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1、Go over the problems below, provide an answer, bring your questions to class. (A list of answers is provided on the last page, for you to check your work once you are finished.)Exam #1Multiple ChoiceThe following questions are worth 3 points each. Provide the single best response._1.Which of the fol
2、lowing statements is most correct?a.One of the advantages of the corporate form of organization is that there is no double taxation.b.The partnership form of organization has easy transferability of ownership.c.One of the disadvantages of the sole proprietorship form of organization is that there is
3、 unlimited liability.d.Statements b and c are correct.e.None of the statements above is correct._2.Which of the following statements is most correct?a.One advantage of forming a corporation is that you have limited liability.b.Corporations face fewer regulations than sole proprietorships.c.One disad
4、vantage of being a sole proprietor is that you have to pay corporate taxes, even though you dont realize the benefits of being a corporation.d.Statements b and c are correct.e.None of the statements above is correct._3.Which of the following could explain why a business might choose to organize as a
5、 corporation rather than as a sole proprietorship or a partnership?a.Corporations generally face fewer regulations.b.Corporations generally face lower taxes.c.Corporations generally find it easier to raise capital.d.Corporations enjoy unlimited liability.e.Statements c and d are correct._4.The prima
6、ry goal of a publicly-owned firm interested in serving its stockholders should be toa.Maximize expected total corporate profit.b.Maximize expected EPS.c.Minimize the chances of losses.d.Maximize the stock price per share.e.Maximize expected net income._5.Which of the following statements is most cor
7、rect?a.A good goal for a corporate manager is maximization of expected EPS.b.Most business in the U.S. is conducted by corporations; corporations popularity results primarily from their favorable tax treatment.c.A good example of an agency relationship is the one between stockholders and managers.d.
8、Corporations and partnerships have an advantage over proprietorships because a sole proprietor is subject to unlimited liability, but investors in the other types of businesses are not.e.Firms in highly competitive industries find it easier to exercise social responsibility than do firms in oligopol
9、istic industries._6.Which of the following statements is most correct?a.A hostile takeover is the main method of transferring ownership interest in a corporation.b.The corporation is a legal entity created by the state and is a direct extension of the legal status of its owners and managers, that is
10、, the owners and managers are the corporation.c.Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.d.In part due to limited liability and ease of ownership transfer, corporations have less trouble raising money in financial mar
11、kets than other organizational forms.e.Although stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firms managers in the same way._7.Last year Aldrin Co. had negative net cash flow, yet its cash on the balance sheet incr
12、eased. What could explain these events?a.Aldrin issued long-term debt.b.Aldrin repurchased some of its common stock.c.Aldrin sold some of its assets.d.Statements a and b are correct.e.Statements a and c are correct._8.Analysts who follow Sierra Nevada Inc. recently noted that, relative to the previo
13、us year, the companys net cash flow was larger but cash on the firms balance sheet had declined. What factors could explain these changes?a.The company sold a division and received cash in return.b.The company cut its dividend.c.The company made a large investment in new plant and equipment.d.Statem
14、ents a and b are correct.e.Statements b and c are correct._9.Which of the following items is included as part of a companys current assets?a.Accounts payable.b.Inventory.c.Accounts receivable.d.Statements b and c are correct.e.All of the statements above are correct._10.A start-up firm is making an
15、initial investment in new plant and equipment. Currently, equipment is depreciated on a straight-line basis over 10 years. Assume that Congress is considering legislation that will allow the corporation to depreciate the equipment over 7 years. If the legislation becomes law, and the firm implements
16、 the 7-year depreciation basis, which of the following will occur?a.The firms tax payments will increase.b.The firms net income will increase.c.The firms taxable income will increase.d.The firms net cash flow will increase.e.The firms operating income (EBIT) will increase._11.Byrd Lumber has 2 milli
17、on shares of common stock outstanding and its stock price is $15 a share. On the balance sheet, the company has $40 million of common equity. What is the companys Market Value Added (MVA)?a.-$80,000,000b.-$20,000,000c.-$10,000,000d.$20,000,000e.$80,000,000_12.Whitehall Clothiers had $5,000,000 of re
18、tained earnings on its balance sheet at the end of 2001. One year later, Whitehall had $6,000,000 of retained earnings on its balance sheet. Whitehall has one million shares of common stock outstanding, and it paid a dividend of $0.80 per share in 2002. What was Whitehalls earnings per share in 2002
19、?a.$0.80b.$1.00c.$1.80d.$5.00e.$6.00_13.All else being equal, which of the following will increase a companys current ratio?a.An increase in accounts receivable.b.An increase in accounts payable.c.An increase in net fixed assets.d.Statements a and b are correct.e.All of the statements above are corr
20、ect._14.Which of the following alternatives could potentially result in a net increase in a companys cash flow for the current year?a.Reduce the days sales outstanding ratio.b.Increase the number of years over which fixed assets are depreciated.c.Decrease the accounts payable balance.d.Statements a
21、and b are correct.e.All of the statements above are correct._15.Company J and Company K each recently reported the same earnings per share (EPS). Company Js stock, however, trades at a higher price. Which of the following statements is most correct?a.Company J must have a higher P/E ratio.b.Company
22、J must have a higher market to book ratio.c.Company J must be riskier.d.Company J must have fewer growth opportunities.e.All of the statements above are correct._16.You are given the following information: Stockholders equity = $1,250; price/earnings ratio = 5; shares outstanding = 25; and market/bo
23、ok ratio = 1.5. Calculate the market price of a share of the companys stock.a.$ 33.33b.$ 75.00c.$ 10.00d.$166.67e.$133.32_17.The Wilson Corporation has the following relationships:Sales/Total assets2.0Return on assets (ROA)4.0%Return on equity (ROE)6.0%What is Wilsons profit margin and debt ratio?a.
24、2%; 0.33b.4%; 0.33c.4%; 0.67d.2%; 0.67e.4%; 0.50_18.Cleveland Corporation has 100,000 shares of common stock outstanding, its net income is $750,000, and its P/E is 8. What is the companys stock price?a.$20.00b.$30.00c.$40.00d.$50.00e.$60.00_19.Which of the following statements is most correct?a.The
25、 NYSE does not exist as a physical location; rather it represents a loose collection of dealers who trade stock electronically.b.An example of a primary market transaction is buying 100 shares of Wal-Mart stock from your uncle.c.Capital market instruments include long-term debt and common stock.d.St
26、atements b and c are correct.e.Statements a, b, and c are correct._20.What is the future value of a 5-year ordinary annuity with annual payments of $200, evaluated at a 15 percent interest rate?a.$ 670.44b.$ 842.91c.$1,169.56d.$1,522.64e.$1,348.48_21.What is the present value of a 5-year ordinary an
27、nuity with annual payments of $200, evaluated at a 15 percent interest rate?a.$ 670.43b.$ 842.91c.$1,169.56d.$1,348.48e.$1,522.64_22.You have the opportunity to buy a perpetuity that pays $1,000 annually. Your required rate of return on this investment is 15 percent. You should be essentially indiff
28、erent to buying or not buying the investment if it were offered at a price ofa.$5,000.00b.$6,000.00c.$6,666.67d.$7,500.00e.$8,728.50_23.In 1958 the average tuition for one year at an Ivy League school was $1,800. Thirty years later, in 1988, the average cost was $13,700. What was the growth rate in
29、tuition over the 30-year period?a.12%b. 9%c. 6%d. 7%e. 8%_24.You have just taken out an installment loan for $100,000. Assume that the loan will be repaid in 12 equal monthly installments of $9,456 and that the first payment will be due one month from today. How much of your third monthly payment wi
30、ll go toward the repayment of principal?a.$7,757.16b.$6,359.12c.$7,212.50d.$7,925.88e.$8,333.33MortgageA 30-year, $115,000 mortgage has a nominal annual rate of 7 percent. All payments are made at the end of each month._25.Refer to Mortgage. What is the monthly payment on the mortgage?a.$760.66b.$76
31、5.10c.$772.29d.$774.10e.$776.89_26.Refer to Mortgage. What is the remaining balance on the mortgage after 5 years?a.$106,545.45b.$106,919.83c.$107,623.52d.$107,988.84e.$108,251.33Exam #1Answer SectionMULTIPLE CHOICE1.C2.A3.C4.D5.C6.D7.E8.C9.D10.D11.C12.C13.A14.A15.A16.B17.A18.E19.C20.E21.A22.C23.D24.A25.B26.E