2. The firm is replacing an old printing press with a new one. The old press is being sold for $250,000 and it has a net book value of $55,000. Assume that National Geographic is in the 40% income tax bracket. How much will National Geographic net from the sale? (Points : 10)
$140,000
$172,000
$215,000
$112,112

3. The firm can purchase a new assembler for $20,573 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the net present value of the assembler if the required rate of return is 12%. (Round your answer to the nearest $10.) (Points : 5)
$7,621
$4,568
$1,156
$1,056

4. The firm has $6 million of debt outstanding with a coupon rate of 10 percent. Currently the yield to maturity on these bonds is 14 percent. If the firm’s tax rate is 40 percent, what is cost of debt to J & B? (Points : 10)
14.0 percent
8.4 percent
12.0 percent
6.0 percent

5. If you invest $775 every six months at 8 percent compounded semi-annually, how much would you accumulate at the end of 9 years? (round to nearest dollar) (Points : 10)
$10,065
$21,731
$10,193
$19,875

6. Colby & Company bonds pay semi-annual interest of $50. They mature in 10 years and have a par value of $1,000. The market rate of interest is 8%. The market value of Colby Bonds is: (round to nearest dollar) (Points : 5)
$1,136
$1,000
$743
$827

7. Which of the following should be included in the initial outlay? (Points : 5)
shipping and installation costs
increased working capital requirements
cost of employee training associated specifically with the asset being evaluated
all of the above

8. The firm will purchase a machine that will cost $2,575,000. Required modifications will cost $375,000. The firm will need to invest $75,000 for additional inventory. The machine has an IRS approved useful life of 7 years; it is presumed to have no salvage value. The firm plans to depreciate the machine by using the straight-line method. The machine is expected to increase the firm’s sales revenues by $1,890,000 per year; operating costs excluding depreciation are estimated at $454,600 per year. Assume that the firm’s tax rate is 40%. What is the annual operating cash flow? (Points : 15)
$413,440
$1,626,440
$922,400
$1,029,811

9. Dawn Swift discovered that twenty years ago, the average tuition for one year at an Ivy League school was $4,500. Today, the average cost is $29,000. What is the growth rate in tuition cost over this 20-year period? Round off to the nearest 0.1%. (Points : 10)
15.5%
10.6%
9.8%
4.2%

10. The expected dividend is $2.00 for a share of stock priced at $20. What is the cost of retained earnings if the long-term growth in dividends is projected to be 8 percent? (Points : 5)
25.0 percent
8.0 percent
18.0 percent
10.0 percent

11. Last year Mike bought 100 shares of Dallas Corporation for $53 per share. During the year he has received dividends of $1.45 per share. The stock is currently selling for $60 per share. What rate of return did Mike earn over the year? (Points : 10)
11.7%
13.2%
15.9%
14.1%

12. The most expensive source of capital is: (Points : 5)
new common stock
debt
retained earnings
preferred stock

13. Which of the following provides the greatest annual interest? (Points : 5)
8.5% compounded monthly
8% compounded daily
9% compounded annually

14. Depreciation expenses affect tax-related cash flows by (Points : 5)
increasing taxable income, thus increasing taxes
decreasing taxable income, thus reducing taxes
decreasing taxable income, with no effect on cash flow since depreciation is a non-cash expense
none of the above

15. Given the following expected returns and standard deviation of assets B, M, Q and D, which asset should the prudent financial manager select?

(Points : 5)
Asset Q
Asset B
Asset M
Asset D

16. At 8 percent compounded annually, how long will it take $750 to double? (Points : 10)
12 years
48 months
10 years
9 years

17. A $1,000 par value 10-year bond with a 10 percent coupon rate recently sold for $900. The yield to maturity is: (Points : 10)
10 percent
cannot be determined
less than 10 percent
greater than 10 percent

18.Regarding the tax treatment of payments to securities holders, it is true that _______________, while ____________________. (Points : 5)
interest and preferred stock dividends are tax-deductible; while common stock dividends are not tax-deductible
common stock dividends and preferred stock dividends are tax-deductible; while interest is not tax-deductible
interest and preferred stock dividends are not tax-deductible; while common stock dividends are tax-deductible
common stock dividends and preferred stock dividends are not tax-deductible; while interest is tax-deductible

*Remember to only select one (1) brand from the options below (click on Option A, Option B, or Option C to view each available brand).

Option A:
Alfa Romeo

General Brand Marketing

Reflected in the distinctive, fluid lines of an Alfa Romeo is the brand’s long sporting tradition.

Every model is a finely-engineered balance of style, performance, comfort and safety. As a result of the continuous innovation in the use of light-weight materials and advanced engine technologies, Alfa Romeo cars are best-in-class in combining operating efficiency with a level of performance and handling that all add up to pure driving emotion.
Option B:
Amazon

Amazon’s Mission Statement
Amazon.com has had a clear focus and a solitary mission since it began. Founder Jeff Bezos has publicly referred to the Amazon.com mission statement as the guiding force behind his leadership decisions many times in the company’s 18-year history. It can be concluded that the success of Amazon.com as the top Internet retailing company in the world is due at least in part to their unwavering commitment to this mission and the daily execution of it. The mission and vision of Amazon.com is…

“Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”

Amazon’s 2001 Positioning Statement (when it almost exclusively sold books)
For World Wide Web users who enjoy books, Amazon.com is a retail bookseller that provides instant access to over 1.1 million books. Unlike traditional book retailers, Amazon.com provides a combination of extraordinary convenience, low prices, and comprehensive selection.

For World Wide Web users who enjoy books, Amazon.com is a retail bookseller that provides instant access to over 1.1 million books. Unlike traditional book retailers, Amazon.com provides a combination of extraordinary convenience, low prices, and comprehensive selection.

Option C:

Google

Google’s Mission Statement
Google’s mission is to organize the world’s information and make it universally accessible and useful.

Google’s Motto
Don’t be evil. (http://www.google.com/about/)