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1. This year Baldwin achieved an ROE of 28.5%. Suppose management takes measures that decrease Asset turnover (Sales/Total Assets) next year. Assuming Sales, Profits, and financial leverage remain the same, what effect would you expect this action to have on Baldwin's ROE?

A. Baldwin ROE will decrease

B. Baldwin ROE will increase

C. Baldwin ROE will remain the same

2. On the income statement, which of the following would be classified as a variable cost?

A. R&D Expense

B. Depreciation Expense

C. Promotion Expense

D. Inventory Carry Expense

3. Next year Baldwin plans to include an additional performance bonus of 0.25% in its compensation plan. This incentive will be provided in addition to the annual raise, if productivity goals are reached. Assuming the goals are reached, how much will Baldwin pay its employees per hour?

A. $31.04

B. $28.15

C. $28.22

D. $29.63

4. Suppose the Baldwin company expands to other markets with good designs, high awareness and easy accessibility, what strategy would they be implementing?

A. Broad cost leader

B. Niche cost leader

C. Broad differentiation

D. Niche differentiation

5. Andrews Corp. ended the year carrying $59,632,000 worth of inventory. Had they sold their entire inventory at their current prices, how much more revenue would it have brought to Andrews Corp.?

A. $129,237,430

B. $17,650,000

C. $59,632,000

D. $97,171,000

6. The Digby's workforce complement will grow by 10% (rounded to the nearest person) next year. Ignoring downsizing from automating, what would their total recruiting cost be? Assume Digby spends the same amount extra above the $1,000 recruiting base as they did last year.

A. $342,000

B. $285,000

C. $3,135,000

D. $3,762,000

7. It is January 2nd. Senior management of Digby meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFO happily notes this will raise their Leverage (=assets/equity) to a new target of 2.7. Assume the stock can be issued at yesterdays stock price ($45.61). Which of the following statements are true? Check all that apply.

A. the Digby bond issue will be $3,876,850

B. Long term debt will increase from $84,505,740 to $86,786,240

C. Digby will issue stock totaling $2,280,500

D. Total investment for Digby will be $6,157,350

The Digby Working Capital will be unchanged at $19,446

Total Assets will rise to $240,644,000

8. The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwins accounts payable goes down:

A. It is a source of cash and will be shown in the financing section as an addition.

B. It is a source of cash, and will be shown in the operating section as an addition.

C. It is a use of cash, and will be shown in the financing section as a subtraction.

D. It is a use of cash, and will be shown in the operating section as a subtraction.

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