Financial literacy

1. Why is working capital one of the most important activities of a financial ma

1. Why is working capital one of the most important activities of a financial manager? What is the net working capital? 2.tryst Enrgy inc. Has an averagenof inventory of 65 days, …

1. Why might a firm want to use an interest rate swap? 2. What is basis risk? Ex

1. Why might a firm want to use an interest rate swap? 2. What is basis risk? Explain it as it relates to a currency swap 3. The Bank of Tennessee has negotiated a plain vanilla s…

1. Willow Brook National Bank operates a drive-up teller window that allows cust

1. Willow Brook National Bank operates a drive-up teller window that allows customers to complete bank transactions without getting out of their cars. On weekday mornings, arrival…

1. Wilson’s Market is reviewing a project with sales of 6,200 units plus or minu

1. Wilson’s Market is reviewing a project with sales of 6,200 units plus or minus 2 percent at a sales price of $29 plus or minus 1 percent per unit. The expected variable cost pe…

1. Winnebagel Corp. currently sells 45,000 motor homes per year at $67,500 each,

1. Winnebagel Corp. currently sells 45,000 motor homes per year at $67,500 each, and 18,000 luxury motor coaches per year at $127,500 each. The company wants to introduce a new po…

1. With a full capacity, the need of additional funds of a firm is reduced by a)

1. With a full capacity, the need of additional funds of a firm is reduced by a) Spontaneous growth of current liabilities b) Spontaneous growth of current assets c) A sharp incre…

1. With reference to the preparation of a family\'s statement of financial posit

1. With reference to the preparation of a family's statement of financial position, all the following statements concerning assets are correct, EXCEPT: Answers:       A. "Use asse…

1. With regard to corporate goals, an MNC is mostly concermed with maximizingand

1. With regard to corporate goals, an MNC is mostly concermed with maximizingand a purely domestic firm is mostly concerned with maximizing shareholder wealth; short-term earnings…

1. Working Capital Management. Indicate howeach of the following six different t

1. Working Capital Management. Indicate howeach of the following six different transactions that acompany might make would affect (i) cash and (ii) net workingcapital: a. Paying o…

1. XYZ company is undergoing a major expansion. The expansion will be financed b

1. XYZ company is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 …

1. XYZ is interested in buying a new machine which is expected to cost $85,000.

1. XYZ is interested in buying a new machine which is expected to cost $85,000. In addition, the company will pay $15,000 in shipping and $5,000 in installation costs. The MACRS c…

1. Xavier Publishing is thinking of purchasing a new printing and binding machin

1. Xavier Publishing is thinking of purchasing a new printing and binding machine. The machine will cost $120,000, plus $7,500 to ship and install the equipment. The new machine w…

1. Year-to-date, Oracle had earned a 1.42 percent return. During the same time p

1. Year-to-date, Oracle had earned a 1.42 percent return. During the same time period, Valero Energy earned 7.74 percent and McDonald's earned 0.48 percent. The table below shows …

1. You are a bank examiner and you need to determine the 100-day Value at Risk f

1. You are a bank examiner and you need to determine the 100-day Value at Risk for a bank with a 99% confidence level (i.e. the lowest 1% of distribution of daily changes). You di…

1. You are a consultant to Pillbriar Company. Pillbriar’s target capital structu

1. You are a consultant to Pillbriar Company. Pillbriar’s target capital structure is 36% debt, 14% preferred, and 50% common equity. The interest rate on new debt is 7.8%, the yi…

1. You are a partner of Private Equity Firm, Lion LLC (Acquiring firm) and you h

1.     You are a partner of Private Equity Firm, Lion LLC (Acquiring firm) and you have the following information for the acquisition of the firm, ABC Corp (target firm), which is…

1. You are a sugar dealer anticipating the purchase of 250,000 pounds of sugar i

1.      You are a sugar dealer anticipating the purchase of 250,000 pounds of sugar in three months. You are concerned that the price of sugar will rise, so you take a long positi…

1. You are an agent who wishes to sell a $1 million life insurance policy. Your

1. You are an agent who wishes to sell a $1 million life insurance policy. Your client thinks she can’t afford a policy that large, so to reduce the price you tell her you will gi…

1. You are an instituational money manager looking to add some Ginnie Mae MBS to

1. You are an instituational money manager looking to add some Ginnie Mae MBS to your portfolio. Consider the following statement statement made to you by a salesperson from broke…

1. You are analyzing the operating cash flow for a proposed project. The equipme

1. You are analyzing the operating cash flow for a proposed project. The equipment has a depreciable life of 6 years; the proposed project life is 8 years. All revenue and operati…

1. You are borrowing $5,510 to buy a car. The terms of the loan call for monthly

1. You are borrowing $5,510 to buy a car. The terms of the loan call for monthly payments for 4 years at a 4.50 percent interest. What is the amount of each payment? 2. You are sc…

1. You are borrowing $5,750 to buy a car. The terms of the loan call for monthly

1. You are borrowing $5,750 to buy a car. The terms of the loan call for monthly payments for 3 years at a 4.50 percent interest compounded monthly. What is the amount of each pay…

1. You are bullish on a particular security and have $500 to invest. The stock i

1. You are bullish on a particular security and have $500 to invest. The stock is trading for $100. Call options with a strike price of $100 are trading for $1.00. You decide to i…

1. You are called in as a financial analyst to appraise the bonds of Olsen’s Clo

1. You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 9 percent, which is …

1. You are choosing between two investments. The first requires an initial inves

1. You are choosing between two investments. The first requires an initial investment of $1000, and pays dividends of $250 starting at the end of the first year and continuing for…

1. You are closing the purchase of a new home and your closing costs, including

1. You are closing the purchase of a new home and your closing costs, including down payment, are $30 500. What form of payment would the lawyer require? Select one: a. Personal c…

1. You are comparing three investments, all of which pay $100 a month and have a

1. You are comparing three investments, all of which pay $100 a month and have an 8 percent interest rate. One is ordinary annuity, one is an annuity due, and the third investment…

1. You are comparing three investments, all of which pay $100 a month and have a

1. You are comparing three investments, all of which pay $100 a month and have an 8 percent interest rate. One is ordinary annuity, one is an annuity due, and the third investment…

1. You are considering an investment in Crisp\'s Cookware\'s common stock. The s

1. You are considering an investment in Crisp's Cookware's common stock. The stock is expected to pay a dividend of $1.5 a share at the end of the year (D1 = $1.50); its beta is 0…

1. You are considering an investment that will have the following cash flows: $5

1. You are considering an investment that will have the following cash flows: $54,000, $66,000, $(60,000), $57,000, and $120,000. The appropriate discount rate is 11 percent. What…

1. You are considering buying shares of stock in the Steel Mill. The forecast fo

1. You are considering buying shares of stock in the Steel Mill. The forecast for the firm is steady growth over the next decade. The firm just paid its annual dividend of $1.42 p…

1. You are considering investing in a high-end retail store located on South Bea

1. You are considering investing in a high-end retail store located on South Beach. The store has a 10-year lease, which implies that it will remain in business for the next 10 ye…

1. You are considering investing in the bonds issued by ABC Corporation. They ha

1. You are considering investing in the bonds issued by ABC Corporation. They have a coupon rate of 6% and a maturity date of March 21, 2046. ABC Corp is an industrial firm and th…

1. You are considering the following two mutually exclusive projects. The requir

1. You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project shoul…

1. You are constructing a portfolio of two assets, Asset A and Asset B. The expe

1. You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 13 percent and 16 percent, respectively. The standard deviations of …

1. You are constructing a portfolio of two assets, Asset A and Asset B. The expe

1. You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 13 percent and 16 percent, respectively. The standard deviations of …

1. You are creating a $25,000 stock portfolio with two component investments: St

1. You are creating a $25,000 stock portfolio with two component investments: Stock X which has a 12% expected return; and Stock Y which has expected return of 9.2%. If the goal i…

1. You are employed in the Finance Division of a firm that has 418,575,000 share

1. You are employed in the Finance Division of a firm that has 418,575,000 shares outstanding. The current share price is $43.76. The forecast earnings are $1,578,570,000. Calcula…

1. You are evaluating the attractiveness of Johnson Manufacturing Corporation Co

1.     You are evaluating the attractiveness of Johnson Manufacturing Corporation Common Stock. Using the Capital Asset Pricing Model, calculate the required return on the stock b…

1. You are evaluating the balance sheet for Goodman\'s Bees Corporation. From th

1. You are evaluating the balance sheet for Goodman's Bees Corporation. From the balance sheet you find the following balances: cash and marketable securities = $500,000, accounts…

1. You are evaluating the balance sheet for Goodman\'s Bees Corporation. From th

1. You are evaluating the balance sheet for Goodman's Bees Corporation. From the balance sheet you find the following balances: cash and marketable securities = $310,000, accounts…

1. You are evaluating two different silicon wafer milling machines. The Techron

1. You are evaluating two different silicon wafer milling machines. The Techron I costs $246,000, has a three-year life, and has pretax operating costs of $65,000 per year. The Te…

1. You are given the following information about two stocks, the market index an

1. You are given the following information about two stocks, the market index and the risk free rate. The forecasted returns are based on your own research and are not the expecte…

1. You are given the following information concerning the share price and return

1. You are given the following information concerning the share price and returns for Cubic Technologies Ltd Day Share Return Day Share Return Price 230 250 232 241 247 260 Price …

1. You are given the following information for Magnatron Corp.: Increase in inve

1. You are given the following information for Magnatron Corp.: Increase in inventory $380 Increase in accounts payable $255 Decrease in notes payable $100 Increase in accounts re…

1. You are given the following probability distribution of returns for stock J:

1. You are given the following probability distribution of returns for stock J: A probability of .2 that the return will be 12%; a probability of .35 that the return will be 18%; …

1. You are looking at a one-year loan of $15,500. The interest rate on a one-yea

1. You are looking at a one-year loan of $15,500. The interest rate on a one-year loan is quoted as 11.8 percent plus three points. What is the EAR? (Round your answer to 2 decima…

1. You are looking at a stock priced at $30 per share that you expect to increas

1. You are looking at a stock priced at $30 per share that you expect to increase in value over the next year. A call option on this stock with exercise price = $35 and a maturity…

1. You are negotiating for the terms of a legal settlement, and your opponent’s

1. You are negotiating for the terms of a legal settlement, and your opponent’s attorney has presented you with the following alternative settlement alternatives: a. $38,000 today…

1. You are operating an old machine that is expected to produce a cash inflow of

1. You are operating an old machine that is expected to produce a cash inflow of $5,000 in each of the next 3 years before it fails. You can replace it now with a new machine that…