory are maintained.41) With a compromise financial policy companies will:A) borrow only long-term funds and refuse any loans that require compensating balances.B) borrow short-term funds and also invest in marketable securities.C) finance all of their assets with various short-term loans.D) finance their seasonal asset peaks with short-term debt and the remainder of their assets with equity.E) finance half of their fixed assets with long-term debt and half with short-term debt.42) Assume each month has 30 days and a company has a 30-day accounts receivable period. During the second calendar quarter of the year, that company will collect payment for the sales it made during which of the following months?A) February, March, and AprilB) April, May and JuneC) December, January, and FebruaryD) January, February, and MarchE) March, April, and May43) The Harvester collects 55 percent of sales in the month of sale, 40 percent of sales in the month following the month of sale, and 5 percent of sales in the second month following themonth of sale. During the month of April, they will collect:A) 55 percent of February sales.B) 5 percent of April sales.C) 40 percent of March sales.D) 5 percent of March sales.E) 40 percent of February sales.44) Timko has a 90-day collection period and produces seasonal merchandise. Sales are lowest during the first calendar quarter of a year and the highest during the third quarter. The company maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters. This company is most apt to face a cash-out situation in:A) the first quarter.B) the second quarter.C) the third quarter.D) the fourth quarter.E) any quarter with equal probabilities of occurrence.45) Summertime Adventures is a seasonal firm that enjoys its highest sales during July and August. The company purchases inventory one month before it is sold and pays for its purchases 60 days after the invoice date. Which one of the following statements is supported by this information?A) Inventory purchases will be highest during the months of July and August.B) Inventory purchases will be highest during the months of May and June.C) Payments to suppliers will be highest during the months of June and July.D) Payments to suppliers will be highest during the months of July and August.E) Payments to suppliers will be highest during the months of August and September.46) Which one of the following combinations is most apt to cause a company that is generally financially sound to have a negative net cash inflow for a particular quarter?A) Low fixed expenses and level monthly salesB) A one-time asset purchase and approaching high seasonal salesC) Highly seasonal sales and a flexible financing policyD) A flexible financing policy and level monthly salesE) A large cash sale and low fixed expenses47) Which one of the following statements is correct concerning a company's cash balance?A) Most firms attempt to maintain a zero cash balance at all times.B) The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum desired cash balance.C) On a cash balance report, the cumulative cash surplus at the end of May is used as June's beginning cash balance.D) A cumulative cash deficit indicates a borrowing need.E) The ending cash balance must equal the minimum desired cash balance.48) A cumulative cash deficit indicates a company:A) has at least a short-term need for external funding.B) is facing long-term financial distress.C) will go out of business within the year.D) is capable of funding all of its needs internally.E) is using its cash wisely.49) Steve has estimated the cash inflows and outflows for his hardware store for next year. The report that he has prepared recapping these cash flows is called a:A) pro forma income statement.B) sales projection.C) cash budget.D) receivables analysis.E) credit analysis.50) Taylor Supply has made an agreement with its bank that allows it to borrow up to $10,000 at any time over the next year. This arrangement is called a(n):A) floor loan.B) open loan.C) compensating balance.D) line of credit.E) bank note.51) Money deposited by a borrower with a bank in a low or non-interest-bearing account as a condition of a loan agreement is called a:A) compensating balance.B) secured credit deposit.C) letter of credit.D) line of cash.E) pledge.52) Brustle's Pottery either factors or assigns all of its receivables to other firms. This is known as:A) accounts receivable financing.B) pledged financing.C) capital funding.D) daily funding.E) capital financing.53) Rose's Gift Shop borrows money on a short-term basis by pledging its inventory as collateral. This is an example of a(n):A) debenture.B) line of credit.C) banker's acceptance.D) working loan.E) inventory loan.54) The most common way to finance a temporary cash deficit is with a:A) long-term secured bank loan.B) short-term secured bank loan.C) short-term issue of corporate bonds.D) long-term unsecured bank loan.E) short-term unsecured bank loan.55) The primary difference between a line of credit and a revolving credit arrangement is the:A) type of collateral used to secure the loan.B) length of the credit period.C) fact that the line of credit is a secured loan and the revolving credit arrangement is unsecured.D) fact that the line of credit is an unsecured loan and the revolving credit arrangement is secured.E) loan's classification as either a committed or a non-committed loan.56) A compensating balance:A) is required when a company acquires any bank financing other than a line of credit.B) is often used by banks as a means of rewarding their best credit customers.C) decreases the cost of short-term bank financing.D) only applies to zero-interest rate loans.E) may be required even if a company never borrows funds.57) High Point Hotel (HPH) has $218,000 in accounts receivable. To finance a major purchase, the company assigns these receivables to Cross Town Bank. Which one of the following statements correctly describes this transaction?A) HPH will immediately receive $218,000 and will have no further obligation related to these receivables.B) HPH will receive some amount of cash immediately while maintaining full responsibility for any uncollected receivables.C) Cross Town Bank accepts full responsibility for the collection of the accounts receivables and, in exchange, immediately pays HPH a discounted value for its receivables.D) Cross Town Bank accepts full responsibility for collecting the accounts receivables and pays HPH a discounted price for the accounts collected after the normal collection period has elapsed.E) HPH receives the full amount of its receivables upon assignment but must reimburse Cross Town Bank for any uncollected account.58) Which one of the following statements is correct?A) The assignment of receivables involves selling accounts receivables at full price.B) Lines of credit frequently require a cleanup period.C) With maturity factoring, the borrower receives the loan amount immediately.D) Commercial paper is short-term financing offered to highly rated corporations by major banks.E) Credit card receivables funding is a relatively inexpensive method of borrowing on a short-term basis.59) Which type of arrangement is a hardware store most apt to use to finance its inventory?A) Accounts receivable assignmentB) Blanket inventory lienC) Trust receiptD) Commercial paperE) Field warehouse financing60) An orange grower is most apt to use which type of financing for its crop?A) Accounts receivable assignmentB) Blanket inventory lienC) Trust receiptD) Commercial paperE) Field warehouse financing61) All of the following are benefits derived from short-term financial planning with the exception of:A) having advance notice of when your firm should require external financing.B) knowing for certain what your cash balance will be six months in advance.C) knowing if excess funds should be available for investing.D) being able to determine the approximate extent of time for which a loan is required.E) having the ability to time capital expenditures in order to place the least financial burden possible on a firm.62) Auto Detailers has a book net worth of $29,700. Long-term debt is $4,800. Net working capital, other than cash, is $3,700 and fixed assets are $27,400. How much cash does the company have?A) $3,900B) $4,800C) $4,300D) $3,400E) $3,70063) New Products has sales of $749,500 and cost of goods sold of $368,600. Beginning inventory is $54,700 and ending inventory is $58,200. What is the length of the inventory period?A) 15.01 daysB) 17.89 daysC) 55.90 daysD) 90.53 daysE) 113.67 days64) Mid-Western Markets has sales of $1,389,400 and costs of goods sold of $892,700. Beginning inventory is $94,300 and ending inventory is $110,200. What is the inventory turnover rate?A) 8.73 timesB) 10.78 timesC) 13.59 timesD) 11.37 timesE) 12.64 times65) North Side Wholesalers has sales of $1,648,900. The cost of goods sold is equal to 71 percent of sales and the average inventory is $75,800. How many days on average does it take to sell the inventory?A) 28.30 daysB) 23.63 daysC) 20.48 daysD) 33.28 daysE) 21.68 days66) The Bear Rug has sales of $647,000. The cost of goods sold is equal to 66 percent of sales. Accounts receivable has a beginning balance of $53,400 and an ending balance of $49,600. How long on average does it take to collect the receivables?A) 12.56 daysB) 29.05 daysC) 18.58 daysD) 20.44 daysE) 19.17 days67) Morning Star has credit sales of $1,032,800, costs of goods sold of $662,350, average accounts receivable of $86,300, and average accounts payable of $92,600. On average, how long does it take Morning Star's credit customers to pay for their purchases?A) 11.97 daysB) 39.24 daysC) 30.50 daysD) 21.88 daysE) 19.56 days68) The Mountain Top Shoppe has sales of $828,000, average accounts receivable of $64,100 and average accounts payable of $72,700. The cost of goods sold is equivalent to 68 percent of sales. How long does it take The Mountain Top Shoppe to pay its suppliers?A) 69.31 daysB) 68.38 daysC) 47.13 daysD) 35.89 daysE) 36.97 days69) HG Livery Supply has a beginning accounts payable balance of $68,800 and an ending accounts payable balance of $72,700. Sales for the period were $942,800 and costs of goods sold were $534,200. What is the payables turnover rate?A) 7.55 timesB) 8.39 timesC) 7.02 timesD) 13.33 timesE) 12.85 times70) Bradley's has an inventory turnover rate of 7.6, a payables turnover rate of 11.4, and a receivables turnover rate of 12.6. How long is the operating cycle?A) 20.20 daysB) 76.99 daysC) 70.63 daysD) 30.13 daysE) 24.11 days71) Meryl Enterprises currently has an operating cycle of 76.4 days. The company is implementing some operational changes that are expected to increase the accounts receivable period by 2.2 days, decrease the inventory period by 5.3 days, and increase the accounts payable period by 1.5 days. What is the new operating cycle expected to be?A) 78.0 daysB) 74.8 daysC) 73.3 daysD) 79.5 daysE) 71.8 days72) On average, Furniture & More is able to sell its inventory in 54.2 days and takes 65.3 days on average to pay for its purchases. Its average customer pays with a credit card which allows the company to collect its receivables in 2.9 days. Given this information, what is the length of operating cycle?A) 57.1 daysB) 88.3 daysC) −8.2 daysD) 116.6 daysE) 122.4 days73) Interior Designs has an inventory period of 84.6 days, an accounts payable period of 43.2 days, and an accounts receivable period of 41.7 days. Management is considering an offer from their suppliers to pay within 10 days and receive a discount of 2 percent. If the new discount is taken, the accounts payable period is expected to decline by 30.4 days. What will be the new operating cycle given the change in the payables period?A) 95.9 daysB) 115.0 daysC) 97.4 daysD) 126.3 daysE) 139.1 days74) Metal Products Co. has an inventory period of 94.2 days, an accounts payable period of 40.4 days, and an accounts receivable turnover rate of 17.6. What is the length of the cash cycle?A) 71.40 daysB) 74.54 daysC) 96.28 daysD) 114.94 daysE) 108.28 days75) West Chester Automation has an inventory turnover of 9.1 and an accounts payable turnover of 10.6. The accounts receivable period is 32.8 days. What is the length of the cash cycle?A) 35.67 daysB) 38.48 daysC) 41.02 daysD) 46.47 daysE) 48.81 days76) Peterson's Antiquities currently has a 32.6-day cash cycle. Assume the company changes its operations such that it decreases its receivables period by 3.1 days, increases its inventory period by 1.8 days, and increases its payables period by 2.2 days. What will the length of the cash cycle be after these changes?A) 33.5 daysB) 36.1 daysC) 30.2 daysD) 29.1 daysE) 27.6 days77) Rossiter's currently has a cash cycle of 43.4 days. Assume the operations are changed such that the receivables period decreases by 2.6 days, the inventory period by increases by 1.3 days, and the payables period increases by 3.4 days. What will be the length of the cash cycle after these changes?A) 39.2 daysB) 45.5 daysC) 38.7 daysD) 41.3 daysE) 48.1 days78) AC Corporation has beginning inventory of $11,062, accounts payable of $8,010, and accounts receivable of $7,844. The end of year values are $11,362 for inventory, $7,898 foraccounts payable, and $8,029 for accounts receivable. Net sales are $109,100 and costs of goods sold are $56,220. How many days are in the cash cycle?A) 47.7 daysB) 80.2 daysC) 55.8 daysD) 97.9 daysE) 67.8 days79) Wake-Up Coffee has projected next year's quarterly sales at $960, $890, $980, and $1,050 for Quarters 1 to 4, respectively. Accounts receivable at the beginning of the year are $212 and the collection period is 18 days. What is the amount of the accounts receivable balance at the end of Quarter 2? Assume a year has 360 days.A) $212B) $207C) $178D) $184E) $16780) Tall Guys Clothing has a 30-day collection period. Sales for the next calendar year are estimated at $1,950, $2,100, $2,650 and $3,200, respectively, by quarter, starting with the first quarter of the year. Given this information, which one of the following statements is correct? Assume a year has 360 days.A) The Quarter 2 collections will be $2,000.B) The accounts receivable balance at the beginning of Quarter 4 will be $940.C) The Quarter 3 collections will be $2,375.D) The end of Quarter 4 accounts receivable balance will be $2,133.E) The Quarter 4 collections will be $3,017.81) Plant Mart has a beginning receivables balance on February 1 of $1,648. Sales for February through May are $2,670, $2,940, $3,820, and $4,450, respectively. The accounts receivable period is 15 days. What is the amount of the April collections? Assume a year has 360 days.A) $3,010B) $3,380C) $2,805D) $3,545E) $3,470。

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