1.) A Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. The yield to maturity is 5 percent. Interest is paid twice per year. How much would the bond sell for?

A) $982.21

B) $1,746

C) $1,099

D) $1,290

2.) Which of the following statements is correct about a company’s balance sheet?

A) It displays sources and uses of cash for the period.

B) It is an expansion of the basic accounting equation: Assets = Liabilities + Owners’ Equity.

C) It provides a detailed list of revenues and expenses including income tax for a given period.

D) It is unnecessary if both an income statement and statement of cash flows are available.

3.) What would be the required return on an asset that had a beta of 1.25 when the expected return on the market portfolio is 12% and the riskless return is 8%?

A) 12.5%

B) 13.0%

C) 13.5%

D) 13.75

4.) A prospective employee might want to review the financial statement of a prospective employer before interviewing for a job.

A) True

B) False

5.) The current dividend for Hawham Tool and Die is $6.70 and is growing at 6% annually. If the required return is 12%, what is the value of one share of stock?

A) $56

B) $118

C) $60

D) $36

6.) The cash flow for a company must match the net income figure for any given accounting period.

A) True

B) False

7.) The Behavioral Principle states that ——???

8.) Capital Stock refers to high quality beef based soup.

A) True

B) False

9.) If an individual's cost of capital were 10%, he/she would prefer to receive $107 at the end of one year rather than $100 right now.

A) True

B) False

10.) _____ says not to act unethically to gain short-term profit at the expense of a supplier or a customer, because such behavior can damage or even destroy a profitable long-term relationship.

A) The Signaling Principle

B) The Self-Interest Principle

C) The Principle of Two-Sided Transactions

D) The Principle of Comparative Advantage

11.) State Street Corp. will pay a dividend on common stock of $4.80 per share at the end of the year. The required return on common stock (Ke) is 13.2%. The firm has a constant growth rate of 7.2%. The current price of the stock (Po) is $36.36.

A) True

B) False

12.) The current dividend for IBM is $2.40 and is growing at 5% annually. If the required return is 13%, what is the value of one share of stock?

A) $2.52

B) $12.00

C) $31.50

D) $91.70

13.) The general rule for using the weighted average cost of capital (WACC) in capital budgeting decisions is to accept all projects with rates of return greater than or equal to the WACC.

A) True

B) False

14.) You are evaluating a proposed project. You find that the DCF-NPV is −$50,000. However, by investing today, you think you might have a future growth option to expand, but it would cost you an additional $100,000—in today’s dollars—to have this option. If this future opportunity occurs, you estimate the present value of this option will be $500,000. However, there's only a 60% chance of this occurring. Does the growth option make investment in the proposed project a positive NPV?

A) Yes, the NPV is $50,000.

B) Yes, the NPV is $100,000.

C) Yes, the NPV is $125,000.

D) Yes, the NPV is $150,000.

15.) Most debt issuers select a coupon rate that will make the bonds

A) less than par

B) worth par

16.) An heir will receive $175,000 in 50 years from an estate. If the funds are discounted back at a rate of 14 percent, the present value of this gift is $101,376.

A) True

B) False

17.) A $1,000 face value bond has a remaining maturity of 8 years and a required return of 6%. The bond’s coupon rate is 3.2%. What is the fair value of this bond?

A) $1,000

B) $961.11

C) $422.19

D) $1,122.19

18.) Which of the following assets might pay a dividend?

A) A share of preferred stock

B) A corporate bond

C) A municipal bond

D) A U.S. Treasury security

19.) A company's Net Cash Flow from Operations must be reported quarterly on the Income Statement and is a component of the stock PE ratio.

A) True

B) False

20.) A firm has 60 million shares outstanding, had Net Income of $450 million and a payout ratio of 20%. Its shares ending market price was $37.50 as of 12/31/20xx. The dividend for the year would likely be:

A) $2.75 per share

B) $0.90 per share

C) $1.50 per share

D) $10.00 per share