1) Which of the statements below is? FALSE?
A. Project A has a higher y?axis intercept for its NPV profilethan mutually exclusive Project B. As long as the profile ofProject A is above the profile of Project? B, Project A will have ahigher NPV value for that particular discount rate.
B. Project A has a higher y?axis intercept for its NPV profilethan mutually exclusive Project B. As we proceed past the crossoverrate to the right on the x??axis, Project? B's profile will beabove Project? A's profile.
C.Project A has a higher y?axis intercept for its NPV profilethan mutually exclusive Project B. This means that Project A has alower NPV than Project B when the discount rate is zero.
D. Project A and Project B are mutually exclusive. The twoprojects intersect in terms of NPV at a discount rate labeled thecrossover rate
2) One method a company may use to handle a cash shortfall is todraw cash from savings.
A) True
B) False
3) Harris Electronics bills its clients on the first of themonth. For? example, any sale made in the month of July is billedAugust 1 and is due September 1. Clients traditionally pay as?follows: 50% by the end of the first month? August), 40% by the endof the second month? (September), 8% by the end of the third month?(October), and? 2% default on their bills. What is the dollar valueof January billings collected in? April?
First Quarter Sales -Jan $88,000 Feb $74,000 March $96,000
Second Quarter Sales - April $99,000 May $82,000 June$63,000
A. $29,600
B.$0.00
C.$7,040
D.?$5,920
4) In terms of the? float, the buyer of a product wants to?________ and the seller wants to? ________.
A. increase the collection? float; decrease the disbursementfloat
B. increase the disbursement? float; decrease the collectionfloat
C. decrease the collection? float; decrease the disbursementfloat
D. decrease the disbursement? float; decrease the collectionfloat
5) Pacific Automotive has a? $250,000 compensating balance loanwith its bank. The terms of the loan call for Pacific to keep? 10%of the loan as a compensating balance and pay interest at an annualrate of? 6.50% on the entire amount. If the firm borrows themaximum amount for one? year, what is the EAR on this? loan?
A. ?6.50%
B. ?7.39%
C. ?7.22%
D. 6.87%
6) Bestor Bookkeeping has a? $150,000 compensating balance loanwith its bank. The terms of the loan call for Bestor to keep? 8% ofthe loan as a compensating balance and pay interest at an annualrate of? 7.50% on the entire amount. If the firm borrows themaximum amount for one? year, what is the EAR on this? loan?
A. ?8.15%
B. ?7.50%
C. ?8.67%
D. 8.35%
7) New York Investments? (NYI), an investment banking? firm, hasproposed two types of payment plans for the IPO being considered byAlbany Exploration. The first is a firm commitment of? $40,000,000.The second is a best efforts arrangement in which NYI will receive?$2.00 for every share sold up to a maximum of? $3,600,000 for the?1,800,000 shares being offered. How much money will NYI earn underthe firm commitment method if it is able to sell only? 95% of theoffering at a price of? $25.00 per? share?
a) $800,000
b) $1,080,000
c) $2,750,000
d) $2,200,000
7) Pacific Motors Inc. plans to issue? $3,000,000 of commercialpaper with a
6?month maturity at? 98% of par value. What is the? EAR?
A.?4.08%
B.?4.12%
C.?4.00%
D.2.00%
8) ?Often, in? bankruptcy, the current managers continue to runthe business while it operates under the reorganization? plan, butthe court may also appoint a trustee to oversee the operations andprotect the rights of the claimants during this period of time.
True
False
