1. What is the present value of $1,000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1). a. $893 b. $3,106 c. $429 d. $833 2. The future value of $500 deposited into an account paying 8% annually for three years is: a. $500. b. $630. c. $700. d. $620. 3. Pacific Waste, Inc. has fixed costs of $225,000. PWs trashbins sell for $45 and have a unit variable cost of $20. What is PWs break-even point in units? a. 8,500 b. 8,750 c. 9,000 d. 9,250 4. Which of the following statements is correct? a. In general, a firm with low operating leverage has a small proportion of its total costs in the form of fixed costs. b. An increase in the personal tax rate would not affect firms capital structure decisions. c. A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else is equal. d. All of the above are correct. e. None of the above is correct. 5. If fixed interest expense is present in a firms cost structure, so is: a. financial leverage. b. capital leverage. c. operating leverage. d. net operating profit after tax. 6. Why are domestic cash management systems less complicated than international cash management systems? a. Domestic systems do not have to allow for currency fluctuations. b. International cash management systems are not affected by interest rate differences. c. International cash management systems actually are less complicated because the rest of the worlds major countries are more attuned to the advantages of electronic funds transfer. d. International cash management systems actually are less complicated because transactions are fewer but for larger sums of money. 7. Which of the following best describes a firms cost of capital? a. The average yield to maturity on debt b. The average cost of the firms assets c. The rate of return that must be earned on its investments in order to satisfy the firms investors d. The coupon rate on preferred stock 8. Given the following information for Kraft, determine the companys weighted average cost of capital. Value Cost of Capital Restaurant Division $ 5 Billion 13% Snack Foods Division 7 Billion 12% Beverages Division 13 Billion 8% a. 10.12% b. 11.00% c. 12.10% d. 13.00% 9. A __________ is a business combination of two companies in which the new company maintains the identity of the acquiring company. a. consolidation b. holding company c. conglomerate d. merger 10. Which of the following is not a potential advantage of a merger in the United States? a. A better financing structure b. A better use of tax-loss carry-forwards c. A more secure monopolization of an industry d. A lower operating risk through diversification 11. If one security has a greater risk than another security, how will investors respond? a. They will require a lower rate of return for the investment that has greater risk. b. They would be indifferent regarding their expectation of rates of return for either investment. c. They will require a higher rate of return for the investment that has greater risk. d. None of the above. 12. If a companys average collection period is higher than the industry average, then the company might be: a. enforcing credit conditions upon its customers which are too stringent. b. allowing its customers too much time to pay their bills. c. too tough in collecting its accounts. d. too liquid. 13. What is the value today of an investment that pays $500 every year at year-end during the next 15 years if the annual interest rate is 9%? a. $4,030.50 b. $…
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