1. Which of these can be used by interested parties to identify changes in corporate performance? Common-size financial statements Industrialized financial statements Sanitized financial statements None of these 2. A deposit of $300 earns interest rates of 7 percent in the first year and 10 percent in the second year. What would be the second year future value? $651.00 $351.00 $602.17 $353.10 3. A small business owner visits his bank to ask for a loan. The owner states that she can repay a loan at $1,500 per month for the next 3 years and then $500 per month for three years after that. If the bank is charging customers 10 percent APR, how much would it be willing to lend the business owner? $61,982.47 $32,019.95 $192,119.70 $57,980.57 4. Which ratio measures the number of dollars of sales produced per dollar of inventory? Internal-growth Inventory turnover Asset management Cash 5. Due to poor spending habits, Ricky has accumulated $10,000 in credit card debt. He has missed several payments and now the annual interest rate on the card is 18.95 percent! If he pays $175 per month on the card, how long will it take Ricky to pay off the card? 148.50 months Ricky never pays off the card. 162.5 months 121.5 months 6. What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent? $5,290.42 $5,802.82 $6,103.73 $5,532.20 7. What is the present value, when interest rates are 6.5 percent, of a $100 payment made every year forever? $1,538.46 $1,000.00 $650.00 $6.50 8. We call the process of earning interest on both the original deposit and on the earlier interest payments: discounting. multiplying. computing. compounding. 9. A mortgage broker is offering a 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 5 percent APR interest rate. After the second year, the mortgage interest charged increases to 8 percent APR. What is the effective interest rate in the first two years? What is the effective interest rate after the second year? 5.00 percent, 8.00 percent respectively 5.12 percent, 8.30 percent respectively 12.59 percent, 12.65 percent respectively 4.89 percent, 7.72 percent respectively 10. Approximately what interest rate is needed to double an investment over four years? 100 percent 18 percent 4 percent 25 percent 11. What annual interest rate would you need to earn if you wanted a $200 per month contribution to grow to $14,700 in five years? 6.47 percent 14.70 percent 8.01 percent 7.76 percent 12. What is the future value of $700 deposited for one year earning 4 percent interest rate annually? $28 $700 $1,428 $728 13. When computing the rate of return from selling an investment, the number of years between the present and future cash flows is an important factor in determining: the annual payments required. whether the present value or the future value is a cash outflow. the annual rate earned. whether the present value or the future value is a cash inflow. 14. If you start making $115 monthly contributions today and continue them for six years, what is their present value if the compounding rate is 12 percent APR? What is the present value of this annuity? $5,633.10 $5,941.12 $5,882.30 $5,512.90 15. Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets? Equity ratios Liquidity ratios Debt management ratios Financial ratios 16. What is the present value of a $200 payment made in 3 years when the discount rate is 8 percent? $515.42 $150.00 $158.77 $251.94 17. You are considering a stock investment in one of two firms (A and B), both of which operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2 million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in equity. Calculate the equity multiplier for the two firms. Firm A: 10 times; Firm B: 1.11 times Firm A: 10…
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