STR581 STR/581 FINAL EXAM CAPSTONE 38/39; ACC/561 AND FIN/571

| July 29, 2018

1. Which of the following financial
statements is concerned with the company at a point in time?
income statement
statement of cash
flows
retained earnings
statement
balance sheet
2. A cost which remains constant per
unit at various levels of activity is a:
fixed cost
mixed cost
variable cost
manufacturing cost
3. M&M Proposition 1: Dynamo
Corp. produces annual cash flows of $150 and is expected to exist forever. The
company is currently financed with 75 percent equity and 25 percent debt. Your
analysis tells you that the appropriate discount rates are 10 percent for the
cash flows, and 7 percent for the debt. You currently own 10 percent of the
stock.
If Dynamo wishes to change its
capital structure from 75 percent equity to 60 percent equity and use the debt
proceeds to pay a special dividend to shareholders, how much debt should they
use?
$600
$375
$225
$321
4. Serox stock was selling for $20
two years ago. The stock sold for $25 one year ago, and it is currently selling
for $28. Serox pays a $1.10 dividend per year. What was the rate of
return for owning Serox in the most recent year? (Round to the nearest
percent.)
32%
16%
12%
40%
5. The process of evaluating
financial data that change under alternative courses of action is called:
contribution
margin analysis
cost-benefit
analysis
double entry
analysis
incremental
analysis
6. What decision criteria should
managers use in selecting projects when there is not enough capital to invest
in all available positive NPV projects?
the discounted
payback
the profitability
index
the internal rate
of return
the modified
internal rate of return
7. The convention of consistency
refers to consistent use of accounting principles:
among firms
within industries
throughout the
accounting period
among accounting
periods
8. External financing needed: Jockey
Company has total assets worth $4,417,665. At year-end it will have net income
of $2,771,342 and pay out 60 percent as dividends. If the firm wants no
external financing, what is the growth rate it can support?
27.3%
32.9%
25.1%
30.3%
9. Which of the following is
considered a hybrid organizational form?
limited liability
partnership
partnership
sole
proprietorship
corporation
10. An activity that has a direct
cause-effect relationship with the resources consumed is a(n):
overhead rate
product activity
cost driver
cost pool
11. Next year Jenkins Traders will
pay a dividend of $3.00. It expects to increase its dividend by $0.25 in
each of the following three years. If their required rate of return if 14
percent, what is the present value of their dividends over the next four years?
$11.63
$13.50
$9.72
$12.50
12. TuleTime Comics is considering a
new show that will generate annual cash flows of $100,000 into the infinite
future. If the initial outlay for such a production is $1,500,000 and the
appropriate discount rate is 6 percent for the cash flows, then what is the
profitability index for the project?
1.90
0.90
0.11
1.11
13. Your firm has an equity
multiplier of 2.47. What is the debt-to-equity ratio?
0
1.74
0.60
1.47
14. If a company’s weighted average
cost of capital is less than the required return on equity, then the
firm:
partnership
is perceived to be
safe
is financed with
more than 50% debt
has debt in its
capital structure
15. When a company assigns the costs
of direct materials, direct labor, and both variable and fixed manufacturing
overhead to products, that company is using:
operations costing
variable costing
absorption costing
product costing
16. The major element in budgetary
control is:
the comparison of
actual results with planned objectives.
the valuation of
inventories
the preparation of
long-term plans
the approval of
the budget by the stockholders
17. Horizontal analysis is a
technique for evaluating a series of financial statement data over a period of
time:
to determine which
items are in error.
that has been
arranged from the highest number to the lowest number.
to determine the
amount and/or percentage increase or decrease that has taken place.
that has been
arranged from the lowest number to the highest number.
18. Which of the following is an
advantage of corporations relative to partnerships and sole proprietorships?
lower taxes
most common form
of organization
harder to transfer
ownership
reduced legal
liability for investors
19. The break-even point is where:
contribution
margin equals total fixed costs.
total variable
costs equal total fixed costs.
total sales equal
total variable costs.
total sales equal
total fixed costs.
20. Turnbull Corp. had an EBIT of
$247 million in the last fiscal year. Its depreciation and amortization
expenses amounted to $84 million. The firm has 135 million shares
outstanding and a share price of $12.80. A competing firm that is very similar
to Turnbull has an enterprise value/EBITDA multiple of 5.40.
What is the enterprise value
of Turnbull Corp.? Round to the nearest million dollars.
$1,787 million
$1,344 million
$1,315 million
$453.6 million
21. Which of the following is
considered a hybrid organizational form?
partnership
limited liability
partnership
corporation
sole
proprietorship
22. The most important information
needed to determine if companies can pay their current obligations is the:
projected net
income for next year
relationship
between short-term and long-term liabilities
relationship
between current assets and current liabilities
net income for
this year
23. Gateway, Corp. has an
inventory turnover of 5.6. What is the firm’s days’s sales in inventory?
61.7
57.9
65.2
64.3
24. Horizontal analysis is also known
as:
vertical analysis
linear analysis
trend analysis
common size
analysis
25. Which of the following presents
a summary of changes in a firm’s balance sheet from the beginning of an
accounting period to the end of that accounting period?
the statement of
net worth
the statement of
working capital
the statement of
cash flows
the statement of
retained earnings
26. Ajax Corp. is expecting
the following cash flows – $79,000, $112,000, $164,000, $84,000, and $242,000 –
over the next five years. If the company’s opportunity cost is 15
percent, what is the present value of these cash flows? (Round to the nearest
dollar.)
$477,235
$429,560
$414,322
$480,906

27. Bond price:Regatta,
Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors
buying the bond today can expect to earn a yield to maturity of 6.875
percent. What should the company’s bonds be priced at today? Assume annual
coupon payments. (Round to the nearest dollar.)

$972
$1,066
$1,014
$923
28. Process costing is used when:
dissimilar
products are involved
production is
aimed at fulfilling a specific customer order.
the production
process is continuous.
costs are to be
assigned to specific jobs.
29. Jack Robbins is saving for a new
car. He needs to have $21,000 for the car in three years. How much will he have
to invest today in an account paying 8 percent annually to achieve his target?
(Round to nearest dollar)
$22,680
$26,454
$19,444
$16,670
30. The accumulation of accounting
data on the basis of the individual manager who has the authority to make
day-to-day decisions about activities in an area is called:
flexible
accounting
static reporting
master budgeting
responsibility
accounting
31. Variance reports are:
SEC financial
reports
internal reports
for management
external financial
reports
all of these
32. The cash conversion cycle?
shows how long the
firm keeps its inventory before selling it.
estimates how long
it takes on average for the firm to collect its outstanding accounts
receivables balance.
begins when the firm
uses its cash to purchase raw materials and ends when the firm collects cash
payments on its credit sales.
begins when the
firm invests cash to purchase the raw materials that would be used to produce
the goods that the firm manufactures.
33. In a process cost system,
product costs are summarized:
when the products
are sold.
on job cost
sheets.
on production cost
reports.
after each unit is
produced.
34. Internal reports that review the
actual impact of decisions are prepared by:
the controller
department heads
factory workers
management
accountants
35. How firms estimate their cost of
capital: The WACC for a firm is 13.00 percent. You know that the firm’s cost of
debt capital is 10 percent and the cost of equity capital is 20% What
proportion of the firm is financed with debt?
70%
50%
30%
33%
36. The group of users of accounting
information charged with achieving the goals of the business is its:
auditors
investors
managers
creditors
37. An unrealistic budget is more
likely to result when it:
has been developed
in a bottom up fashion.
has been developed
by all levels of management.
is developed with
performance appraisal usages in mind.
has been developed
in a top down fashion.
38. Jayadev Athreya has started his
first job. He will invest $5,000 at the end of each year for the next 45 years
in a fund that will earn a return of 10 percent. How much will Jayadev
have at the end of 45 years?
$3,594,524
$2,667,904
$1,745,600
$5,233,442
39. Firms that achieve higher growth
rates without seeking external financing:
Have a low
plowback ratio
are highly
leveraged
have less equity
and/or are able to generate high net income leading to a high ROE.
None of these
40. Teakap, Inc. has current assets
of $1,456,312 and total assets of $4,812,369 for the year ending September 30,
2006. It also has current liabilities of $1,041,012, common equity of
$1,500,000 and retained earnings of $1,468,347. How much long-term debt does
the firm have?
$803,010
$1,844,022
$2,123,612
$2,303,010

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