|MC Qu. 49 Which of the following would correctly…Which of the following would correctly differentiate general partners from limited partners in a limited partnership? General partners have unlimited personal liability. General partners have more job experience. General partners are subject to double taxation. General partners have an ownership interest.||issuing stock to repay debt. MC Qu. 53 Which of the following is not an advantage…Which of the following is not an advantage to incorporating a business? MC Qu. 54 Unlimited liability is faced by the owners…Unlimited liability is faced by the owners of: MC Qu. 63 A common problem for closely held…A common problem for closely held corporations is: MC Qu. 64 Which of the firm s financial managers…Which of the firm’s financial managers is most likely to be involved with obtaining financing for the firm? TF Qu. 12 The stocks of major corporations trade in…The stocks of major corporations trade in many markets throughout the world on a continuous or near-continuous basis. TF Qu. 15 The key to the banks ability…The key to the banks’ ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors. TF Qu. 21 Financial markets and intermediaries allow…Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk. TF Qu. 23 The rates of return on investments outside…The rates of return on investments outside the corporation set the minimum return for investment projects inside the corporation. TF Qu. 29 The effects of the financial crisis of…The effects of the financial crisis of 2007-2009 were confined to the U.S. and domestic companies. MC Qu. 33 Reinvestment means:”Reinvestment” means: additional investment in existing operations. new investment by new shareholders. new investment in new operations. additional investment by existing shareholders. MC Qu. 61 Long-term financing decisions commonly…Long-term financing decisions commonly occur in the: MC Qu. 66 In 2010, U.S. corporate and foreign bonds…In 2010, U.S. corporate and foreign bonds totaled: MC Qu. 67 In 2010, U.S. corporate equities totaled:In 2010, U.S. corporate equities totaled: MC Qu. 71 Which of the following is least liquid?Which of the following is least liquid? MC Qu. 78 Who was responsible for the financial…Who was responsible for the financial crisis of 2007-2009? MC Qu. 50 Which of the following statements is true…Which of the following statements is true for a corporation with $1 million market value of equity, $2 million market value of assets, and 1,000 shares of outstanding stock? MC Qu. 57 Accrual accounting, which attempts to match…Accrual accounting, which attempts to match sales revenues and the expenses associated with the production of the goods, is conducted in an attempt to: MC Qu. 71 Which of the following is more likely to…Which of the following is more likely to be correct if market value of equity is less than book value of equity? MC Qu. 78 An increase in depreciation expense will…An increase in depreciation expense will (other things equal): MC Qu. 94 For a corporation in the 25% marginal tax…For a corporation in the 25% marginal tax bracket that incurs $70.00 in labor and materials expense, plus $15.00 in depreciation expense while generating an incremental revenue of $100.00, tax liability will increase by: MC Qu. 100 What is the marginal impact on taxes for a…What is the marginal impact on taxes for a profitable corporation in the 35% marginal tax bracket that incurs an additional dollar of depreciation expense? TF Qu. 8 ROE is equal to ROA when the firm has no…ROE is equal to ROA when the firm has no debt. MC Qu. 33 Which of the following statements is…Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT? The firm: MC Qu. 35 If ROC is less than a firm s cost…If ROC is less than a firm’s cost of capital, which of the following must be true? MC Qu. 54 How would you interpret an inventory…How would you interpret an inventory turnover ratio of 10.7? MC Qu. 75 An example of liquid assets would be:An example of liquid assets would be: MC Qu. 93 Net Corp. has an ROE of…Net Corp. has an ROE of 30% and would like to see earnings grow at a 18% annual rate. What percentage of earnings can it afford to pay out as dividends? Problem 3-14 Market versus Book Values (LO2)The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $3,300,000 in setting up a production plant. He believes that he could sell his patent for $75 million.|
a.What are the book value and market value of the firm? (Enter your answers in dollars not in millions.)b.If there are 3 million shares of stock in the new corporation, what would be the price per share and the book value per share? (Round your answers to 2 decimal places.) Problem 3-18 Profits versus Cash Flow (LO3)During the last year of operations, accounts receivable increased by $10,900, accounts payable increased by $5,900, and inventories decreased by $2,900. What is the total impact of these changes on the difference between profits and cash flow? (Input the amount as a positive value.) Problems 3-27 Earnings per Share (LO1)The table below contains data on Fincorp, Inc., the balance sheet items correspond to values at year-end of 2010 and 2011, while the income statement items correspond to revenues or expenses during the year ending in either 2010 or 2011. All values are in thousands of dollars.
20102011 Revenue$4,200 $4,300 Cost of goods sold1,700 1,800 Depreciation520 540 Inventories310 370 Administrative expenses520 570 Interest expense170 170 Federal and state taxes*420 440 Accounts payable310 370 Accounts receivable412 470 Net fixed assets†5,200 6,020 Long-term debt2,200 2,600 Notes payable1,010 620 Dividends paid450 450 Cash and marketable securities820 320
* Taxes are paid in their entirety in the year that the tax obligation is incurred.† Net fixed assets are fixed assets net of accumulated depreciation since the asset was installed.
Suppose that Fincorp has 500,000 shares outstanding. What were earnings per share? (Round your answers to 2 decimal places.) Problem 4-3 EVA (LO2)Here are simplified financial statements of Phone Corporation from a recent year:
(Figures in millions of dollars) Net sales12,700 Cost of goods sold3,810 Other expenses4,112 Depreciation2,368 Earnings before interest and taxes (EBIT)2,410 Interest expense660 Income before tax1,750 Taxes (at 30%)525 Net income1,225 Dividends826
(Figures in millions of dollars) End of YearStart of Year Assets Cash and marketable securities84 153 Receivables2,132 2,390 Inventories162 213 Other current assets842 907 Total current assets3,220 3,663 Net property, plant, and equipment19,923 19,865 Other long-term assets4,166 3,720 Total assets27,309 27,248 Liabilities and shareholders’ equity Payables2,514 2,990 Short-term debt1,394 1,548 Other current liabilities786 762 Total current liabilities4,694 5,300 Long-term debt and leases8,263 7,728 Other long-term liabilities6,128 6,099 Shareholders’ equity8,224 8,121 Total liabilities and shareholders’ equity27,309 27,248
Phone Corp.’s cost of capital was 7.8%.
What was Phone Corp.’s economic value added?(Enter your answer in millions rounded to 2 decimal places.) Problem 4-6 Sustainable Growth (LO5)Consider the following information:
Chili’sBagwell Company Return on equity (ROE)15.70% 10.60% Plowback ratio0.50 0.85 Sustainable growth7.20% 8.40%
a.What would the sustainable growth rate be if Davis Chili’s plowback ratio rose to the same value as Bagwell Company? (Round your answer to 2 decimal places.)
b.What would the sustainable growth rate be if Davis Chili’s return on equity were only 14.7%? (Round your answer to 2 decimal places.) Problem 4-23 Times Interest Earned (LO3)In the past year, TVG had revenues of $2.96 million, cost of goods sold of $2.46 million, and depreciation expense of $95,300. The firm has a single issue of debt outstanding with book value of $1.14 million on which it pays an interest rate of 10%. What is the firm’s times interest earned ratio? (Round your answer to 2 decimal places.)